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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

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Form 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended June 30, 2000

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

For the transition period from ________ to ________

Commission File Number 000-27115

PCTEL, Inc.
(Exact Name of Business Issuer as Specified in Its Charter)

Delaware 77-0364943
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)

1331 California Circle, Milpitas, CA 95035
(Address of Principal Executive Office) (Zip Code)

(408) 965-2100
(Registrant's Telephone Number, Including Area Code)

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Indicate by checkmark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
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 [ ]

As of July 31, 2000, there were 18,439,597 shares of the Registrant's Common
Stock outstanding.

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PCTEL, Inc.

Form 10-Q
For the Quarter Ended June 30, 2000

Page
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Part I. Financial Information

Item 1 Financial Statements

Consolidated Condensed Balance Sheets
as of June 30, 2000 (unaudited) and December 31, 1999 3

Consolidated Condensed Statements of Operations (unaudited)
for the three and six months ended June 30, 2000 and 1999 4

Consolidated Condensed Statements of Cash Flows (unaudited)
for the six months ended June 30, 2000 and 1999 5

Notes to the Consolidated Condensed Financial
Statements (unaudited) 6

Item 2 Management's Discussion and Analysis of Financial Condition and
Results Of Operations 14

Item 3 Quantitative and Qualitative Disclosures about Market Risk 27

Part II. Other Information

Item 1 Legal Proceedings 28

Item 2 Changes in Securities and Use of Proceeds 28

Item 3 Defaults upon Senior Securities 28

Item 4 Submission of Matters to a Vote of Security Holders 28

Item 5 Other Information 28

Item 6 Exhibits and Reports on Form 8-K 28

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

PCTEL, Inc.

CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share information)

June 30, December 31,
2000 1999
---------------- ----------------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 70,172 $ 44,705
Short-term investments 51,107 53,585
Accounts receivable, net of allowance for doubtful 19,186
accounts of $2,865 and $2,213, respectively 6,555
Inventories, net 8,389 5,741
Prepaid expenses and other assets 2,487 2,422
Deferred tax asset 3,455 3,211
-------------------- --------------------
Total current assets 154,796 116,219

Property and Equipment, net 4,203 3,099
Goodwill and Other Intangible Assets, net 22,761 8,649
Deferred Tax Asset 2,365 2,365
Other Assets 284 273
-------------------- --------------------
TOTAL ASSETS $ 184,409 $ 130,605
==================== ====================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 5,491 $ 7,140
Accrued royalties 9,540 7,868
Income taxes payable 3,179 3,290
Accrued liabilities 12,215 8,029
-------------------- --------------------
Total current liabilities 30,425 26,327
-------------------- --------------------
Stockholders' Equity:
Common stock, $0.001 par value, 50,000,000 shares authorized;
18,282,165 and 16,560,335 shares issued and outstanding at
June 30, 2000 and December 31, 1999, respectively. 18 17
Additional paid-in capital 143,421 99,334
Deferred compensation (3,647) (4,856)
Retained earnings 14,368 9,849
Accumulated other comprehensive loss (176) (66)
-------------------- --------------------
Total stockholders' equity 153,984 104,278
-------------------- --------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 184,409 $ 130,605
==================== ====================

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

PCTEL, Inc.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share information)
(Unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------- ---------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ---------------

Revenues $ 27,523 $ 17,890 $ 51,644 $ 33,046
Cost of Revenues 14,596 9,071 27,364 16,997
--------------- --------------- --------------- ---------------
Gross Profit 12,927 8,819 24,280 16,049
--------------- --------------- --------------- ---------------
Operating Expenses:
Research and development 4,301 2,380 7,709 4,423
Sales and marketing 3,730 2,647 6,725 4,945
General and administrative 1,713 1,248 3,478 2,063
Acquired in-process research and development - - 1,600 -
Amortization of goodwill 782 - 1,016 -
Amortization of deferred compensation (See Note 5) 328 148 677 164
--------------- --------------- --------------- ---------------
Total operating expenses 10,854 6,423 21,205 11,595
--------------- --------------- --------------- ---------------
Income from Operations 2,073 2,396 3,075 4,454
Other Income, net:
Interest income (expense), net 1,777 (255) 3,158 (592)
--------------- --------------- --------------- ---------------
Income Before Provision for Income Taxes 3,850 2,141 6,233 3,862
Provision for Income Taxes 1,059 642 1,714 1,158
--------------- --------------- --------------- ---------------
Net Income $ 2,791 $ 1,499 $ 4,519 $ 2,704
=============== =============== =============== ===============

Basic earnings per share $ 0.16 $ 0.61 $ 0.26 $ 1.10
Shares used in computing basic earnings per share 17,989 2,475 17,399 2,461

Diluted earnings per share $ 0.14 $ 0.12 $ 0.22 $ 0.21
Shares used in computing diluted earnings per share 20,588 12,685 20,547 12,638

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

PCTEL, Inc.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

Six Months Ended
June 30,
----------------------------
2000 1999
------------- ------------

Cash Flows from Operating Activities:

Net income $ 4,519 $ 2,704
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Acquired in-process research and development 1,600 -
Depreciation and amortization 2,823 1,350
Amortization of deferred debt costs - 152
Provision for allowance for doubtful accounts 552 1,093
Provision for excess and obsolete inventories 233 525
Increase in deferred tax asset - (453)
Amortization of deferred compensation 677 164
Changes in operating assets and liabilities, net of acquisitions:
(Increase) decrease in accounts receivable (12,607) 6,322
(Increase) in inventories (2,881) (2,042)
(Increase) in prepaid expenses and other assets (70) (190)
(Decrease) in accounts payable (1,651) (1,591)
Increase in accrued royalties 1,673 1,372
Increase (decrease) in income taxes payable (112) 837
Increase in accrued liabilities 3,463 2,019
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Net Cash Provided by (Used in) Operating Activities (1,781) 12,262
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Cash Flows from Investing Activities:

Capital expenditures for property and equipment (1,774) (698)
Purchase of Voyager Technologies, net of cash acquired (3,648) -
Sale (purchase) of available-for-sale investments, net 2,368 (6,282)
------------- ------------

Net Cash Used in Investing Activities (3,054) (6,980)
------------- ------------

Cash Flows from Financing Activities:

Proceeds from issuance of common stock 31,154 10
Cost incurred related to issuance of common stock (852) (156)
Principal payments on capital lease obligations - (13)
Principal payments on notes payable - (859)
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Net Cash Provided by (Used in) Financing Activities 30,302 (1,018)
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Net increase in cash and cash equivalents 25,467 4,264

Cash and cash equivalents, beginning of period 44,705 12,988
------------- ------------

Cash and cash equivalents, end of period $ 70,172 $ 17,252
============== ============

The accompanying notes are an integral part of these consolidated condensed
financial statements.PCTEL, Inc.

PCTEL, Inc.

Notes to the Consolidated Condensed Financial Statements
For the Three and Six Months Ended June 30, 2000
(unaudited)

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1. BASIS OF PRESENTATION

The condensed financial statements included herein have been prepared by
PCTEL, Inc. (the "Company" or "PCTEL"), pursuant to the laws and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. In the opinion of management, the
disclosures are adequate to make the information not misleading. The condensed
balance sheet as of December 31, 1999 has been derived from the audited
financial statements as of that date, but does not include all disclosures
required by generally accepted accounting principles. These financial
statements and notes should be read in conjunction with the audited financial
statements and notes thereto, included in PCTEL's Registration Statement on Form
S-1 and annual report on Form 10-K filed with the Securities and Exchange
Commission.

The unaudited condensed financial statements reflect all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of financial position, results of operations and cash flows for the
periods indicated. The results of operations for the three and six months ended
June 30, 2000 are not necessarily indicative of the results that may be expected
for future quarters or the year ending December 31, 2000.

2. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Operations of the Company

PCTEL was originally incorporated in California in February 1994. In July
1998, the Company reincorporated in Delaware and this reincorporation has been
reflected retroactively in the accompanying consolidated financial statements.

We are a leading provider of software based high speed connectivity solutions
to individuals and businesses worldwide. We design, develop, produce and market
advanced software-based high performance, low cost modems that are flexible and
upgradable, with functionality that can include data/fax transmission at various
speeds, and telephony features. Our soft modem products consist of a hardware
chip set containing a proprietary host signal processing software architecture
which allows for the utilization of the computational and processing resources
of a host central processor, effectively replacing special-purpose hardware
required in conventional hardware-based modems. Together, the combination of the
chip set and software drivers are a component part within a computer which
allows for telecommunications connectivity. By replacing hardware with a
software solution, our host signal processing technology lowers costs while
enhancing capabilities.

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 disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates.

Consolidation and Foreign Currency Translation

PCTEL uses the United States dollar for all its financial statements, even for
our subsidiaries in foreign countries. All gains and losses resulting from
transactions originally in foreign currencies and then translated into US
dollars are included in net income. As of June 30, 2000, PCTEL had subsidiaries
in the Cayman Islands and Japan. These consolidated financial statements include
the accounts of PCTEL and our subsidiaries after eliminating intercompany
accounts and transactions.

Cash Equivalents and Short-Term Investments

We divide our financial instruments into two different classifications:

Cash equivalents: are debt instruments that mature within three
months after we purchase them.

Short-term investments: are marketable debt instruments that generally
mature between three months and two years from the
date we purchase them. All of our short-term
investments are classified as current assets and
available-for-sale because they are marketable and
we have the option to sell them before they mature.

As of June 30, 2000, short-term investments
consisted of high-grade corporate securities with
maturity dates of approximately five months to two
years.

These investments are recorded at market price and
any unrealized holding gains and losses (based on
the difference between market price and book value)
are reflected as other comprehensive income/loss in
the stockholders' equity section of the balance
sheet. We have accumulated a $176,000 unrealized
holding loss as of June 30, 2000. Realized gains
and losses and declines in value of securities
judged to be other than temporary are included in
interest income and have not been significant to
date. Interest and dividends of all securities are
included in interest income.

Inventories

Inventories are stated at the lower of cost or market and include material,
labor and overhead costs. Inventories as of June 30, 2000 and December 31, 1999
were composed of finished goods only. Based on our current estimated
requirements, it was determined that there was excess inventory and those excess
amounts were fully reserved as of June 30, 2000 and December 31, 1999. Due to
competitive pressures and technological innovation, it is possible that these
estimates could change in the near term.

Revenue Recognition

Revenues consist primarily of sales of products to original equipment
manufacturers ("OEMs") and distributors. Revenues from sales to OEMs are
recognized upon shipment. We provide for estimated sales returns and allowances
related to sales to OEMs at the time of shipment. Revenues from sales to
distributors are made under agreements allowing price protection and rights of
return on unsold products. We record revenue relating to sales to distributors
only when the distributors have sold the product to the end user.

We also generate revenues from engineering contracts. Revenues from
engineering contracts are recognized as contract milestones are achieved.
Royalty revenue is recognized when confirmation of royalties due to PCTEL is
received from licensees.

Earnings Per Share

We compute earnings per share in accordance with SFAS No. 128, "Earnings Per
Share". SFAS No. 128 requires companies to compute net income per share under
two different methods, basic and diluted, and present per share data for all
periods in which a statement of operations is presented. Basic earnings per
share is computed by dividing net income by the weighted average number of
shares of common stock outstanding. Diluted earnings per share is computed by
dividing net income by the weighted average number of common stock and common
stock equivalents outstanding. Common stock equivalents consist of preferred
stock using the "if converted" method and stock options and warrants using the
treasury stock method. Preferred stock, common stock options and warrants are
excluded from the computation of diluted earnings per share if their effect is
anti-dilutive.

Based on SEC Staff Accounting Bulletin No. 98, preferred and common stock
issued or granted for below fair market value (nominal consideration) prior to
the IPO must be included in the earnings per share calculation as if they had
been outstanding the entire period. We have never issued or granted this type of
stock.

The following table provides a reconciliation of the numerators and
denominators used in calculating basic and diluted earning per share for the
three and six months ended June 30, 2000 and 1999, respectively (in thousands,
except per share information):

Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- --------------------------------
2000 1999 2000 1999
-------------- --------------- -------------- --------------
(Unaudited) (Unaudited)

Net income $ 2,791 $ 1,499 $ 4,519 $ 2,704
============== =============== ============== ==============

Basic earnings per share:
Weighted average common shares outstanding 17,989 2,475 17,399 2,461
-------------- --------------- -------------- --------------

Basic earnings per share $ 0.16 $ 0.61 $ 0.26 $ 1.10
============== =============== ============== ==============

Diluted earnings per share:
Weighted average common shares outstanding 17,989 2,475 17,399 2,461
Weighted average common stock option grants and 2,599 1,699 3,148 1,666
outstanding warrants
Weighted average preferred stock outstanding - 8,511 - 8,511
-------------- --------------- -------------- --------------
Weighted average common shares and common stock
equivalents outstanding 20,588 12,685 20,547 12,638
-------------- --------------- -------------- --------------

Diluted earnings per share $ 0.14 $ 0.12 $ 0.22 $ 0.21
============== =============== ============== ==============

Industry Segment, Customer and Geographic Information

We are organized based upon the nature of the products we offer. Under this
organizational structure, we operate in one segment, that segment being
software-based modems using host signal processing technology. We market our
products worldwide through our sales personnel, independent sales
representatives and distributors.

Our sales to customers outside of the United States, as a percentage of
revenues are as follows:

Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
2000 1999 2000 1999
-------- -------- -------- --------
(Unaudited) (Unaudited)

Taiwan 66% 16% 60% 21%
China (Hong Kong) 28 57 34 47
Rest of Asia 5 27 5 31
-------- -------- -------- --------

99% 100% 99% 99%
======== ======== ======== ========

Sales to our major customers representing greater than 10% of revenues are as
follows:

Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ------------------------

Customer 2000 1999 2000 1999
- -------- ---- ---- ---- ----
(Unaudited) (Unaudited)

A 6% 7% 11% 6%
B 5% 7% 10% 10%
C 24% 52% 31% 42%
D --% 19% --% 20%
E 13% --% 10% --%
F 26% --% 17% --%
G 10% --% 7% 3%

Our customers are concentrated in the personal computer industry and modem
board manufacturer industry segment and in certain geographic locations. We
actively market and sell products in Asia. We perform ongoing evaluations of our
customers' financial condition and generally require no collateral. As of June
30, 2000, approximately 72% of gross accounts receivable were concentrated with
five customers. As of June 30, 1999, approximately 68% of gross accounts
receivable were concentrated with five customers.

Recent Accounting Pronouncements

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition". In June 2000, the
SEC deferred the adoption date for SAB 101 until our fourth quarter ended
December 31, 2000. SAB 101 summarizes certain areas of the Staff's views in
applying generally accepted accounting principles to revenue recognition in
financial statements. The Company has not quantified the effect of SAB 101 on
its financial position or results of operations and has not yet determined the
timing and method of adoption.

In March 2000, the FASB issued Financial Standards Board Interpretation (FIN)
No. 44, "Accounting for Certain Transactions Involving Stock Compensation--an
Interpretation of APB Opinion No. 25." FIN 44 addresses the application of APB
25 to clarify, among other issues, (a) the definition of employee for purposes
of applying APB 25, (b) the criteria for determining whether a plan qualifies as
a noncompensatory plan, (c) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and
(d) the accounting for an exchange of stock compensation awards in a business
combination. FIN 44 is effective July 1, 2000, but certain conclusions cover
specific events that occur after either December 15, 1998 or January 12, 2000.
To the extent FIN 44 covers events occurring during the period after December
15, 1998 or January 12, 2000, but before the effective date of July 1, 2000,
the effects of applying the interpretation will be recognized on a prospective
basis from July 1, 2000. The Company currently is evaluating FIN 44 and does
not expect that it will have a material effect on its financial position or
results of operations.

3. ACQUISITIONS:

Voyager Technologies, Inc.

On February 24, 2000, we completed the acquisition of Voyager Technologies,
Inc., ("Voyager"), a provider of personal connectivity and internet access
technology. Under the terms of the Agreement and Plan of Reorganization (the
"Merger Agreement"), the former shareholders of Voyager received 237,272 shares
of our common stock and $2,065,331 of cash in exchange for all shares of Voyager
common stock. In addition, 645,157 vested and unvested options to purchase
shares of Voyager common stock were converted into 49,056 options to purchase
our common stock at the exchange ratio of 0.07604. Included in the 237,272
shares are 82,419 restricted shares of common stock

issued to a Voyager shareholder. These shares are not subject to forfeiture
under any circumstances and, thus, were considered in the determination of the
purchase price at the date of acquisition.

The purchase price of Voyager was allocated based upon the estimated fair
value of the assets acquired and liabilities assumed, which approximated book
value. The following table summarizes the components of the total purchase
price and the allocation (in thousands, except share amounts).

Fair value of 237,272 shares of our common stock $11,802
Fair value of options for 49,056 shares of our common stock 2,504
Cash 2,065
Settlement of outstanding claim 1,500
Acquisition costs 699
----------------
Estimated total purchase price 18,570
Less: Net assets acquired (762)
----------------
Estimated acquired intangibles $17,808
================

The acquisition was structured as a tax-free reorganization and is being
accounted for under the purchase method of accounting. Under this method, if the
purchase price exceeds the net tangible assets acquired, the difference is
recorded as excess purchase price. In this circumstance, the difference was
$15.6 million. We attributed $1.6 million of the excess purchase price to in-
process research and development, which we expensed immediately, and the balance
of $14.0 million was attributed to intellectual property ($0.5 million),
workforce ($0.3 million) and goodwill ($13.2 million). We have classified this
balance of $14.0 million as goodwill and other intangible assets, net, in the
accompanying consolidated balance sheets and are amortizing it over useful lives
of five years. We have included the results of Voyager from the date of
acquisition to June 30, 2000 in the consolidated condensed statements of
operations.

In addition to the 237,272 shares of our common stock issued to the
shareholders of Voyager, 30,415 additional shares of common stock were held in
an escrow account pending resolution of an outstanding claim. These shares had
been treated as contingent consideration and were not recognized as purchase
price due to the uncertainty of how the claim would be resolved. In May 2000,
the outstanding claim was settled for $1.5 million which resulted in the return
of the stock held in escrow to the Company. No amount was initially recorded
for the now-unissued stock while in escrow, however, the $1.5 million
outstanding claim settlement has now been recognized as additional purchase
price in the quarter ended June 30, 2000.

In addition, total estimated acquisition costs were increased from $33,000 to
$699,000 as reflected in the above table.

As part of the acquisition, we granted 49,056 vested and unvested options to
purchase our common stock upon conversion of the outstanding Voyager options,
based on the exchange ratio of 0.07604. The fair value of these options was
determined using the Black-Scholes option pricing model and the following
assumptions: risk-free interest rate of 5.50%; dividend yields of zero; an
estimated volatility factor of the market price of the our common stock of
75%; and an expected life between three to six months after vest date. The
weighted-average estimated fair value of these options was $51.05.

Upon completion of the Voyager acquisition, we immediately expensed $1.6
million representing purchased in-process technology that had not yet reached
technological feasibility and had no alternative future use. The $1.6 million
expensed as in-process research and development was approximately 9% of the
purchase price and was attributed and supported by a discounted cash flow
analysis that identified revenue and costs on a project by project basis. The
value assigned to purchased in-process technology, based on a percentage of
completion discounted cash flow method, was determined by identifying research
projects in areas for which technological feasibility has not been established.
The following in-process projects existed at Voyager as of the acquisition date:
Bluetooth, HomeRF, Direct Sequence Cordless, Bluetooth/HomeRF Combo,
Bluetooth/HomeRF/Direct Sequence, Wireless Gas Tank Sensor, Wireless GPS and
Wireless Industrial Garage Door Opener projects.

The value of in-process research and development was determined by estimating
the costs to develop the purchased in-process technology into commercially
viable products, estimating the resulting net cash flows from such projects and
discounting the net cash flows back to their present value. The discount rate
includes a risk adjusted discount rate to take into account the uncertainty
surrounding the successful development of the purchased

in-process technology. The risk-adjusted discount rate applied to the projects'
cash flows was 15% for existing technology and 20% for the in-process
technology. Based upon assessment of each in-process project's development
stage, including relative difficulty of remaining development milestones, it was
determined that application of a 20% discount rate was appropriate for all
acquired in-process projects. The valuation includes cash inflows from in-
process technology through 2005 with revenues commencing in 2000 and increasing
significantly in 2001 before declining in 2005. The projected total revenue of
Voyager was broken down to revenue attributable to the in-process technologies,
existing technologies, core technology and future technology. The revenue
attributable to core technology was determined based on the extent to which the
in-process technologies rely on the already developed intellectual property. The
Bluetooth and HomeRF projects were approximately 25% complete at the time of the
valuation and the expected timeframe for achieving these product releases was
assumed to be in the second half of 2000. The Direct Sequence Cordless project
was approximately 65% complete at the time of the valuation and the expected
time frame for achieving this product release was assumed to be in the second
half of 2000. The Bluetooth/HomeRF Combo and Bluetooth/HomeRF/Direct Sequence
projects were approximately 10% complete at the time of the valuation and the
expected timeframe for achieving these product releases was assumed to be in the
second half of 2000 and the first half of 2000, respectively. The Wireless Gas
Tank Sensor and the Wireless Industrial Garage Door Opener projects were
approximately 70% complete at the time of the valuation and the expected time
frame for achieving these product releases was assumed to be 2001. The Wireless
GPS was approximately 50% complete at the time of the valuation and the expected
time frame for achieving this product release was assumed to be in the second
half of 2000. The percentage complete calculations for all projects were
estimated based on research and development expenses incurred to date and
management estimates of remaining development costs. Significant remaining
development efforts must be completed in the next 6 to 18 months in order for
Voyager's projects to become implemented in a commercially viable timeframe.
Management's cash flow and other assumptions utilized at the time of acquisition
do not materially differ from historical pricing/licensing, margin, and expense
levels of the Voyager group prior to acquisition.

Approximately $0.5 million was attributed to core wireless technology and
royalty revenue associated with the Wireless Water Meter Reading Device project.

If these projects are not successfully developed, our future revenue and
profitability may be adversely affected. Additionally, the value of other
intangible assets acquired may become impaired.

The unaudited pro forma financial information for the six months ended June
30, 2000 and 1999 is presented below (in thousands except per share information)
as if Voyager had been acquired on January 1. Pro forma net income excludes the
write-off of acquired in-process research and development of $1.6 million.

Six Months Ended June 30,
------------------------------------
2000 1999
---------------- ----------------
Revenues $51,815 $33,709
Net income $ 6,124 $ 2,867
Diluted net income per share $ 0.30 $ 0.23

4. CONTINGENCIES:
As of June 30, 2000 and December 31, 1999, we had accrued royalties of
approximately $9.5 million and $7.9 million, respectively. We entered into
royalty agreements in fiscal 1999 and 1998 and continue to negotiate royalty
agreements with several other third parties. Accordingly, we have accrued our
best estimate of the amount of royalties payable based on royalty agreements
already signed or in negotiation, as well as advice from patent counsel. Should
the final agreements result in royalty rates significantly different from these
assumptions, our business, operating results and financial condition could be
materially and adversely affected.

During 1998, Motorola, Inc. ("Motorola") filed an action for patent
infringement against us (and one other defendant) related to seven Motorola
patents. In its complaint, Motorola was seeking damages for our alleged
infringement, including treble damages for our alleged willful infringement and
an injunction against us. Motorola was also seeking attorney's fees and costs.

We filed an answer to Motorola's complaint denying infringement of the seven
asserted Motorola patents and asserted that each patent is invalid or
unenforceable. In addition, we asserted counterclaims and declaratory relief for

invalidity and/or unenforceability and noninfringements of each of the seven
asserted Motorola patents. By our counterclaims, we were seeking compensatory
and punitive damages, an injunction against Motorola, and an award of treble
damages for Motorola's violation of the Federal and state antitrust laws, and
for violation of Massachusetts General Law. We were also seeking our costs and
attorney's fees in this action. In September 1999, we reached a settlement with
Motorola as to all claims raised by both parties. The settlement requires us to
make royalty payments to Motorola based on unit volume. As part of the
settlement, we granted a cross-license to Motorola to utilize portions of our
technology and Motorola granted us a cross-license to utilize portions of their
technology. This settlement did not have a material effect on our financial
position or operating results.

On April 9, 1999, ESS Technology Inc. filed a complaint against us in the U.S.
District Court for the Northern District of California, alleging that we failed
to grant licenses for some of our International Telecommunications Union-related
patents to ESS on fair, reasonable and non-discriminatory terms. ESS's complaint
includes claims based on antitrust law, patent misuse, breach of contract and
unfair competition. In its complaint, ESS also seeks a declaration that some of
our International Telecommunications Union-related patents are unenforceable and
that we should be ordered by the court to grant a license to ESS on fair,
reasonable and non-discriminatory terms.

We filed an answer to ESS's complaint by moving to dismiss on the basis that
ESS had not alleged facts sufficient to state a legal claim. ESS responded by
amending its complaint to include additional factual and legal allegations and
filing an opposition to the motion to dismiss. On August 2, 1999, the Court
denied our motion to dismiss as moot in view of ESS's amended complaint.

On August 12, 1999, we filed a motion to dismiss ESS's amended complaint. On
November 4, 1999, the United States District Court in San Jose, California,
granted a dismissal of the antitrust and state unfair competition claims, ruling
that ESS had failed to allege injury to competition in the market for modems.
The Court allowed the specific performance of contract claim to stand, ruling
that the license terms granted to other market participants would provide a
sufficient basis for defining contractual terms that could be applied to ESS.
The Court also denied the Motion with respect to dismissal of the declaratory
relief claims, holding that they were sufficiently ripe for adjudication. The
Court granted ESS leave to again amend its complaint, which it did on November
24, 1999, by filing a second amended complaint. On January 14, 2000, we filed a
motion to dismiss the second amended complaint. ESS filed its opposition to the
motion on January 21, 2000 and we filed our reply on January 28, 2000. On
February 11, 2000, the Court heard oral argument on our motion to dismiss the
second amended complaint. On February 14, 2000, the Court dismissed ESS's
complaint and gave ESS twenty days to amend its complaint. In particular, the
Court stated that ESS must allege the relevant geographic market and product
market in the complaint. In response to the Court's February 14, 2000 order, ESS
filed its third amended complaint on March 6, 2000.

On March 15, 2000, we filed a motion to dismiss ESS's third amended complaint.
ESS responded on March 31, 2000 and we filed reply papers on April 6, 2000. A
case management conference was held on April 21, 2000. The motion was denied on
July 3, 2000. The judge ordered that discovery proceed only on the issue of
whether we license our patents on a reasonable and non-discriminatory basis.
This initial discovery period will end on December 8, 2000. During this period
of time, the parties will disclose experts and exchange expert reports on the
above issue. A Case Management Conference will be held on December 15, 2000.

On August 7, 2000, we filed our answer to ESS's Third Amended Complaint,
denying ESS's allegations, and filed a counterclaim charging ESS with infringing
our patents that are essential to practice the V.34 and V.90 international modem
standards. The counterclaim seeks damages in the amount of reasonable royalties
for the period during which ESS has infringed our patents.

Due to the nature of litigation generally and because the lawsuit brought by
ESS is still in the pleading stage, we cannot ascertain the outcome of the final
resolution of the lawsuit, the availability of injunctive relief or other
equitable remedies, or estimate the total expenses, possible damages or
settlement value, if any, that we may ultimately incur in connection with ESS's
suit. This litigation could be time consuming and costly, and we will not
necessarily prevail given the inherent uncertainties of litigation. However, we
believe that we have valid defenses to this litigation, including the fact that
other companies license these International Telecommunications Union-related
patents from us on the same terms that are being challenged by ESS. We believe
that it is unlikely this litigation will have a material adverse effect on our
financial position or results of operations. We are vigorously contesting, and
intend to continue to vigorously contest, all of ESS's claims.

PCTEL is subject to various claims which arise in the normal course of
business. In the opinion of management, the ultimate disposition of these claims
will not have a material adverse effect on its financial position, liquidity or
results of operations.

5. AMORTIZATION OF DEFERRED COMPENSATION:

In connection with the grant of stock options to employees prior to our
initial public offering, we have recorded deferred compensation representing the
difference between the exercise price and deemed fair market value of our common
stock on the date these stock options were issued.

For the quarters and six months ended June 30, 2000 and 1999, amortization of
deferred compensation (in thousands) relates to the following functional
categories:

Three Months Ended June 30, Six Months Ended June 30,
----------------------------------------- ----------------------------------------
2000 1999 2000 1999
------------------ ------------------ ------------------ -----------------

Research and development $ 73 $ 64 $ 152 $ 64
Sales and marketing $ 77 $ 59 $ 156 $ 75
General and administrative $ 178 $ 25 $ 366 $ 25

6. COMMON STOCK

On April 11, 2000, the Company effected its secondary public offering of
common stock. A total of 2,750,000 shares were sold at a price of $46.50 per
share; 650,000 shares were sold by the Company and 2,100,000 shares were sold by
selling stockholders of the Company. The offering resulted in net proceeds to
the Company and the selling stockholders of approximately $27.9 million and
$92.8 million, respectively, net of an underwriting discount of $6.4 million and
estimated offering expenses of $0.8 million.

PCTEL, Inc.

Item 2: Management's Discussion and Analysis of Financial Condition and
results of Operations

================================================================================

The following information should be read in conjunction with the condensed
interim financial statements and the notes thereto included in Item 1 of this
Quarterly Report and with Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in PCTEL's Prospectus filed with
the Securities and Exchange Commission on April 11, 2000. Certain statements
contained in this Quarterly Report on Form 10-Q, including, without limitation,
statements containing the words "believes", "anticipates", "estimates",
"expects", and words of similar import, constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
You should not place undue reliance on these forward-looking statements. Our
actual results could differ materially from those anticipated in these forward-
looking statements for many reasons, including the risks faced by us described
below and elsewhere in this Quarterly Report, and in other documents we file
with the SEC.

Overview

We provide cost-effective software-based communications solutions that address
high speed internet connectivity requirements for existing and emerging
technologies. Our communications products enable internet access through PCs and
alternative internet access devices. Our soft modem products consist of a
hardware chip set containing a proprietary host signal processing software
architecture which allows for the utilization of the computational and
processing resources of a host central processor, effectively replacing special-
purpose hardware required in conventional hardware-based modems. Together, the
combination of the chip set and software drivers are a component part within a
computer which allows for telecommunications connectivity. By replacing hardware
with a software solution, our host signal processing technology lowers costs
while enhancing capabilities.

From our inception in February 1994 through the end of 1995, we were a
development stage company primarily engaged in product development, product
testing and the establishment of strategic relationships with customers and
suppliers. From December 31, 1995 to June 30, 2000, our total headcount
increased from 18 to 180. We first recognized revenue on product sales in the
fourth quarter of 1995, and became profitable in 1996, our first full year of
product shipments. Revenues increased from $16.6 million in 1996 to $24.0
million in 1997, $33.0 million in 1998 and $76.3 million in 1999. Revenues for
the six months ended June 30, 2000 were $51.6 million.

We sell soft modems to manufacturers and distributors principally in Asia
through our sales personnel, independent sales representatives and distributors.
Our sales to manufacturers and distributors in Asia were 99%, 76% and 77% of our
total sales for the years ended 1999, 1998 and 1997, respectively, and 99% and
100% for the three months ended June 30, 2000 and 1999, respectively. The
predominance of our sales is in Asia because our customers are primarily
motherboard and modem manufacturers, and the majority of these manufacturers are
located in Asia. In many cases, our indirect original equipment manufacturer
customers specify that our products be included on the modem boards or
motherboards that they purchase from the board manufacturers, and we sell our
products directly to the board manufacturers for resale to our indirect original
equipment manufacturer customers, both in the United States and internationally.
Industry statistics indicate that approximately two-thirds of modems
manufactured in Asia are sold in North America.

We recognize revenues from product sales to customers upon shipment, except
sales to distributors which are recognized only when distributors have sold the
product to the end user. We provide for estimated sales returns, allowances and
discounts related to such sales at the time of shipment. We recognize revenues
from non-recurring engineering contracts as contract milestones are achieved.

Results of Operations

Three and six months ended June 30, 2000 and 1999
(All amounts in tables are in thousands, except percentages)

Revenues

- ------------------------------------------------------------------------------------------------------------------------------------

Three Months Ended Three Months Ended Six Months Ended Six Months Ended

June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------------ ------------------ ---------------- ----------------

Revenues....................................... $27,523 $17,890 $51,644 $33,046
% change from year ago period................. 53.8% 56.3%
- ------------------------------------------------------------------------------------------------------------------------------------

Our revenues primarily consist of product sales of soft modems to board
manufacturers and distributors in Asia. Revenues increased $9.6 million for the
three months ended June 30, 2000 compared to the same period in 1999. Revenues
for the six months ended June 30, 2000 increased $18.6 million compared to the
same period in 1999. These increases were attributable to increased units sold
to Compaq Computer Corporation, as well as design wins at Fujitsu Limited and
NEC Corporation in Japan. The increase in sales volume was partly offset by
downward pressure on average selling prices and sales discounts to customers.
Our average selling prices decreased 25% from June 30, 1999 to June 30, 2000,
mainly due to the downward pricing pressure which is commonly seen in the
industry. However, we believe this decrease has generated the increase in our
market share.

Gross Profit

- ------------------------------------------------------------------------------------------------------------------------------------

Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------------ ------------------ ---------------- ----------------

Gross profit............................ $12,927 $8,819 $24,280 $16,049
Percentage of revenues.................. 47.0% 49.3% 47.0% 48.6%
% change from year ago period........... 46.6% 51.3%
- ------------------------------------------------------------------------------------------------------------------------------------

Cost of revenues consists primarily of chip sets we purchase from third party
manufacturers and also includes amortization of intangibles related to the
Communications Systems Division acquisition, accrued intellectual property
royalties, cost of operations, provision for inventory obsolescence and
distribution costs.

Gross profit increased $4.1 million for the three months ended June 30, 2000
compared to the same period last year due to increased revenues, partially
offset by a reduction in average selling prices, inventory cost reduction and
economies of scale. Gross profit as a percentage of revenue decreased from
49.3% for the three months ended June 30, 1999 to 47.0% for the three months
ended June 30, 2000 because of a shift to higher volume, lower selling price,
customer mix and, generally, average selling prices decreased faster than the
rate of cost reduction, which adversely impacted our profit margins.

Gross profit increased $8.2 million for the six months ended June 30, 2000
over the same period in 1999 but decreased as a percentage of revenue from 48.6%
to 47.0% for the same reasons as above.

Research and Development

- ------------------------------------------------------------------------------------------------------------------------------------

Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------------ ------------------ ---------------- ----------------

Research and development................. $4,301 $2,380 $7,709 $4,423
Percentage of revenues................... 15.6% 13.3% 14.9% 13.4%
% change from year ago period............ 80.7% 74.3%
- ------------------------------------------------------------------------------------------------------------------------------------

Research and development expenses include compensation costs for software and
hardware development, prototyping, certification and pre-production costs. We
expense all research and development costs as incurred.

Research and development expenses increased $1.9 million and as a percentage
of revenues for the three months ended June 30, 2000 compared to the same period
in 1999 as we continue to invest heavily in the development of the G.Lite,
G.DMT, wireless and embedded modems, as well as v.92 upgrade. The increase in
amount and as a percentage of revenues were also due to software consulting
services and system maintenance costs related to new product development.
Research and development headcount increased from 58 to 72 from June 30, 1999 to
June 30, 2000.

Research and development expenses increased $3.3 million and as a percentage
of revenues for the six months ended June 30, 2000 compared to the same period
in 1999 for the same reasons as above. Approximately 64 % of all research and
development expenses are payroll related. We expect that our research and
development expenses will increase because we intend to hire additional
personnel and continue to develop new products.

Sales and Marketing

- ------------------------------------------------------------------------------------------------------------------------------------

Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------------ ------------------ ---------------- ----------------

Sales and marketing............................ $3,730 $2,647 $6,725 $4,945
Percentage of revenues......................... 13.6% 14.8% 13.0% 15.0%
% change from year ago period.................. 40.9% 36.0%
- ------------------------------------------------------------------------------------------------------------------------------------

Sales and marketing expenses consist primarily of personnel costs, sales
commissions and marketing costs. Sales commissions payable to our distributors
are recognized when our products are "sold through" from the distributors to end
users so that the commission expense is matched with related recognition of
revenues. Marketing costs include promotional goods and trade shows.

Sales and marketing expenses increased $1.1 million but decreased as a
percentage of revenues for the three months ended June 30, 2000 compared to the
same period in 1999. The increase reflects the increased costs to support higher
sales and the addition of sales and marketing personnel to develop new accounts
and drive new product development and product launches. Sales and marketing
headcount increased from 50 to 62 from June 30, 1999 to 2000. The production of
collateral sales materials, travel costs, trade shows, sales programs and press
tours also resulted in the increase of the sales and marketing expenses.

Sales and marketing expenses increased $1.8 million but decreased as a
percentage of revenues for the six months ended June 30, 2000 compared to the
same period in the prior year. The increase in expenses is due to the increase
in headcount, as well as the production of collateral sales materials,
additional travel costs, trade shows, sales programs and press tour.

General and Administrative

- ------------------------------------------------------------------------------------------------------------------------------------

Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------------ ------------------ ---------------- ----------------

General and administrative..................... $1,713 $1,248 $3,478 $2,063
Percentage of revenues......................... 6.2% 7.0% 6.7% 6.2%
% change from year ago period.................. 37.3% 68.6%
- ------------------------------------------------------------------------------------------------------------------------------------

General and administrative expenses include costs associated with our general
management and finance functions as well as professional service charges, such
as legal, tax and accounting fees. Other general expenses include rent,
insurance, utilities, travel and other operating expenses to the extent not
otherwise allocated to other functions.

General and administrative expenses increased $465,000 for the three months
ended June 30, 2000 compared to the same period in 1999 and $1.4 million for the
six months ended June 30, 2000 compared to the same period in 1999. The
increase was primarily due to our increase in staffing and related
infrastructure to support our continued growth. General and administrative
headcount increased from 13 to 29 from June 30, 1999 to June 30, 2000.

Acquired In-Process Research and Development

- ------------------------------------------------------------------------------------------------------------------------------------

Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------------ ------------------ ---------------- ----------------

Acquired in-process research and development.... $ -- $ -- $1,600 $ --
Percentage of revenues.......................... -- % -- % 3.1% -- %
- ------------------------------------------------------------------------------------------------------------------------------------

As explained in Footnote 3 of the consolidated condensed financial statements,
on February 24, 2000, we completed the acquisition of Voyager Technologies,
Inc., ("Voyager"), a provider of personal connectivity and internet access
technology. It was determined that $1.6 million of the purchase price was
related to in-process research and development, which was immediately expensed
in the first quarter of 2000.

Amortization of Deferred Compensation

- ------------------------------------------------------------------------------------------------------------------------------------

Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------------ ------------------ ---------------- ----------------

Amortization of deferred compensation......... $ 328 $148 $ 677 $164
Percentage of revenues........................ 1.2% 0.8% 1.3% 0.5%
% change from year ago period................. 121.6% 312.8%
- ------------------------------------------------------------------------------------------------------------------------------------

The amortization of deferred compensation increased $181,000 for the three
months ended June 30, 2000 compared to the same period in 1999 primarily due to
a higher deemed fair market value of our stock and additional stock options
granted to new employees prior to the initial public offering.

The amortization of deferred compensation increased $513,000 for the six
months ended June 30, 2000 compared to the same period in 1999 for the reasons
discussed above. We expect that the amortization of deferred compensation to
remain at approximately $320,000 per quarter through the third quarter of 2003.

Other Income, Net

- ------------------------------------------------------------------------------------------------------------------------------------

Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------------ ------------------ ---------------- ----------------

Other income (expense), net.................... $1,777 $ (255) $3,158 $ (592)
Percentage of revenues......................... 6.5% (1.4)% 6.1% (1.8)%
% change from year ago period.................. N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------

Other income, net, consists of interest income, net of interest expense.
Interest income is expected to fluctuate over time. Other income, net,
increased $2.0 million for the three months ended June 30, 2000 compared to the
same period in 1999 primarily due to interest earned from the proceeds from the
initial public offering and secondary public offering proceeds and the
elimination of interest expenses on the loan that we used to acquire
Communications Systems Division.

Other income, net, increased $3.8 million for the six months ended June 30,
2000 compared to the same period in 1999 because of the same reasons discussed
above.

Provision for Income Taxes

- ------------------------------------------------------------------------------------------------------------------------------------

Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------------ ------------------ ---------------- ----------------

Provision for income taxes..................... $1,059 $ 642 $1,714 $1,158
Effective tax rate............................. 27.5% 30.0% 27.5% 30.0%
% change from year ago period.................. 65.0% 48.0%
- ------------------------------------------------------------------------------------------------------------------------------------

Provision for income taxes increased for the three months ended June 30, 2000
over the same period in 1999 due to higher taxable income, while the effective
tax rate decreased from 30.0% to 27.5%. The decrease in the effective tax rates
results from changes in the geographical distribution of income.

We have $5.8 million in deferred tax assets as of June 30, 2000. We believe
that our effective tax rate will continue to be below the statutory tax rate of
35% due to international sales and profits through our wholly owned
subsidiaries, which are taxed at rates below the statutory tax rate in the U.S.

Liquidity and Capital Resources

- ------------------------------------------------------------------------------------------------------------------------------------

Six Months Ended Six Months Ended
June 30, 2000 June 30, 1999
------------------- ------------------

Net cash provided by (used in) operating activities.......................................... $ (1,781) $12,262
Net cash provided by (used in) investing activities......................................... $ (3,054) $(6,980)
Net cash provided by (used in) financing activities.......................................... $ 30,302 $(1,018)
Cash, cash equivalents and short-term investments at the end of period....................... $121,279 $23,534
Working capital at the end of period......................................................... $124,371 $16,361
- ------------------------------------------------------------------------------------------------------------------------------------

For the six months ended June 30, 2000, cash used in operating activities were
primarily from the increases in accounts receivable and inventory. Net cash
used in investing activities for the six months ended June 30, 2000 consists of
the acquisition of Voyager Technologies and purchases of property and equipment,
partially offset by proceeds from maturity of short-term investments. Net cash
provided by financing activities for six months ended June 30, 2000 consisted of
proceeds from issuance of common stock associated with the secondary public
offering, stock option exercises and purchase of shares through the employee
stock purchase plan.

As of June 30, 2000, we had $121.3 million in cash, cash equivalents and
short-term investments, and working capital of $124.4 million.

We believe that our existing sources of liquidity will be sufficient to meet
our working capital and anticipated capital expenditure requirements for at
least the next 12 months. Thereafter, we may require additional funds to
support our working capital requirements or for other purposes, and may seek,
even before that time, to raise additional funds through public or private
equity or debt financing or from other sources. Additional financing may not be
available at all, and if it is available, the financing may not be obtainable on
terms acceptable to us or that are not dilutive to our stockholders.

Factors Affecting Operating Results

This quarterly report on Form 10-Q contains forward-looking statements which
involve risks and uncertainties. Our actual results could differ materially
from those anticipated by such forward-looking statements as a result of certain
factors including those set forth below.

Risks Related to Our Business

Our sales are concentrated among a limited number of customers and the loss of
one or more of these customers could cause our revenues to decrease.

Our sales are concentrated among a limited number of customers. If we were to
lose one or more of these customers, or if one or more of these customers were
to delay or reduce purchases of our products, our sales revenues may decrease.
For the six months ended June 30, 2000, approximately 79% of our revenues were
generated by five of our customers with one customer representing 31% of
revenues. These customers may in the future decide not to purchase our products
at all, purchase fewer products than they did in the past or alter their
purchasing patterns, because:

. we do not have any long-term purchase arrangements or contracts with these
or any of our other customers,

. our product sales to date have been made primarily on a purchase order
basis, which permit our customers to cancel, change or delay product
purchase commitments with little or no notice and without penalty, and

. many of our customers also have pre-existing relationships with current or
potential competitors which may affect our customers' purchasing decisions.

We expect that a small number of customers will continue to account for a
substantial portion of our revenues for at least the next 12 to 18 months and
that a significant portion of our sales will continue to be made on the basis of
purchase orders.

We have significant sales and operations concentrated in Asia. Continued
political and economic instability in Asia and difficulty in collecting accounts
receivable may make it difficult for us to maintain or increase market demand
for our products.

Our sales to customers located in Asia accounted for 99% of our total revenues
for the six months ended June 30, 2000. The predominance of our sales are in
Asia, mostly in Taiwan and China, because our customers are primarily
motherboard or modem manufacturers that are located there. In many cases, our
indirect original equipment manufacturer customers specify that our products be
included on the modem boards or motherboards, the main printed circuit board
containing the central processing unit of a computer system, that they purchase
from board manufacturers, and we sell our products directly to the board
manufacturers for resale to our indirect original equipment manufacturer
customers, both in the United States and internationally. Due to the industry
wide concentration of modem manufacturers in Asia, we believe that a high
percentage of our future sales will continue to be concentrated with Asian
customers. As a result, our future operating results could be uniquely affected
by a variety of factors outside of our control, including:

. political and economic instability,

. changes in tariffs, quotas, import restrictions and other trade barriers
which may make our products more expensive compared to our competitors'
products,

. delays in collecting accounts receivable, which we have experienced from
time to time, and

. fluctuations in the value of Asian currencies relative to the U.S. dollar,
which may make it more costly for us to do business in Asia which may in
turn make it difficult for us to maintain or increase our revenues.

To successfully expand our sales in Asia and internationally, we must
strengthen foreign operations, hire additional personnel and recruit additional
international distributors and resellers. This will require significant
management attention and financial resources. To the extent that we are unable
to effect these additions in a timely manner, we may not be able to maintain or
increase market demand for our products in Asia and internationally, and our
operating results could be hurt.

Continuing decreases in the average selling prices of our products could result
in decreased revenues.

Product sales in the connectivity industry have been characterized by
continuing erosion of average selling prices. Price erosion experienced by any
company can cause revenues and gross margins to decline. The average selling
price of our products has decreased by approximately 57% from October 1995 to
June 30, 2000. We expect this trend to continue.

In addition, we believe that the widespread adoption of industry standards in
the soft modem industry is likely to further erode average selling prices,
particularly for analog modems. Adoption of industry standards is driven by the
market requirement to have interoperable modems. End users need this
interoperability to ensure modems from different manufacturers communicate with
each other without problems. Historically, users have deferred

purchasing modems until these industry standards are adopted. However, once
these standards are accepted, it lowers the barriers to entry and price erosion
results. Decreasing average selling prices in our products could result in
decreased revenues even if the number of units that we sell increases.
Therefore, we must continue to develop and introduce next generation products
with enhanced functionalities that can be sold at higher gross margins. Our
failure to do this could cause our revenues and gross margin to decline.

Our gross margins may vary based on the mix of sales of our products and
services, and these variations may hurt our net income.

We derive a significant portion of our sales from our software-based
connectivity products. We expect margins on newly introduced products generally
to be higher than our existing products. However, due in part to the
competitive pricing pressures that affect our products and in part to increasing
component and manufacturing costs, we expect margins from both existing and
future products to decrease over time. In addition, licensing revenues from our
products historically have provided higher margins than our product sales.
Changes in the mix of products sold and the percentage of our sales in any
quarter attributable to products as compared to licensing revenues will cause
our quarterly results to vary and could result in a decrease in net income.

Our future success depends on our ability to develop and successfully introduce
new and enhanced products that meet the needs of our customers.

Our future success depends on our ability to anticipate our customers' needs
and develop products that address those needs. Introduction of new products and
product enhancements will require coordination of our efforts with those of our
suppliers to rapidly achieve volume production. If we fail to coordinate these
efforts, develop product enhancements or introduce new products that meet the
needs of our customers as scheduled, our revenues may be reduced and our
business may be harmed. We cannot assure you that product introductions will
meet the anticipated release schedules.

Our revenues may fluctuate each quarter due to both domestic and international
seasonal trends.

We have experienced and continue to experience seasonality in sales of our
connectivity products. These seasonal trends materially affect our quarter-to-
quarter operating results. Our revenues are typically higher in the third and
fourth quarters due to the back-to-school and holiday seasons as well as
purchasers of PCs making purchase decisions based on their calendar year-end
budgeting requirements.

We are currently expanding our sales in international markets, particularly in
Asia, Europe and South America. To the extent that our revenues in Asia, Europe
or other parts of the world increase in future periods, we expect our period-to-
period revenues to reflect seasonal buying patterns in these markets.

Any delays in our normally lengthy sales cycles could result in customers
canceling purchases of our products.

Sales cycles for our products with major customers are lengthy, often lasting
six months or longer. In addition, it can take an additional six months or more
before a customer commences volume production of equipment that incorporates our
products. Sales cycles with our major customers are lengthy for a number of
reasons:

. our original equipment manufacturer customers usually complete a lengthy
technical evaluation of our products, over which we have no control, before
placing a purchase order,

. the commercial integration of our products by an original equipment
manufacturer is typically limited during the initial release to evaluate
product performance, and

. the development and commercial introduction of products incorporating new
technologies frequently are delayed.

A significant portion of our operating expenses is relatively fixed and is
based in large part on our forecasts of volume and timing of orders. The
lengthy sales cycles make forecasting the volume and timing of product orders
difficult. In addition, the delays inherent in lengthy sales cycles raise
additional risks of customer decisions to cancel or change product phases. If
customer cancellations or product changes were to occur, this could result in
the loss of anticipated sales without sufficient time for us to reduce our
operating expenses.

We expect that our operating expenses will increase substantially in the future
and these increased expenses may diminish our ability to remain profitable.

Although we have been profitable in recent years, we may not remain profitable
on a quarterly or annual basis in the future. We anticipate that our expenses
will increase substantially over at least the next three years as we:

. further develop and introduce new applications and functionality for our
host signal processing technology,

. conduct research and development and explore emerging product opportunities
in digital technologies and wireless and cable communications,

. expand our distribution channels, both domestically and in our international
markets, and

. pursue strategic relationships and acquisitions.

In order to maintain profitability we will be required to increase our
revenues to meet these additional expenses. Any failure to significantly
increase our revenues as we implement our product, service, distribution and
strategic relationship strategies would result in a decrease in our overall
profitability.

To date, we have principally relied upon our distributor sales organization
for product sales to smaller accounts. Our direct sales efforts have focused
principally on board manufacturers and smaller PC original equipment
manufacturers. To increase penetration of our target customer base, including
large, tier-one original equipment manufacturers, we must significantly increase
the size of our direct sales force and organize and deploy sales teams targeted
at specific domestic tier-one original equipment manufacturer accounts. If we
are unable to expand our sales to additional original equipment manufacturers,
our revenues may not meet analysts' expectations which could cause our stock
price to drop.

We must accurately forecast our customer demand for our products. If there is
an unexpected fluctuation in demand for our products, we may incur excessive
operating costs or lose product revenues.

We must forecast and place purchase orders for specialized semiconductor
chips, such as the application specific integrated circuit, coder/decoder and
discrete access array, or data access arrangement, components of our modem
products, several months before we receive purchase orders from our own
customers. This forecasting and order lead time requirement limits our ability
to react to unexpected fluctuations in demand for our products. These
fluctuations can be unexpected and may cause us to have excess inventory, or a
shortage, of a particular product. In the event that our forecasts are
inaccurate, we may need to write down excess inventory. For example, we were
required to write down inventory in the second quarter of 1996 in connection
with a product transition within our 14.4 Kbps product family. Similarly, if we
fail to purchase sufficient supplies on a timely basis, we may incur additional
rush charges or we may lose product revenues if we are not able to meet a
purchase order. These failures could also adversely affect our customer

relations. Significant write-downs of excess inventory or declines in inventory
value in the future could cause our net income and gross margin to decrease.

We rely heavily on our intellectual property rights which offer only limited
protection against potential infringers. Unauthorized use of our technology may
result in development of products that compete with our products which could
cause our market share and our revenues to be reduced.

Our success is heavily dependent upon our proprietary technology. We rely
primarily on a combination of patent, copyright and trademark laws, trade
secrets, confidentiality procedures and contractual provisions to protect our
proprietary rights. These means of protecting our proprietary rights may not be
adequate. We hold a total of 40 patents, a number of which cover technology that
is considered essential for International Telecommunications Union standard
communications solutions, and also have 29 additional patent applications
pending or filed. These patents may never be issued. These patents, both issued
and pending, may not provide sufficiently broad protection against third party
infringement lawsuits or they may not prove enforceable in actions against
alleged infringers.

Despite precautions that we take, it may be possible for unauthorized third
parties to copy aspects of our current or future products or to obtain and use
information that we regard as proprietary. We may provide our licensees with
access to our proprietary information underlying our licensed applications.
Additionally, our competitors may independently develop similar or superior
technology. Finally, policing unauthorized use of software is difficult, and
some foreign laws, including those of various countries in Asia, do not protect
our proprietary rights to the same extent as United States laws. Litigation may
be necessary in the future to enforce our intellectual property rights, to

protect our trade secrets or to determine the validity and scope of the
proprietary rights of others. Litigation could result in substantial costs and
diversion of resources.

We have received, and may receive in the future, communications from third
parties asserting that our products infringe on their intellectual property
rights, that our patents are unenforceable or that we have inappropriately
licensed our intellectual property to third parties. These claims could affect
our relationships with existing customers and may prevent potential future
customers from purchasing our products or licensing our technology. Because we
depend upon a limited number of products, any claims of this kind, whether they
are with or without merit, could be time consuming, result in costly litigation,
cause product shipment delays or require us to enter into royalty or licensing
agreements. In the event that we do not prevail in litigation, we could be
prevented from selling our products or be required to enter into royalty or
licensing agreements on terms which may not be acceptable to us. We could also
be prevented from selling our products or be required to pay substantial
monetary damages. Should we cross license our intellectual property in order to
obtain licenses, we may no longer be able to offer a unique product. Other than
the ESS Technology lawsuit described elsewhere in the financial footnotes, no
material lawsuits relating to intellectual property are currently filed against
us.

New patent applications may be currently pending or filed in the future by
third parties covering technology that we use currently or may use in the
future. Pending U.S. patent applications are confidential until patents are
issued, and thus it is impossible to ascertain all possible patent infringement
claims against us. We believe that several of our competitors, including Lucent,
Motorola and Texas Instruments, may have a strategy of protecting their market
share by filing intellectual property claims against their competitors and may
assert claims against us in the future. The legal and other expenses and
diversion of resources associated with any such litigation could result in a
decrease in our revenues and profitability.

In addition, some of our customer agreements include an indemnity clause that
obligates us to defend and pay all damages and costs finally awarded by a court
should third parties assert patent and/or copyright claims against our
customers. As a result, we may be held responsible for infringement claims
asserted against our customers. If our financial reserves for potential future
license fees are less than any actual fees that we are required to pay, our net
income would be reduced.

If our financial reserves for potential future license fees are less than any
actual fees that we are required to pay, our net income would be reduced.

We have established and recorded on a monthly basis a reserve for payment of
future license fees based upon our estimate as to the likely amount of the
licensing fees that we may be required to pay in the event that licenses are
obtained. We believe that it is typical for participants in the modem industry
to obtain licenses in exchange for grants of cross licenses rather than for
payment of fees and we have based our estimates on our understanding of the
license fee practices of other segments of our industry. Our reserves may not be
adequate because of factors outside of our control and because these license fee
practices in the modem industry may not be applicable to our experience.

Competition in the connectivity market is intense, and if we are unable to
compete effectively, the demand for, or the prices of, our products may be
reduced.

The connectivity device market is intensely competitive. We may not be able to
compete successfully against current or potential competitors. Our current
competitors include Conexant, ESS Technology, Lucent Technologies, Motorola and
SmartLink. We expect competition to increase in the future as current
competitors enhance their product offerings, new suppliers enter the
connectivity device market, new communication technologies are introduced and
additional networks are deployed.

We may in the future also face competition from other suppliers of products
based on host signal processing technology or on new or emerging communication
technologies, which may render our existing or future products obsolete or
otherwise unmarketable. We believe that these competitors may include Alcatel,
Analog Devices, Aware, Broadcom, Efficient Networks, ITeX, Terayon
Communications, Texas Instruments and Virata.

As a result of our February 2000 acquisition of Voyager Technologies, we
anticipate that we will enter the markets for wireless Internet connectivity and
wireless home networking. These markets are intensely competitive. We believe
that our future competitors in these markets may include Aironet, Breezecom,
Conexant, Lucent, Intersil, Motorola, Proxim and Symbol Technologies.

We believe that the principal competitive factors required by users and
customers in the connectivity product market include compatibility with industry
standards, price, functionality, ease of use and customer service and support.
Although we believe that our products currently compete favorably with respect
to these factors, we may not be able to maintain our competitive position
against current and potential competitors.

In order for us to maintain our profitability and continue to introduce and
develop new products for emerging markets, we must attract and retain our
executive officers and qualified technical, sales, support and other
administrative personnel.

Our past performance has been and our future performance is substantially
dependent on the performance of our current executive officers and certain key
engineering, sales, marketing, financial, technical and customer support
personnel. If we lose the services of one or more of our executives or key
employees, a replacement could be difficult to recruit and we may not be able to
grow our business.

We maintain "key person" life insurance policies on Peter Chen, our Chairman
and Chief Executive Officer, William Wen-Liang Hsu, our Vice President, Business
Development, and Han Yeh, our Vice President, Technology, in the face amount of
$1 million for each individual. However, these insurance policies may not
adequately compensate us for the loss of services of any of these individuals.

We intend to hire a significant number of additional engineering, sales,
support, marketing and finance personnel in the future. Competition for
personnel, especially engineers and marketing and sales personnel in Silicon
Valley, is intense. We are particularly dependent on our ability to identify,
attract, motivate and retain qualified engineers with the requisite education,
background and industry experience. As of June 30, 2000, we employed a total of
72 people in our engineering department, over half of whom have advanced
degrees. In the past we have experienced difficulty in recruiting qualified
engineering personnel, especially developers, on a timely basis. If we are not
able to hire at the levels that we plan, our ability to continue to develop
products and technologies responsive to our markets will be impaired.

Our acquisition of Voyager Technologies and any future acquisitions may be
difficult to integrate, disrupt our business, dilute stockholder value or divert
management attention.

We acquired Voyager Technologies on February 24, 2000. We are in the process
of integrating Voyager Technologies into our business. We may encounter problems
associated with the integration of Voyager Technologies including:

. difficulties in assimilation of acquired personnel, operations,
technologies or products,

. unanticipated costs associated with the acquisition,

. diversion of management's attention from other business concerns,

. adverse effects on our existing business relationships with our and
Voyager Technologies' customers, and

. inability to retain employees of Voyager Technologies.

As part of our business strategy, we may in the future seek to acquire or
invest in additional businesses, products or technologies that we believe could
complement or expand our business, augment our market coverage, enhance our
technical capabilities or that may otherwise offer growth opportunities. These
future acquisitions could pose the same risks to our business posed by the
acquisition described above. In addition, we could use substantial portions of
our available cash to pay for future acquisitions. We could also issue
additional securities as consideration for these acquisitions, which could cause
our stockholders to suffer significant dilution.

We have experienced significant growth in our business in recent periods and
failure to manage our growth could strain our management, financial and
administrative resources.

Our ability to successfully sell our products and implement our business plan
in rapidly evolving markets requires an effective management planning process.
Future expansion efforts could be expensive and put a strain on our management
by significantly increasing the scope of their responsibilities and resources by
increasing the

number of people using them. We have increased, and plan to continue to
increase, the scope of our operations at a rapid rate. Our headcount has grown
and will continue to grow substantially. Our headcount increased from 95 at
December 31, 1998 to 180 at June 30, 2000. In addition, we expect to continue to
hire a significant number of new employees. To effectively manage our growth, we
must maintain and enhance our financial and human resources systems and
controls, integrate new personnel and manage expanded operations.

We rely on independent companies to manufacture, assemble and test our products.
If these companies do not meet their commitments to us, our ability to sell
products to our customers would be impaired.

We do not have our own manufacturing, assembly or testing operations.
Instead, we rely on independent companies to manufacture, assemble and test the
semiconductor chips, which are integral components of our products. Most of
these companies are located outside of the United States. There are many risks
associated with our relationships with these independent companies, including
reduced control over:

. delivery schedules,

. quality assurance,

. manufacturing costs,

. capacity during periods of excess demand, and

. access to process technologies.

In addition, the location of these independent parties outside of the United
States creates additional risks resulting from the foreign regulatory, political
and economic environments in which each of these companies exists. Further, some
of these companies are located near earthquake fault lines. While we have not
experienced any material problems to date, failures or delays by our
manufacturers to provide the semiconductor chips that we require for our
products, or any material change in the financial arrangements we have with
these companies, could have an adverse impact on our ability to meet our
customer product requirements.

We design, market and sell application specific integrated circuits and
outsource the manufacturing and assembly of the integrated circuits to third
party fabricators. The majority of our products and related components are
manufactured by five principal companies: Taiwan Semiconductor Manufacturing
Corporation, ST Microelectronics, Kawasaki/LSI, Silicon Labs and Delta
Integration. We expect to continue to rely upon these third parties for these
services. Currently, the data access arrangement chips used in our soft modem
products are provided by a sole source, Silicon Labs, on a purchase order basis,
and we have only a limited guaranteed supply arrangement under a contract with
our supplier. Although we believe that we would be able to qualify an
alternative manufacturing source for data access arrangement chips within a
relatively short period of time, this transition, if necessary, could result in
loss of purchase orders or customer relationships, which could result in
decreased revenues.

Undetected software errors or failures found in new products may result in loss
of customers or delay in market acceptance of our products.

Our products may contain undetected software errors or failures when first
introduced or as new versions are released. To date, we have not been made
aware of any significant software errors or failures in our products. However,
despite testing by us and by current and potential customers, errors may be
found in new products after commencement of commercial shipments, resulting in
loss of customers or delay in market acceptance.

Risks Related to Our Industry

If the market for applications using our host signal processing technology does
not grow as we anticipate, or if our products are not accepted in this market,
our revenues may stagnate or decrease.

Our success depends on the growth of the market for applications using our
host signal processing technology. Market demand for host signal processing
technology depends primarily upon the cost and performance benefits relative to
other competing solutions. This market has only recently begun to develop and
may not develop at the growth rates that have been suggested by industry
estimates. Although we have shipped a significant number of soft modems since we
began commercial sales of these products in October 1995, the current level of
demand for soft

modems may not be sustained or may not grow. If customers do not accept soft
modems or the market for soft modems does not grow, our revenues will decrease.

Further, we are in the process of developing next generation products and
applications which improve and extend upon our host signal processing
technology, such as a G.Lite modem solution and a remote access solution. If
these products are not accepted in our markets when they are introduced, our
revenues and profitability will be negatively affected.

Our industry is characterized by rapidly changing technologies. If we do not
adapt to these technologies, our products will become obsolete.

The connectivity product market is characterized by rapidly changing
technologies, limited product life cycles and frequent new product
introductions. To remain competitive in this market, we have been required to
introduce many products over a limited period of time. For example, we
introduced a 14.4 Kbps product in 1995, a 28.8 Kbps product in 1996, a 33.6 Kbps
product in late 1996, a non-International Telecommunications Union standard 56
Kbps modem in the second half of 1997 and a v.90 International
Telecommunications Union standard 56 Kbps modem in early 1998. The market for
high speed data transmission is also characterized by several competing
technologies that offer alternative broadband solutions which allow for higher
modem speeds and faster internet access. These competing broadband technologies
include digital subscriber line, wireless and cable. However, substantially all
of our current product revenue is derived from sales of analog modems, which use
a more conventional technology. We must continue to develop and introduce
technologically advanced products that support one or more of these competing
broadband technologies. If we are not successful in our response, our products
will become obsolete and we will not be able to compete effectively.

Changes in laws or regulations, in particular, future FCC regulations affecting
the broadband market, internet service providers, or the communications industry
could negatively affect our ability to develop new technologies or sell new
products and therefore, reduce our profitability.

The jurisdiction of the Federal Communications Commission, or FCC, extends to
the entire communications industry, including our customers and their products
and services that incorporate our products. Future FCC regulations affecting
the broadband access services industry, our customers or our products may harm
our business. For example, future FCC regulatory policies that affect the
availability of data and internet services may impede our customers' penetration
into their markets or affect the prices that they are able to charge. In
addition, international regulatory bodies are beginning to adopt standards for
the communications industry. Although our business has not been hurt by any
regulations to date, in the future, delays caused by our compliance with
regulatory requirements may result in order cancellations or postponements of
product purchases by our customers, which would reduce our profitability.

Risks Related to our Common Stock

Substantial future sales of our common stock in the public market may depress
our stock price.

Our current stockholders hold a substantial number of shares, which they will
be able to sell in the public market in the near future. Sales of a substantial
number of shares of our common stock could cause our stock price to fall.

Provisions in our charter documents may inhibit a change of control or a change
of management which may cause the market price for our common stock to fall and
may inhibit a takeover or change in our control that a stockholder may consider
favorable.

Provisions in our charter documents could discourage potential acquisition
proposals and could delay or prevent a change in control transaction that our
stockholders may favor. These provisions could have the effect of discouraging
others from making tender offers for our shares, and as a result, these
provisions may prevent the market price of our common stock from reflecting the
effects of actual or rumored takeover attempts and may prevent stockholders from
reselling their shares at or above the price at which they purchased their
shares. These provisions may also prevent changes in our management that our
stockholders may favor. Our charter documents do not permit stockholders to act
by written consent, do not permit stockholders to call a stockholders meeting
and provide for a classified board of directors, which means stockholders can
only elect, or remove, a limited number of our directors in any given year.

Our board of directors has the authority to issue up to 5,000,000 shares of
preferred stock in one or more series. The board of directors can fix the
price, rights, preferences, privileges and restrictions of this preferred stock
without any further vote or action by our stockholders. The rights of the
holders of our common stock will be affected by, and may be adversely affected
by, the rights of the holders of any preferred stock that may be issued in the
future. Further, the issuance of shares of preferred stock may delay or prevent
a change in control transaction without further action by our stockholders. As
a result, the market price of our common stock may drop. The board of directors
has not elected to issue additional shares of preferred stock since the initial
public offering on October 19, 1999.

Our stock price may be volatile based on a number of factors, some of which are
not in our control.

The trading price of our common stock has been highly volatile. Our stock
price could be subject to wide fluctuations in response to a variety of factors,
many of which are out of our control, including:

. actual or anticipated variations in quarterly operating results,

. announcements of technological innovations,

. new products or services offered by us or our competitors,

. changes in financial estimates by securities analysts,

. conditions or trends in our industry,

. our announcement of significant acquisitions, strategic partnerships,
joint ventures or capital commitments,

. additions or departures of key personnel, and

. sales of common stock by us or our stockholders.

In addition, the Nasdaq National Market, where many publicly held
telecommunications companies, including our company, are traded, often
experiences extreme price and volume fluctuations. These fluctuations often have
been unrelated or disproportionate to the operating performance of these
companies. The trading prices of many technology companies continue to trade at
multiples of earnings or revenues which are substantially above historic levels.
These trading prices and multiples may not be sustainable. These broad market
and industry factors may seriously harm the market price of our common stock,
regardless of our actual operating performance. In the past, following periods
of volatility in the market price of an individual company's securities,
securities class action litigation often has been instituted against that
company. This type of litigation, if instituted, could result in substantial
costs and a diversion of management's attention and resources.

PCTEL, Inc.

Item 3: Quantitative and Qualitative Disclosures about Market Risk

================================================================================

We are exposed to minimal market risks. We manage the sensitivity of our
results of operations to these risks by maintaining a conservative investment
portfolio, which is comprised solely of high-grade securities. We do not hold or
issue derivative, derivative commodity instruments or other financial
instruments for trading purposes. We are exposed to currency fluctuations, as we
sell our products internationally. We manage the sensitivity of our
international sales by denominating all transactions in U.S. dollars.

We may be exposed to interest rate risks, as we may use additional financing
to fund additional acquisitions and fund other capital expenditures. The
interest rate that we may be able to obtain on financings will depend on market
conditions at that time and may differ from the rates we have secured in the
past.

PCTEL, Inc.

Part II. Other Information
For the Three and Six months Ended June 30, 2000

================================================================================

Item 1 Legal Proceedings:

See Note 4 of Notes to the Consolidated Condensed Financial Statements.

Item 2 Changes in Securities and Use of Proceeds:

The effective date of PCTEL's registration statement on Form S-1 under
the Securities and Exchange Act of 1933 (No. 333-32570) was April 11,
2000, relating to our secondary public offering of our common stock. A
total of 650,000 shares of our common stock were sold at a price of
$46.50 per share to an underwriting syndicate led by Banc of America
Securities LLC, Warburg Dillon Read LLC, PaineWebber Incorporated,
Needham & Company, Inc and WR Hambrecht + Co. PCTEL received aggregate
gross proceeds of $30.2 million in connection with its secondary public
offering of 650,000 shares. The selling stockholders of PCTEL received
aggregate gross proceeds of $97.7 million from the 2,100,000 shares
sold. Of such amounts, approximately $6.4 million was paid to the
underwriters in connection with underwriting discounts, and
approximately $0.8 million was paid by PCTEL in connection with offering
expenses, including legal, accounting, printing, filing and other fees.
None of the offering proceeds have been used for the construction of
plant, buildings, or facilities or other purchase or installation of
machinery or equipment or for purchases of real estate or the
acquisition of other business. PCTEL is currently investing the net
offering proceeds for future use as additional working capital. Such
remaining net proceeds may be used for general corporate purposes,
including working capital, and for potential investments in and
acquisitions of complementary products, technologies or businesses.

None of the proceeds from the initial public offering have been used for
the construction of plant, buildings, or facilities or other purchase or
installation of machinery or equipment or for purchases of real estate
or the acquisition of other business. PCTEL is currently investing the
net offering proceeds for future use as additional working capital. Such
remaining net proceeds may be used for general corporate purposes,
including working capital, and for potential investments in and
acquisitions of complementary products, technologies or businesses.

During the second quarter of 2000, 589,751 shares of stock options were
exercised by employees and 558 warrants were exercised by third
parties.

Item 3 Defaults upon Senior Securities: None.

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

The 2000 Annual Meeting of the Stockholders of the Company was held on
May 15, 2000 in Milpitas, California. Peter Chen and Han Yeh were
elected to the Board of Directors. In addition, the following items were
acted upon:

1. Ratification of Arthur Andersen LLP as independent accountants for
the Company for the year ending December 31, 2000.

FOR: 10,353,728 AGAINST: 1,050,000 ABSTAIN: 1,285,000

Item 5 Other Information: None.

Item 6 Exhibits and reports on Form 8-K:

(a) Exhibits

Exhibit
Number Description
- ------- -----------

**2.1 Agreement and Plan of Reorganization dated as of February 23, 2000 by and among PCTEL, Inc.,
Voyager Technologies, Inc., VT Acquisition Corp. and certain shareholders of Voyager
Technologies, Inc.
*3.1 Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect
(Incorporated by reference to Exhibit 3.1 of the Company's Registration Statement on Form
S-1, Registration Statement No. 333-94707).
*3.2 Form of Amended and Restated Certificate of Incorporation of the Registrant to be filed
after the closing of the offering made under this Registration Statement (Incorporated by
reference to Exhibit 3.2 of the Company's Registration Statement on Form S-1, Registration
Statement No. 333-94707).
*3.3 Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibit 3.3 of
the Company's Registration Statement on Form S-1, Registration Statement No. 333-94707).
*4.1 Specimen common stock certificate (Incorporated by reference to Exhibit 4.1 of the Company's
Registration Statement on Form S-1, Registration Statement No. 333-94707).
*4.2 Warrant to purchase shares of Series C preferred stock of the Registrant issued to Pentech
Financial Services, Inc. (Incorporated by reference to Exhibit 4.2 of the Company's
Registration Statement on Form S-1, Registration Statement No. 333-94707).
*4.3 Warrant to purchase shares of Series C preferred stock of the Registrant issued to PFF Bank
and Trust, Inc. (Incorporated by reference to Exhibit 4.3 of the Company's Registration
Statement on Form S-1, Registration Statement No. 333-94707).
*4.4 Warrant to purchase shares of common stock of the Registrant issued to Edward Gibstein
(Incorporated by reference to Exhibit 4.4 of the Company's Registration Statement on Form
S-1, Registration Statement No. 333-94707).
*4.5 Warrant to purchase shares of common stock of the Registrant issued to Irving Minnaker
(Incorporated by reference to Exhibit 4.5 of the Company's Registration Statement on Form
S-1, Registration Statement No. 333-94707).
*4.6 Warrant to purchase shares of common stock of the Registrant issued to Mitchell Segal
(Incorporated by reference to Exhibit 4.6 of the Company's Registration Statement on Form
S-1, Registration Statement No. 333-94707).
*4.7 Warrant to purchase shares of common stock of the Registrant issued to State Street
Securities, Inc. (Incorporated by reference to Exhibit 4.7 of the Company's Registration
Statement on Form S-1, Registration Statement No. 333-94707).
*4.8 Amended and Restated Rights Agreement dated December 31, 1997 (Incorporated by reference to
Exhibit 4.8 of the Company's Registration Statement on Form S-1, Registration Statement No.
333-94707).
*4.9 Addendum to the Amended and Restated Rights Agreement by and between the Registrant and PFF
Bank and Trust, Inc. dated February 1, 1999 (Incorporated by reference to Exhibit 4.9 of the
Company's Registration Statement on Form S-1, Registration Statement No. 333-94707).
*4.10 Addendum to the Amended and Restated Rights Agreement by and between the Registrant and
Pentech Financial Services, Inc. dated February 1, 1999 (Incorporated by reference to
Exhibit 4.10 of the Company's Registration Statement on Form S-1, Registration Statement No.
333-94707).
*10.1 Form of Indemnification Agreement between PC-Tel and each of its directors and officers
(Incorporated by reference to Exhibit 10.1 of the Company's Registration Statement on Form
S-1, Registration Statement No. 333-94707).

*10.2 1995 Stock Option Plan and form of agreements thereunder (Incorporated by reference to
Exhibit 10.2 of the Company's Registration Statement on Form S-1, Registration Statement No.
333-94707).
*10.3 1997 Stock Option Plan, as amended and restated, August 3, 1999, and form of agreements
thereunder (Incorporated by reference to Exhibit 10.3 of the Company's Registration
Statement on Form S-1, Registration Statement No. 333-94707).
*10.4 1998 director option plan and form of agreements thereunder (Incorporated by reference to
Exhibit 10.4 of the Company's Registration Statement on Form S-1, Registration Statement No.
333-94707).
*10.5 1998 employee stock purchase plan and form of agreements thereunder (Incorporated by
reference to Exhibit 10.5 of the Company's Registration Statement on Form S-1, Registration
Statement No. 333-94707).
*10.6 Employment offer letter between Derek S. Obata and the Registrant dated March 31, 1998
(Incorporated by reference to Exhibit 10.6 of the Company's Registration Statement on Form
S-1, Registration Statement No. 333-94707).
*10.7 Employment offer letter between William F. Roach and the Registrant dated July 19, 1999
(Incorporated by reference to Exhibit 10.7 of the Company's Registration Statement on Form
S-1, Registration Statement No. 333-94707).
*10.8 Sublease between KLA-Tencor Corporation and the Registrant dated September 24, 1998
(Incorporated by reference to Exhibit 10.8 of the Company's Registration Statement on Form
S-1, Registration Statement No. 333-94707).
*10.9 Commercial Security Agreement by and between the Registrant and PPF Bank and Trust and
related documents (Incorporated by reference to Exhibit 10.9 of the Company's Registration
Statement on Form S-1, Registration Statement No. 333-94707).
*10.10 Asset Purchase Agreement by and among PC-Tel, Inc., PC-Tel Global Technologies, Ltd. And
General Datacomm, Inc. dated as of December 22, 1998 (Incorporated by reference to Exhibit
10.10 of the Company's Registration Statement on Form S-1, Registration Statement No.
333-94707).
*10.11 Escrow Agreement by and between the Registrant and General DataComm, Inc. dated December 22,
1998 (Incorporated by reference to Exhibit 10.11 of the Company's Registration Statement on
Form S-1, Registration Statement No. 333-94707).
*10.12 Bonus Pool Disbursement Agreement by and between the Registrant and General DataComm, Inc.
dated December 22, 1998 (Incorporated by reference to Exhibit 10.12 of the Company's
Registration Statement on Form S-1, Registration Statement No. 333-94707).
*10.13 Form of Acquisition Bonus Agreement by and between the Registrant and General DataComm, Inc.
dated on December 22, 1998 (Incorporated by reference to Exhibit 10.13 of the Company's
Registration Statement on Form S-1, Registration Statement No. 333-94707).
*10.14 Direct Sales Agreement by and between PC-Tel Global Technologies, Ltd. and Kawasaki LSI
U.S.A. dated December 4, 1998 (Incorporated by reference to Exhibit 10.14 of the Company's
Registration Statement on Form S-1, Registration Statement No. 333-94707).
*10.15 Volume Purchase Agreement dated June 1, 1998 by and between Silicon Laboratories, Inc. and
the Registrant (Incorporated by reference to Exhibit 10.15 of the Company's Registration
Statement on Form S-1, Registration Statement No. 333-94707).
***10.16 Lease agreement dated September 17, 1999 between PC-Tel, Inc. and Sun Microsystems, Inc. for
an office building located at 1331 California Circle, Milpitas, CA 95035 (Incorporated by
reference to Exhibit 10.16 of the Company's Form 10-Q for the quarter ended September 30,
1999).

27.1 Financial Data Schedule for the six months ended June 30, 2000.
- --------------------

* Incorporated by reference herein to the Registration Statement of Form
S-1 and all amendments thereto filed with the Securities and Exchange
Commission on August 6, 1999 and declared effective October 19, 1999.

** Incorporated by reference herein to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on March 10, 2000.

*** Incorporated by reference herein to the quarterly report on Form 10-Q for
the period ended September 30, 1999.

SIGNATURES

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

PCTEL, Inc.
A Delaware Corporation
(Registrant)

August 14, 2000 /s/ Andrew Wahl
-------------------------------------------
Andrew Wahl
Vice President, Finance and Chief Financial Officer
(principal financial and accounting officer)

EXHIBIT INDEX

27.1 Financial Data Schedule