<PAGE>

   As filed with the Securities and Exchange Commission on October 28, 1999
                                                    Registration No. 333-
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC 20549
                               ----------------
                                   FORM S-1
                            REGISTRATION STATEMENT
                                     Under
                          The Securities Act of 1933
                               ----------------

                                PHONE.COM, INC.

            (Exact Name of Registrant as Specified in Its Charter)
                               ----------------

<TABLE>
 <S>               <C>                           <C>
     Delaware                  3661                       94-3219054
 (State or Other
 Jurisdiction of   (Primary Standard Industrial        (I.R.S. Employer
 Incorporation or
  Organization)     Classification Code Number)      Identification Number)
</TABLE>
                               ----------------
                             800 Chesapeake Drive
                        Redwood City, California 94063
                                (650) 562-0200
  (Address, Including Zip Code, and Telephone Number, Including Area Code, of
                   Registrant's Principal Executive Offices)
                               ----------------
                                Alain Rossmann
                     Chairman and Chief Executive Officer
                                Phone.com, Inc.
                             800 Chesapeake Drive
                        Redwood City, California, 94063
                                (650) 562-0200
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
                             of Agent for Service)

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

                                  Copies to:
           Mark A. Medearis                       Mark A. Bertelsen
             Edward Y. Kim                         Jose F. Macias
            Anita Vasudevan                           Jon Avina
           Venture Law Group                        Elise Brinck
      A Professional Corporation          Wilson Sonsini Goodrich & Rosati
          2775 Sand Hill Road                 Professional Corporation
         Menlo Park, CA 94025                    650 Page Mill Road
                               ----------------  Palo Alto, CA 94304

   Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
                               ----------------

   If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
   If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
   If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
   If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
   If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

                        CALCULATION OF REGISTRATION FEE
<TABLE>
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
<CAPTION>
                                                                    Proposed
                                                     Proposed       Maximum
                                       Amount        Maximum       Aggregate      Amount Of
     Title Of Each Class Of            To Be      Offering Price    Offering     Registration
   Securities To Be Registered     Registered(1)   Per Unit(2)      Price(2)         Fee
---------------------------------------------------------------------------------------------
<S>                                <C>            <C>            <C>            <C>
Common stock, par value $.001...      3,795,000      $208.22      $790,194,900     $219,675
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 495,000 shares of common stock issuable upon exercise of the
    Underwriters' over-allotment option.
(2) Estimated solely for the purpose of computing the amount of the
    registration fee, based on the average of the high and low prices for the
    Company's Common Stock as reported on The Nasdaq National Market on
    October 27, 1999 in accordance with Rule 457 under the Securities Act.

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

   The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained herein is subject to completion or amendment. A         +
+registration statement relating to these securities has been filed with the   +
+Securities and Exchange Commission. These securities may not be sold nor may  +
+offers to buy be accepted prior to the time the registration statement        +
+becomes effective. This prospectus shall not constitute an offer to sell or   +
+the solicitation of an offer to buy nor shall there be any sale of these      +
+securities in any State in which such offer, solicitation or sale would be    +
+unlawful prior to the registration or qualification under the securities laws +
+of any such State.                                                            +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
                  SUBJECT TO COMPLETION DATED OCTOBER 28, 1999

                                3,300,000 Shares

                                     [LOGO]

                                Phone.com, Inc.

                                  Common Stock

                                   --------

  We are selling 1.0 million shares of common stock and the selling
stockholders are selling 2.3 million shares of common stock. We will not
receive any of the proceeds from shares sold by the selling stockholders.

  The underwriters have an option to purchase a maximum of 495,000 additional
shares to cover over-allotments of shares.

  Our shares are listed for trading on the Nasdaq National Market under the
symbol "PHCM." On October 27, 1999, the last reported sales price for our
common stock on the Nasdaq National Market was $205.75 per share.

  Investing in the common stock involves risks. See "Risk Factors" starting on
page 8.

<TABLE>
<CAPTION>
                                          Underwriting              Proceeds to
                                 Price to Discounts and Proceeds to   Selling
                                  Public   Commissions   Phone.com  Stockholders
                                 -------- ------------- ----------- ------------
<S>                              <C>      <C>           <C>         <C>
Per Share.......................
Total...........................
</TABLE>

  The shares of common stock will be delivered on or about      , 1999.

  Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

Credit Suisse First Boston                                 Goldman, Sachs & Co.

Hambrecht & Quist

                               Robertson Stephens

                                                      U.S. Bancorp Piper Jaffray

                   The date of this prospectus is     , 1999
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                      Page
                                      ----
<S>                                   <C>
Prospectus Summary..................    4
Risk Factors........................    8
Special Note Regarding Forward-
 Looking Statements.................   17
Use of Proceeds.....................   18
Price Range of Common Stock.........   18
Dividend Policy.....................   18
Additional Information About
 Phone.com..........................   18
Capitalization......................   19
Dilution............................   20
Selected Consolidated Financial
 Data...............................   21
Management's Discussion and Analysis
 of Financial Condition and Results
 of Operations......................   22
</TABLE>
<TABLE>
<CAPTION>
                                      Page
                                      ----
<S>                                   <C>
Business............................   35
Management..........................   51
Certain Transactions................   61
Principal and Selling Stockholders..   63
Description of Capital Stock........   65
Shares Eligible for Future Sale.....   67
Underwriting........................   69
Notice to Canadian Residents........   71
Legal Matters.......................   72
Experts.............................   72
Where You Can Find More
 Information........................   72
Index to Consolidated Financial
 Statements.........................  F-1
</TABLE>

                                       3
<PAGE>


                               PROSPECTUS SUMMARY

   This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all the information you
should consider before buying shares in this offering. You should read the
entire prospectus carefully.

                                Phone.com, Inc.

   We are a leading provider of software that enables the delivery of Internet-
based services to mass-market wireless telephones. Using our software, network
operators can provide Internet-based services to their wireless subscribers,
and wireless telephone manufacturers can turn their mass-market wireless
telephones into mobile Internet appliances. Wireless subscribers thus have
access to Internet- and corporate intranet-based services, including email,
news, stocks, weather, travel and sports. In addition, subscribers have access
via their wireless telephones to network operators' intranet-based telephony
services, which may include over-the-air activation, call management, billing
history information, pricing plan subscription and voice message management.
Our software platform consists of the UP.Link Server Suite, which is installed
on network operators' systems, and UP.Browser, which is embedded in wireless
telephones.

   In September 1999, we announced MyPhone, our mobile Internet portal platform
that enables network operators to rapidly deploy branded portal sites for their
wireless subscribers. With MyPhone, network operators can provide their
subscribers with a customized set of information services and applications that
are optimized for the mobile user, thereby enhancing subscriber loyalty and
capturing new revenue opportunities.

   We were a pioneer in the convergence of the Internet and mobile telephony.
To provide a worldwide standard for the delivery of Internet-based services
over mass-market wireless telephones, we formed the Wireless Application
Protocol Forum in close cooperation with co-founders Ericsson, Motorola and
Nokia. In April 1998, the WAP Forum published technical specifications for
application development and product interoperability, substantial portions of
which are based on our technology and on Internet standards. Over 150 leading
network operators, telecommunications device and equipment manufacturers, and
software and services companies worldwide have joined the WAP Forum as of
September 1999.

   We focus on selling our UP.Link Server Suite and related technical support
to network operators to enable them to offer a variety of wireless Internet-
based services to their subscribers. The UP.Link Server Suite includes (1) a
means of exchanging data between the Internet and mass-market wireless
telephones, commonly referred to as a gateway; (2) a service platform that
performs subscriber management and service provisioning functions and
communicates with the network operator's customer care and billing systems; and
(3) Internet-based wireless applications such as email and personal information
management software. As of August 1999, 31 network operators have licensed our
software and have commenced or announced commercial service or are in market or
laboratory trials. Our current network operator customers include:

   . AT&T Wireless Services             .  Mannesmann Mobilfunk (D2)
   . Bell Atlantic Mobile               .  Nextel Communications
   . GTE Wireless                       .  Southern LINC
   . SFR/CEGETEL                        .  Shinsegi Telecom
   . DDI Corporation                    .  US West
   . IDO Corporation                    .  Telstra Corporation
   . Bell Mobility                      .  Deutsche Telekom Mobilnet GmbH (T-
   . LG Telecom                            Mobile)
   . Omnitel                            .  France Telecom Mobile
   . Sprint PCS                         .  Telecom Italia Mobile


                                       4
<PAGE>

   The UP.Browser is a browser and messaging software product that is
specifically designed for mass-market wireless telephones. We license our
UP.Browser software to wireless telephone manufacturers, who embed UP.Browser
into their products. In order to encourage these manufacturers to include
UP.Browser in their wireless telephone models, no per-unit royalty is charged.
As of September 1999, 25 wireless telephone manufacturers have licensed
UP.Browser, including:

   . Alcatel                            .  Neopoint
   . Bosch                              .  Nokia
   . Casio                              .  Panasonic (Matsushita)
   . Hitachi                            .  Philips
   . Hyundai Electronics                .  Qualcomm
   . IGS                                .  Sagem
   . Kyocera                            .  Samsung Electronics
   . LG Information & Communications    .  Sharp
   . Mitsubishi                         .  Siemens
   . Motorola                           .  Sony
   . NEC                                .  Toshiba
                                        .  3Com (Palm Computing division)

In addition, Ericsson has announced that it will introduce wireless telephones
that will be interoperable with the UP.Link Server Suite.

   Our principal executive offices are located at 800 Chesapeake Drive, Redwood
City, California 94063, and our telephone number is (650) 562-0200.

Recent Developments

   In October 1999, we completed the acquisition of the outstanding share
capital of APiON Telecoms Ltd., a company based in Belfast, Northern Ireland.
APiON is a provider of WAP software products to GSM network operators in Europe
and has expertise in GSM Intelligent Networks, wireless data and WAP
technology. APiON has commercial relationships with a number of GSM network
operators in Europe including Swisscom and Sonora Ltd. In connection with this
transaction, we acquired all of the outstanding shares of capital stock of
APiON in exchange for an aggregate of approximately 1,196,513 shares of our
common stock. A portion of these shares are held in escrow for a period of one
year to indemnify us against potential liabilities of APiON and its former
shareholders. In addition, we also agreed to issue cash and common stock with
an aggregate value of up to $14.1 million to current and former employees of
APiON. A more detailed description of the transaction is provided in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

   On October 21, 1999, we announced our operating results for the quarter
ended September 30, 1999. Total revenues were $8.5 million for the quarter,
while net loss was $4.9 million, or $0.16 per share. Deferred revenue was $38.4
million as of September 30, 1999. As of September 30, 1999, we had cash and
short-term investments of $117.8 million, total assets of $136.8 million and
total stockholders' equity of $87.6 million.

                                       5
<PAGE>


                                  The Offering

<TABLE>
<S>                                 <C>
Common stock offered............... 3,300,000 shares (comprised of 1,000,000
                                    shares offered by Phone.com and 2,300,000
                                    shares offered by selling stockholders, of
                                    which 500,000 shares are being offered by
                                    former APiON shareholders)
Common stock to be outstanding
 after this offering............... 32,213,094 shares
                                    Working capital and general corporate
Use of proceeds.................... purposes
Nasdaq National Market symbol...... PHCM
</TABLE>

   This table is based on shares outstanding as of June 30, 1999. This table
excludes:

  .  4,751,189 shares subject to outstanding options at a weighted average
     exercise price of $6.35 per share as of June 30, 1999,
  .  31,486 shares issuable upon exercise of outstanding warrants at a
     weighted average exercise price of $3.81 per share as of June 30, 1999,
  .  an aggregate of 4,136,826 shares available for future issuance under our
     1995 Stock Plan, 1996 Stock Plan, 1999 Directors' Stock Option Plan and
     1999 Employee Stock Purchase Plan as of June 30, 1999,
  .  1,196,513 shares issued in October 1999 to former APiON shareholders in
     connection with the APiON acquisition.

                                       6
<PAGE>


                      Summary Consolidated Financial Data

<TABLE>
<CAPTION>
                                                       Year Ended June 30,
                                           -----------------------------------------------
                            December 16,                                      1999
                          1994 (Inception)                             -------------------
                          to June 30, 1995  1996     1997      1998     Actual   Pro Forma
                          ---------------- -------  -------  --------  --------  ---------
                                (In thousands, except per share data)
<S>                       <C>              <C>      <C>      <C>       <C>       <C>
Consolidated Statements
 of Operations Data:
Revenues:
  License...............      $    --      $    --  $    80  $    522  $  5,229  $   5,229
  Maintenance and
   support services.....           --           --      212     1,683     5,921      5,921
  Consulting services...           --           --       --        --     2,292      2,292
                              -------      -------  -------  --------  --------  ---------
    Total revenues......           --           --      292     2,205    13,442     13,442
                              -------      -------  -------  --------  --------  ---------
Gross profit (loss).....           --           --      (61)    1,047     8,903      8,903
Stock-based
 compensation...........           --           --       --       108     1,011      4,832
Amortization of goodwill
 and other intangible
 assets.................           --           --       --        --        --     81,512
Other operating
 expenses...............          103        2,666    8,394    12,544    28,354     29,438
                              -------      -------  -------  --------  --------  ---------
Operating loss..........         (103)      (2,666)  (8,455)  (11,605)  (20,462)  (106,879)
                              -------      -------  -------  --------  --------  ---------
Net loss................      $  (103)     $(2,470) $(7,991) $(10,623) $(20,763) $(107,327)
                              =======      =======  =======  ========  ========  =========
Basic and diluted net
 loss per share.........      $ (0.02)     $ (0.53) $ (1.67) $  (2.03) $  (2.98) $  (13.15)
                              =======      =======  =======  ========  ========  =========
Shares used in computing
 basic and diluted net
 loss per share.........        4,671        4,704    4,776     5,221     6,966      8,162
                              =======      =======  =======  ========  ========  =========
</TABLE>

<TABLE>
<CAPTION>
                                                        June 30, 1999
                                                ------------------------------
                                                 Actual  Pro Forma As Adjusted
                                                -------- --------- -----------
<S>                                             <C>      <C>       <C>
Consolidated Balance Sheet Data:
Cash, cash equivalents and short-term
 investments................................... $113,086 $102,789     $
Total assets...................................  138,933  376,736
Equipment loan and capital lease obligations,
 less current portion..........................      498      579       579
Total stockholders' equity.....................   92,292  328,256
</TABLE>
--------
See Note 1 of Notes to Consolidated Financial Statements for an explanation of
the method used to determine the number of shares used to compute the net loss
per share amounts.

   The pro forma consolidated statements of operations data for the year ended
June 30, 1999 and the pro forma consolidated balance sheet data as of June 30,
1999 summarized above have been derived from the unaudited Pro Forma Combined
Condensed Financial Statements contained elsewhere in this prospectus. The pro
forma combined condensed balance sheet data assumes that the APiON acquisition
took place on June 30, 1999 and combines Phone.com's consolidated balance sheet
data as of June 30, 1999 with the WAP Business of APiON's statement of assets
acquired and liabilities assumed data as of March 31, 1999. The pro forma
combined condensed statement of operations data assumes the acquisition took
place on July 1, 1998 and combines Phone.com's consolidated statement of
operations data for the year ended June 30, 1999 with the WAP Business of
APiON's statement of operations data for the year ended March 31, 1999.

   The as adjusted numbers in the table above are adjusted to give effect to
receipt of the net proceeds from the sale of shares of common stock offered by
us at the assumed public offering price of $    per share after deducting the
underwriting discounts and commissions and estimated offering expenses payable
by us. See also "Use of Proceeds," "Capitalization" and "Underwriting."

   Except as otherwise noted herein, all information in this prospectus assumes
no exercise of the underwriters' over-allotment option. In addition, the
information in this prospectus does not give effect to our proposed two-for-one
stock split, which will be effected through a stock dividend to all
stockholders of record as of October 29, 1999.

                                       7
<PAGE>

                                  RISK FACTORS

   You should carefully consider the following risks before making an
investment decision. The risks described below are intended to highlight risks
that are specific to us and are not the only ones that we face. Additional
risks and uncertainties, such as those that generally apply to our industry or
to companies that have recently undertaken initial public offerings, also may
impair our business operations. You should also refer to the other information
set forth in this prospectus, including the discussions set forth in "Special
Note Regarding Forward-Looking Statements," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business," as
well as our consolidated financial statements and the related notes. You should
rely only on the information contained in this document. We have not authorized
anyone to provide you with information that is different. The information in
this document may only be accurate on the date of this document.

   This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in the forward-looking statements as a result of factors that are
described below and elsewhere in this prospectus. See "Special Note Regarding
Forward-Looking Statements."

Our future profitability is uncertain because we have a limited operating
history.

   Because we commenced operations in December 1994 and commercially released
our first products in June 1996, we only have a limited operating history on
which you can base your evaluation of our business. We may not continue to grow
or achieve profitability. We face a number of risks encountered by early stage
companies in the wireless telecommunications and Internet software industries,
including:

  . our need for network operators to launch and maintain commercial services
    utilizing our products;
  . the uncertainty of market acceptance of commercial services utilizing our
    products;
  . our substantial dependence on products with only limited market
    acceptance to date;
  . our need to introduce reliable and robust products that meet the
    demanding needs of network operators and wireless telephone
    manufacturers;
  . our need to expand our marketing, sales, consulting and support
    organizations, as well as our distribution channels;
  . our ability to anticipate and respond to market competition;
  . our need to manage expanding operations; and
  . our dependence upon key personnel.

   Our business strategy may not be successful, and we may not successfully
address these risks. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview."

We may not achieve or sustain our revenue or profit goals.

   Because we expect to continue to incur significant product development,
sales and marketing, and administrative expenses, we will need to generate
significant revenues to become profitable and sustain profitability on a
quarterly or annual basis. We may not achieve or sustain our revenue or profit
goals, and our ability to do so depends on a number of factors outside of our
control, including the extent to which:

  . there is market acceptance of commercial services utilizing our products;
  . our competitors announce and develop, or lower the prices of, competing
    products; and
  . our strategic partners dedicate resources to selling our products and
    services.

   As a result, we may not be able to increase revenue or achieve profitability
on a quarterly or annual basis. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview."

                                       8
<PAGE>

Our quarterly operating results are subject to significant fluctuations, and
our stock price may decline if we do not meet expectations of investors and
analysts.

   Our quarterly revenues and operating results are difficult to predict and
may fluctuate significantly from quarter to quarter due to a number of factors,
some of which are outside of our control. These factors include, but are not
limited to:

  . delays in market acceptance or implementation by our customers of our
    products and services;

  . changes in demand by our customers for additional products and services;

  . our lengthy sales cycle, our concentrated target market and the
    potentially substantial effect on total revenues that may result from the
    gain or loss of business from each incremental network operator customer;

  . introduction of new products or services by us or our competitors;

  . delays in developing and introducing new products and services;

  . changes in our pricing policies or those of our competitors or customers;

  . changes in our mix of domestic and international sales;

  . risks inherent in international operations;

  . changes in our mix of license, consulting and maintenance and support
    services revenues;

  . changes in accounting standards, including standards relating to revenue
    recognition, business combinations and stock-based compensation; and

  . the impact of year 2000 concerns on the timing of capital expenditures by
    network operators and their launches of commercial services utilizing our
    products and services.

   Our sales cycle, which is lengthy--typically between nine and twelve
months--contributes to fluctuations in our quarterly operating results. Many
factors outside our control add to the lengthy education and customer approval
process for our products. For example, many of our prospective customers have
neither budgeted expenses for the provision of Internet-based services to
wireless subscribers nor specifically dedicated personnel for the procurement
and implementation of our products and services. Further, the emerging and
evolving nature of the market for Internet-based services via wireless
telephones may lead prospective customers to postpone their purchasing
decisions. In addition, general concerns regarding year 2000 compliance may
further delay purchase decisions by prospective customers.

   Most of our expenses, such as employee compensation and lease payments for
facilities and equipment, are relatively fixed. In addition, our expense levels
are based, in part, on our expectations regarding future revenues. As a result,
any shortfall in revenues relative to our expectations could cause significant
changes in our operating results from quarter to quarter. Due to the foregoing
factors, we believe period to period comparisons of our revenue levels and
operating results are not meaningful. You should not rely on our quarterly
revenues and operating results to predict our future performance.

We may be unable to successfully integrate APiON into our business or achieve
the expected benefits of the APiON acquisition.

   Our acquisition of APiON, which was completed in October 1999, will require
integrating the business and operations of APiON with our company. We may not
be able to successfully assimilate the personnel, operations and customers of
APiON into our business. Additionally, we may fail to achieve the anticipated
synergies from the acquisition of APiON, including marketing, product
development, distribution and other operational synergies.

                                       9
<PAGE>

   The integration process may further strain our existing financial and
managerial controls and reporting systems and procedures. This may result in
the diversion of management and financial resources from our core business
objectives. In addition, we are not experienced in managing significant
facilities or operations in geographically distant areas. Finally, we cannot be
certain that we will be able to retain APiON's key employees.

Our sales cycle is long, and our stock price could decline if sales are delayed
or cancelled.

   Quarterly fluctuations in our operating performance are exacerbated by our
sales cycle, which is lengthy, typically between nine and twelve months, and
unpredictable. Because our products represent a significant capital investment
for our customers, we spend a substantial amount of time educating customers
regarding the use and benefits of our products and they in turn spend a
substantial amount of time performing internal reviews and obtaining capital
expenditure approvals before purchasing our products. Any delay in sales of our
products could cause our quarterly operating results to vary significantly from
projected results, which could cause our stock price to decline. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Results of Operations."

Our success depends on acceptance of our products and services by network
operators and their subscribers.

   From inception through June 30, 1999, 34% of our total cumulative revenues
have come from fees paid to us by wireless telephone manufacturers that embed
our browser in their wireless telephones. However, our future success depends
on our ability to increase revenues from sales of our UP.Link Server Suite
software and related services to new and existing network operator customers
and on market acceptance of new products and services, and we may not be able
to achieve widespread adoption by these customers. This dependence is
exacerbated by the relatively small number of network operators worldwide. To
date, we currently have only a limited number of network operator customers,
including AT&T Wireless Services, Bell Atlantic Mobile, DDI, GTE Wireless, IDO,
SFR/Cegetel and Sprint, that have implemented and deployed services based on
our products. We cannot assure you that network operators will widely deploy or
successfully market services based on our products, or that large numbers of
subscribers will use these services. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Overview."

The market for the delivery of Internet-based services through wireless
telephones is rapidly evolving, and we may not be able to adequately address
this market.

   The market for the delivery of Internet-based services through wireless
telephones is rapidly evolving and is characterized by an increasing number of
market entrants that have introduced or developed, or are in the process of
introducing or developing, products that facilitate the delivery of Internet-
based services through wireless telephones. As a result, the life cycle of our
products is difficult to estimate. We may not be able to develop and introduce
new products, services and enhancements that respond to technological changes
or evolving industry standards on a timely basis, in which case our business
would suffer. In addition, we cannot predict the rate of adoption by wireless
subscribers of these services or the price they will be willing to pay for
these services. As a result, it is extremely difficult to predict the pricing
of these services and the future size and growth rate of this market.

   Our network operator customers face implementation and support challenges in
introducing Internet-based services via wireless telephones, which may slow
their rate of adoption or implementation of the services our products enable.
Historically, network operators have been relatively slow to implement new
complex services such as Internet-based services. In addition, network
operators may encounter greater customer service demands to support Internet-
based services via wireless telephones than they do for their traditional voice
services. We have limited or no control over the pace at which network
operators implement these new services. The failure of network operators to
introduce and support services utilizing our products in a timely and effective
manner could harm our business. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview."

                                       10
<PAGE>

To date, we have relied on sales to a small number of customers, some of whom
are our stockholders, and the failure to retain these customers or add new
customers may harm our business.

   To date, a significant portion of our revenues in any particular period has
been attributable to a limited number of customers, comprised primarily of
network operators and wireless telephone manufacturers, some of whom are our
stockholders. We believe that we will continue to depend upon a limited number
of customers for a significant portion of our revenues for each quarter for the
foreseeable future. Any failure by us to capture a significant share of those
customers could materially harm our business. For example, during the fiscal
year ended June 30, 1998, AT&T Wireless Services, which owned approximately
2.5% of our common stock as of June 30, 1999, and Matsushita Communication
Industrial accounted for approximately 22% and 18%, respectively, of our total
revenues. For the fiscal year ended June 30, 1999, AT&T Wireless Services
accounted for approximately 17% of our total revenues, and DDI Corporation,
which owned approximately 0.6% of our common stock as of June 30, 1999,
accounted for approximately 14% of our total revenues. The foregoing
calculations are based on revenues derived from direct and indirect sales to
these customers.

If wireless telephones are not widely adopted for mobile delivery of Internet-
based services, our business could suffer.

   We have focused our efforts on mass-market wireless telephones as the
principal means of delivery of Internet-based services using our products. If
wireless telephones are not widely adopted for mobile delivery of Internet-
based services, our business would suffer materially. Mobile individuals
currently use many competing products, such as portable computers, to remotely
access the Internet and email. These products generally are designed for the
visual presentation of data, while wireless telephones historically have been
limited in this regard. If mobile individuals do not adopt wireless telephones
as a means of accessing Internet-based services, our business would suffer. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview."

If widespread integration of browser technology does not occur in wireless
telephones, our business could suffer.

   Because our current UP.Link Server Suite software offers enhanced features
and functionality that are not currently covered by the specifications
promulgated by the WAP Forum, subscribers currently must use UP.Browser-enabled
wireless telephones in order to fully utilize these features and functionality.
Additionally, we expect that future versions of our UP.Link Server Suite
software will offer features and functionality that are compatible with the
specifications promulgated by the WAP Forum. Our business could suffer
materially if widespread integration of UP.Browser or WAP-compliant third party
browser software in wireless telephones does not occur. Recently, a number of
manufacturers have delayed commercial release of WAP-compliant wireless
telephones, particularly affecting European and other markets based on the GSM
standard. All of our agreements with wireless telephone manufacturers are
nonexclusive, so they may choose to embed a browser other than ours in their
wireless telephones. We may not succeed in maintaining and developing
relationships with telephone manufacturers, and any arrangements may be
terminated early or not renewed at expiration. In addition, wireless telephone
manufacturers may not produce products using UP.Browser in a timely manner and
in sufficient quantities, if at all. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Overview."

Our strategy for the MyPhone service is subject to uncertainties, and we may
not be able to achieve market acceptance of the service.

   In September 1999, we announced our MyPhone service. The MyPhone service
will be used by network operator customers on a trial basis beginning in late
1999. We intend to offer MyPhone as an OEM service to enable network operators
to create branded mobile Internet portals for their subscribers, and we do not
currently intend to develop our own branded portal site. We have limited
experience in developing mobile Internet portals, and we may not be successful
in executing our business strategy for the MyPhone service. The

                                       11
<PAGE>

success of MyPhone will depend on a number of factors, including the adoption
of MyPhone by network operators, our ability to establish strong relationships
with content and information service providers, our ability to provide
compelling applications and services through MyPhone and the acceptance by
wireless subscribers of the MyPhone service. Developing these capabilities and
commercializing this service will require us to incur significant additional
expenses, including costs relating to operating the portal, as well as sales
and marketing and research and development expenses. We expect to incur these
costs and expenses in advance of generating revenues from this service.
Furthermore, our business model for MyPhone is new and evolving. Even if we are
successful in executing this strategy, we cannot be certain that our business
model for the MyPhone service will result in significant revenues or
profitability.

The market for our products and services is highly competitive.

   The market for our products and services is becoming increasingly
competitive. The widespread adoption of open industry standards such as the WAP
specifications may make it easier for new market entrants and existing
competitors to introduce products that compete with our software products. In
addition, a number of our competitors, including Nokia, have announced or are
expected to announce enhanced features and functionality as proprietary
extensions to the WAP protocol. Furthermore, some of our competitors, such as
NTT, have introduced or may introduce services based on proprietary wireless
protocols that are not compliant with the WAP specifications.

   We expect that we will compete primarily on the basis of price, time to
market, functionality, quality and breadth of product and service offerings.
Our current and potential competitors include the following:

  . Wireless equipment manufacturers, such as Ericsson and Nokia;
  . Microsoft;
  . Wireless Knowledge, a joint venture of Microsoft and Qualcomm;
  . Systems integrators, such as CMG plc, and software companies, such as
    Oracle Corporation;
  . Wireless network operators, such as NTT DoCoMo; and
  . Providers of Internet software applications and content, electronic
    messaging applications and personal information management software
    solutions.

   In particular, Microsoft Corporation has announced its intention to
introduce products and services that may compete directly with our UP.Link,
UP.Browser and UP.Application products. In addition, Microsoft has announced
that it intends to enable its Windows CE operating system to run on wireless
handheld devices, including wireless telephones, and to develop and market its
own browser for these devices. Furthermore, Nokia is marketing a WAP server to
corporate customers and content providers. This WAP server is designed to
enable wireless telephone subscribers to directly access applications and
services provided by these customers, rather than through gateways provided by
network operators' WAP servers. If Nokia's WAP server is widely adopted by
corporate customers and content providers, it could undermine the need for
network operators to purchase WAP servers. Many of our existing competitors, as
well as potential competitors, have substantially greater financial, technical,
marketing and distribution resources than we do.

   As we enter new markets and introduce new services, such as the MyPhone
service, we will face additional competitors. These competitors may include
telecommunications companies such as Lucent Technologies, traditional Internet
portals such as AOL, InfoSpace, Microsoft and Yahoo!, Internet infrastructure
software companies and several private mobile Internet portal companies. See
"Business--Competition."

Our software products may contain defects or errors, and shipments of our
software may be delayed.

   The software we develop is complex and must meet the stringent technical
requirements of our customers. We must develop our products quickly to keep
pace with the rapidly changing Internet software and telecommunications
markets. Software products and services as complex as ours are likely to
contain undetected errors or defects, especially when first introduced or when
new versions are released. We have in

                                       12
<PAGE>

the past experienced delays in releasing some versions of our products until
software problems were corrected. Our products may not be free from errors or
defects after commercial shipments have begun, which could result in the
rejection of our products and damage to our reputation, as well as lost
revenues, diverted development resources, and increased service and warranty
costs, any of which could harm our business. See "Business--Research and
Product Development."

We depend on recruiting and retaining key management and technical personnel
with telecommunications and Internet software experience.

   Because of the technical nature of our products and the dynamic market in
which we compete, our performance depends on attracting and retaining key
employees. In particular, our future success depends in part on the continued
services of each of our current executive officers. We currently maintain key
person life insurance policies for Alain Rossmann, our Chief Executive Officer,
and Charles Parrish, our Executive Vice President. We are seeking to hire a
Vice President of Worldwide Sales and a general manager of the MyPhone service.
Competition for qualified personnel in the telecommunications and Internet
software industries is intense, and finding qualified personnel with experience
in both industries is even more difficult. We believe that there are only a
limited number of persons with the requisite skills to serve in many key
positions, and it is becoming increasingly difficult to hire and retain these
persons. Competitors and others have in the past, and may in the future,
attempt to recruit our employees. See "Business--Employees."

We may fail to support our anticipated growth in operations.

   To succeed in the implementation of our business strategy, we must rapidly
execute our sales strategy and further develop products and expand service
capabilities, while managing anticipated growth by implementing effective
planning and operating processes. If we fail to manage our growth effectively,
our business could suffer materially. To manage anticipated growth, we must:

  . continue to implement and improve our operational, financial and
    management information systems; for example, we are currently in the
    process of implementing Oracle financial software;
  . hire, train and retain additional qualified personnel;
  . continue to expand and upgrade core technologies; and
  . effectively manage multiple relationships with various network operators,
    wireless telephone manufacturers, content providers, applications
    developers and other third parties.

   Our systems, procedures and controls may not be adequate to support our
operations, and our management may not be able to achieve the rapid execution
necessary to exploit the market for our products and services. See "Business--
Employees."

Our success, particularly in international markets, depends in part on our
ability to maintain and expand our distribution channels.

   Our success depends in part on our ability to increase sales of our products
and services through value-added resellers and systems integrators and to
expand our indirect distribution channels. If we are unable to maintain the
relationships that we have with our existing distribution partners, increase
revenues derived from sales through our indirect distribution channels, or
increase the number of distribution partners with whom we have relationships,
then we may not be able to increase our revenues or achieve profitability.

   To date, the majority of our revenues from international markets have
resulted from our direct sales efforts. We expect that network operators in
international markets generally will require that our products and support
services be supplied through value-added resellers and systems integrators.
Thus, we expect that a significant portion of international sales will be made
through value-added resellers and systems integrators, and the success of our
international operations will depend on our ability to maintain productive
relationships with value-added resellers and systems integrators.

   In addition, our agreements with our distribution partners do not restrict
the sale by them of products and services that are competitive with our
products and services, and each of our partners generally can cease

                                       13
<PAGE>

marketing our products and services at their option and, in some circumstances,
with little notice and with little or no penalty. See "Business--Sales and
Marketing."

We depend on others to provide content and develop applications for wireless
telephones.

   In order to increase the value to customers of our product platform and
encourage subscriber demand for Internet-based services via wireless
telephones, we must successfully promote the development of Internet-based
applications and content for this market. If content providers and application
developers fail to create sufficient applications and content for Internet-
based services via wireless telephones, our business could suffer materially.
Our success in motivating content providers and application developers to
create and support content and applications that subscribers find useful and
compelling will depend, in part, on our ability to develop a customer base of
network operators and wireless telephone manufacturers large enough to justify
significant and continued investments in these endeavors. See "Business--
Research and Product Development" and "--Sales and Marketing."

If we are unable to integrate our products with third-party technology, such as
network operators' systems, our business may suffer.

   Our products are integrated with network operators' systems and wireless
telephones. If we are unable to integrate our platform products with these
third-party technologies, our business could suffer materially. For example,
if, as a result of technology enhancements or upgrades of these systems or
telephones, we are unable to integrate our products with these systems or
telephones, we could be required to redesign our software products. Moreover,
many network operators use legacy, or custom-made, systems for their general
network management software. Legacy systems are typically very difficult to
integrate with new server software such as our UP.Link Server Suite. We may not
be able to redesign our products or develop redesigned products that achieve
market acceptance. See "Business--Research and Product Development."

An interruption in the supply of software that we license from third parties
could cause a decline in product sales.

   We license technology that is incorporated into our products from third
parties, such as RSA Data Security, Inc. and other companies. Any significant
interruption in the supply of any licensed software could cause a decline in
product sales, unless and until we are able to replace the functionality
provided by this licensed software. We also depend on these third parties to
deliver and support reliable products, enhance their current products, develop
new products on a timely and cost-effective basis, and respond to emerging
industry standards and other technological changes. The failure of these third
parties to meet these criteria could materially harm our business. See
"Business--Research and Product Development."

We may be unable to adequately protect our proprietary rights.

   Our success depends significantly on our ability to protect our proprietary
rights to the technologies used in our products. If we are not adequately
protected, our competitors could use the intellectual property that we have
developed to enhance their products and services, which could harm our
business. We rely on patent protection, as well as a combination of copyright
and trademark laws, trade secrets, confidentiality provisions and other
contractual provisions, to protect our proprietary rights, but these legal
means afford only limited protection. See "Business--Intellectual Property
Rights."

We may be sued by third parties for infringement of their proprietary rights.

   The telecommunications and Internet software industries are characterized by
the existence of a large number of patents and frequent litigation based on
allegations of patent infringement or other violations of intellectual property
rights. As the number of entrants into our market increases, the possibility of
an intellectual property claim against us grows. Any intellectual property
claims, with or without merit, could be time-consuming and expensive to
litigate or settle and could divert management attention from administering our
core business. See "Business--Intellectual Property Rights."


                                       14
<PAGE>

International expansion is an important part of our strategy, and this
expansion carries specific risks.

   International sales of products and services accounted for 7%, 44% and 66%
of our total revenues in the years ended June 30, 1997, 1998 and 1999,
respectively. We expect international sales to continue to account for a
significant portion of our revenues, although the percentage of our total
revenues derived from international sales may vary. Risks inherent in our
international business activities include business risks, economic and
political risks, and legal risks. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview" and "Business--Sales
and Marketing."

Our year 2000 compliance efforts may involve significant time and expense, and
uncorrected problems could harm our business.

   Many currently installed computer systems are not capable of distinguishing
21st century dates from 20th century dates. As a result, beginning on January
1, 2000, computer systems and software used by many companies in a wide variety
of industries, including technology, transportation, utilities, finance and
telecommunications, will produce erroneous results or fail unless they have
been modified or upgraded to process date information correctly. Year 2000
compliance efforts may involve significant time and expense, and uncorrected
problems could materially and adversely affect our business. We may face claims
based on year 2000 issues arising from the integration of multiple products,
including ours, within an overall system. Network operators may also cease or
delay purchase and installation of new complex systems, such as our server
software products, as a result of, and during, their own internal year 2000
testing. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Year 2000 Readiness Disclosure."

We may acquire technologies or companies in the future, and these acquisitions
could result in the dilution of our stockholders and disruption of our
business.

   We may acquire technologies or companies in the future. Entering into an
acquisition entails many risks, any of which could materially harm our
business, including:

  . diversion of management's attention from other business concerns;
  . failure to assimilate the acquired company with our pre-existing
    business;
  . potential loss of key employees from either our pre-existing business or
    the acquired business;
  . dilution of our existing stockholders as a result of issuing equity
    securities; and
  . assumption of liabilities of the acquired company.

Our stock price, like that of many companies in the Internet and
telecommunications software industries, may be volatile.

   Since our initial public offering in June 1999, our stock price has
experienced significant volatility. We expect that the market price of our
common stock also will fluctuate in the future as a result of variations in our
quarterly operating results. These fluctuations may be exaggerated if the
trading volume of our common stock is low. In addition, due to the technology-
intensive and emerging nature of our business, the market price of our common
stock may rise and fall in response to:

  . announcements of technological or competitive developments;
  . acquisitions or strategic alliances by us or our competitors;
  . the gain or loss of a significant customer or order; and
  . changes in estimates of our financial performance or changes in
    recommendations by securities analysts.

Our executive officers and directors own a large percentage of our voting stock
and could exert significant influence over matters requiring stockholder
approval.

   Our executive officers and directors and their respective affiliates,
currently own approximately 39% of our outstanding common stock, based on
shares outstanding as of June 30, 1999. Accordingly, these stockholders may, as
a practical matter, be able to exert significant influence over matters
requiring approval by our stockholders, including the election of directors and
the approval of mergers or other business combinations. This concentration
could have the effect of delaying or preventing a change in control.

                                       15
<PAGE>

Our certificate of incorporation and bylaws and Delaware law contain provisions
that could discourage a takeover.

   Provisions of our certificate of incorporation and bylaws and Delaware law
may discourage, delay or prevent a merger or acquisition that a stockholder may
consider favorable. These provisions include the following:

  . establishing a classified board in which only a portion of the total
    board members will be elected at each annual meeting;
  . authorizing the board to issue preferred stock;
  . prohibiting cumulative voting in the election of directors;
  . limiting the persons who may call special meetings of stockholders;
  . prohibiting stockholder action by written consent; and
  . establishing advance notice requirements for nominations for election of
    the board of directors or for proposing matters that can be acted on by
    stockholders at stockholder meetings.

   See "Management--Board Composition" and "Description of Capital Stock--Anti-
Takeover Provisions of Delaware Law and Charter Provisions."

                                       16
<PAGE>

               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

   Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business," and elsewhere in this prospectus are forward-looking
statements made within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934. These statements
involve known and unknown risks, uncertainties, and other factors that may
cause our or our industry's actual results, levels of activity, performance, or
achievements to be materially different from any future results, levels of
activity, performance, or achievements expressed or implied by these forward-
looking statements. These factors are described in "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other sections of this prospectus.

   In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," or "continue" or the negative of these
terms or other comparable terminology.

   Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of forward-
looking statements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform them to actual results.

                                       17
<PAGE>

                                USE OF PROCEEDS

   The net proceeds to us from the sale of the 1,000,000 shares of common stock
offered by us are estimated to be approximately $    million (approximately
$    million if the underwriters' over-allotment option is exercised in full)
based on an assumed public offering price of $    per share and after deducting
the underwriting discounts and commissions and the estimated offering expenses.
We will not receive any portion of the proceeds from the sale of shares of
common stock by the selling stockholders.

   We intend to use the net proceeds of this offering primarily for additional
working capital and other general corporate purposes, including increased sales
and marketing expenditures, increased research and development expenditures and
capital expenditures. We have not yet determined our expected use of these
proceeds. The amounts and timing of these expenditures will vary depending on a
number of factors, including the amount of cash generated by our operations,
competitive and technological developments and the rate of growth, if any, of
our business. We may also use a portion of the net proceeds to acquire
additional businesses, products and technologies, to lease additional
facilities, or to establish joint ventures that we believe will complement our
current or future business. However, we have no specific agreements or
commitments to do so and are not currently engaged in any negotiations for any
material acquisition or joint venture. The amounts that we actually expend for
working capital and other general corporate purposes will vary significantly
depending on a number of factors, including future revenue growth, if any, and
the amount of cash we generate from operations. As a result, we will retain
broad discretion in the allocation of the net proceeds of this offering.
Pending the uses described above, we will invest the net proceeds in short-
term, interest-bearing, investment-grade securities.

                          PRICE RANGE OF COMMON STOCK

   Our common stock has been listed for quotation on the Nasdaq National Market
under the symbol "PHCM" since our initial public offering on June 11, 1999. The
following table shows the high and low sales prices of our common stock as
reported by the Nasdaq National Market for the period indicated.


<TABLE>
<CAPTION>
   1999                                                          High     Low
   ----                                                         ------- -------
   <S>                                                          <C>     <C>
   Quarter ended June 30, 1999 (from June 11, 1999)............ $ 65.56 $ 16.00
   Quarter ended September 30, 1999............................ $185.31 $ 39.63
   Period from October 1, 1999 through October 27, 1999........ $251.25 $149.63
</TABLE>

   The closing sale price of the common stock as reported on the Nasdaq
National Market on October 27, 1999 was $205.75 per share. As of that date
there were 185 holders of record of the common stock. This does not include the
number of persons whose stock is in nominee or "street name" accounts through
brokers.

                                DIVIDEND POLICY

   We have never paid cash dividends on our common stock. We currently intend
to retain any future earnings to fund the development and growth of our
business. Therefore, we do not currently anticipate paying any cash dividends
in the foreseeable future. In addition, the terms of our current equipment loan
prohibit us from paying dividends without our lender's consent.

                     ADDITIONAL INFORMATION ABOUT PHONE.COM

   We were incorporated in Delaware under the name "Libris, Inc." in December
1994 and changed our name to "Unwired Planet, Inc." in April 1996. In April
1999, we changed our name from "Unwired Planet, Inc." to "Phone.com, Inc." Our
principal executive offices are located at 800 Chesapeake Drive, Redwood City,
California 94063, and our telephone number is (650) 562-0200. The address of
our Web site is "www.phone.com." Information contained on our Web site shall
not be deemed to be a part of this prospectus.

                                       18
<PAGE>

                                 CAPITALIZATION

   The following table sets forth the following information:

  .  the actual capitalization of Phone.com as of June 30, 1999;
  .  the as adjusted capitalization to give effect to the sale of 1,000,000
     shares of common stock by Phone.com at the assumed public offering price
     of $    per share in this offering after deducting the underwriting
     discounts and commissions Phone.com expects to pay in connection with
     this offering and estimated offering expenses payable by Phone.com.

   This table should be read in conjunction with the Consolidated Financial
Statements and the Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus.

<TABLE>
<CAPTION>
                                                          As of June 30, 1999
                                                          ---------------------
                                                                        As
                                                           Actual    Adjusted
                                                          ---------  ----------
                                                            (In thousands,
                                                          except share data)
<S>                                                       <C>        <C>
Equipment loan and capital lease obligations, less
 current portion......................................... $     498  $     498
                                                          ---------  ---------
Stockholders' equity:
  Convertible preferred stock $0.001 par value, 5,000,000
   shares authorized, no shares issued and outstanding,
   actual and as adjusted ...............................        --         --
  Common stock $0.001 par value, 100,000,000 shares
   authorized, 31,213,094 shares issued and outstanding,
   actual; 100,000,000 shares authorized, 32,213,094
   shares issued and outstanding, as adjusted(1) ........        31
  Additional paid-in capital.............................   136,209
  Deferred stock-based compensation......................    (1,318)    (1,318)
  Treasury stock.........................................      (196)      (196)
  Notes receivable from stockholders.....................      (484)      (484)
  Accumulated deficit....................................   (41,950)   (41,950)
                                                          ---------  ---------
    Total stockholders' equity...........................    92,292
                                                          ---------  ---------
      Total capitalization............................... $  92,790  $
                                                          =========  =========
</TABLE>
--------
(1) This table excludes the following shares:

  .  4,751,189 shares subject to outstanding options at a weighted average
     exercise price of $6.35 per share as of June 30, 1999,
  .  31,486 shares issuable upon exercise of outstanding warrants at a
     weighted average exercise price of $3.81 per share as of June 30, 1999,
  .  an aggregate of 4,136,826 shares available for future issuance under our
     1995 Stock Plan, 1996 Stock Plan, 1999 Directors' Stock Option Plan and
     1999 Employee Stock Purchase Plan as of June 30, 1999. See "Management--
     Stock Plans" and Notes 4 and 5 of the Notes to Consolidated Financial
     Statements,
  .  1,196,513 shares issued in October 1999 to former APiON shareholders in
     connection with the APiON acquisition.

                                       19
<PAGE>

                                    DILUTION

   The net tangible book value of our common stock on June 30, 1999 was $92.3
million, or approximately $2.96 per share. Pro forma net tangible book value
represents the amount of our total tangible assets less total liabilities,
divided by the number of shares of common stock outstanding. Dilution in net
tangible book value per share represents the difference between the amount per
share paid by purchasers of shares of our common stock in this offering and the
net tangible book value per share of our common stock immediately following
this offering. After giving effect to our sale of 1,000,000 shares of common
stock offered by this prospectus at the assumed public offering price of $
per share and after deducting the underwriting discounts and commissions and
estimated offering expenses payable by us, our net tangible book value would
have been $    million, or approximately $    per share. This represents an
immediate increase in net tangible book value of $    per share to existing
stockholders and an immediate dilution in net tangible book value of $    per
share to new investors.

<TABLE>
<S>                                                                  <C>    <C>
Public offering price per share.....................................        $
  Net tangible book value per share as of June 30, 1999............. $ 2.96
  Increase per share attributable to new investors..................
                                                                     ------
Net tangible book value per share after this offering...............
                                                                            ----
Dilution per share to new investors.................................        $
                                                                            ====
</TABLE>

   The following table sets forth, as of June 30, 1999, the differences between
the number of shares of common stock purchased from us, the total price and
average price per share paid by existing investors and by the new investors,
before deducting the underwriting discounts and commissions and estimated
offering expenses payable by us at the assumed public offering price of $
per share.

<TABLE>
<CAPTION>
                                                       Total
                                 Shares Purchased  Consideration
                                ------------------ --------------  Average Price
                                  Number   Percent Amount Percent    Per Share
                                ---------- ------- ------ -------  -------------
<S>                             <C>        <C>     <C>    <C>      <C>
Existing stockholders.......... 31,213,094       %  $            %    $
New investors..................
                                ----------  -----   ---   -------
  Total........................             100.0%  $     $ 100.0%
                                ==========  =====   ===   =======
</TABLE>

   The sales by the selling stockholders in this offering will reduce the
number of shares of common stock held by existing stockholders to    , or
approximately   % of the total shares of common stock outstanding immediately
after this offering, and will increase the number of shares of common stock
held by new investors to    , or   % of the total number of shares of common
stock outstanding immediately after this offering. See "Principal and Selling
Stockholders."

                                       20
<PAGE>

                      SELECTED CONSOLIDATED FINANCIAL DATA

   The tables that follow present portions of our consolidated financial
statements and are not complete. You should read the following selected
consolidated financial data in conjunction with our consolidated financial
statements and related notes thereto and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
in this prospectus. The consolidated statements of operations data for the
years ended June 30, 1997, 1998 and 1999, and the consolidated balance sheet
data as of June 30, 1998 and 1999 are derived from our consolidated financial
statements that have been audited by KPMG LLP, independent auditors, which are
included elsewhere in this prospectus. The pro forma combined condensed
statement of operations and balance sheet data have been derived from the
Unaudited Pro Forma Condensed Combined Financial Statements included elsewhere
in this prospectus. The pro forma combined condensed balance sheet data assumes
that the APiON acquisition took place on June 30, 1999 and combines Phone.com's
consolidated balance sheet data as of June 30,1999 with the WAP Business of
APiON's statement of assets acquired and liabilities assumed data as of March
31, 1999. The pro forma combined condensed statement of operations data assumes
the acquisition took place on July 1, 1998 and combines Phone.com's
consolidated statement of operations data for the year ended June 30, 1999 with
the WAP Business of APiON's statement of operations data for the year ended
March 31, 1999. The selected unaudited pro forma financial information below
does not represent what Phone.com's financial position or results of operations
would have been if the acquisition of APiON had occurred on the dates
indicated, or the financial position or results of operations of Phone.com and
APiON as a combined company for any future period. The consolidated statements
of operations data for the period from December 16, 1994 (inception) to June
30, 1995 and for the year ended June 30, 1996, and the consolidated balance
sheet data as of June 30, 1995, 1996 and 1997 are derived from audited
consolidated financial statements that are not included in this prospectus. The
historical results presented below are not necessarily indicative of the
results to be expected for any future fiscal year. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
                                                        Year Ended June 30,
                                           --------------------------------------------------
                            December 16,                                        1999
                          1994 (Inception)                               --------------------
                          to June 30, 1995  1996      1997      1998      Actual    Pro Forma
                          ---------------- -------  --------  ---------  ---------  ---------
                                  (In thousands, except per share data)
<S>                       <C>              <C>      <C>       <C>        <C>        <C>
Consolidated Statements
 of Operations Data:
Revenues:
 License................      $    --      $    --  $     80  $     522  $   5,229  $   5,229
 Maintenance and support
  services..............           --           --       212      1,683      5,921      5,921
 Consulting services....           --           --        --         --      2,292      2,292
                              -------      -------  --------  ---------  ---------  ---------
 Total revenues.........           --           --       292      2,205     13,442     13,442
                              -------      -------  --------  ---------  ---------  ---------
Cost of revenues:
 License................           --           --        87         95        371        371
 Maintenance and support
  services..............           --           --       266      1,063      3,022      3,022
 Consulting services....           --           --        --         --      1,146      1,146
                              -------      -------  --------  ---------  ---------  ---------
 Total cost of
  revenues..............           --           --       353      1,158      4,539      4,539
                              -------      -------  --------  ---------  ---------  ---------
 Gross profit (loss)....           --           --       (61)     1,047      8,903      8,903
                              -------      -------  --------  ---------  ---------  ---------
Operating expenses:
 Research and
  development...........           92        1,387     3,959      5,732     13,082     13,514
 Sales and marketing....            6          757     3,198      5,011     10,840     11,067
 General and
  administrative........            5          522     1,237      1,801      4,432      4,857
 Stock-based
  compensation..........           --           --        --        108      1,011      4,832
 Amortization of
  goodwill and other
  intangible assets.....           --           --        --         --         --     81,512
                              -------      -------  --------  ---------  ---------  ---------
 Total operating
  expenses..............          103        2,666     8,394     12,652     29,365    115,782
                              -------      -------  --------  ---------  ---------  ---------
 Operating loss.........         (103)      (2,666)   (8,455)   (11,605)   (20,462)  (106,879)
Interest income, net....           --          196       464        982      1,803      1,803
                              -------      -------  --------  ---------  ---------  ---------
 Loss before income
  taxes.................         (103)      (2,470)   (7,991)   (10,623)   (18,659)  (105,076)
Income taxes............           --           --        --         --      2,104      2,251
                              -------      -------  --------  ---------  ---------  ---------
 Net loss...............      $  (103)     $(2,470) $ (7,991) $ (10,623) $ (20,763) $(107,327)
                              =======      =======  ========  =========  =========  =========
Basic and diluted net
 loss per share.........      $ (0.02)     $ (0.53) $  (1.67) $   (2.03) $   (2.98) $  (13.15)
                              =======      =======  ========  =========  =========  =========
Shares used in computing
 basic and diluted net
 loss per share.........        4,671        4,704     4,776      5,221      6,966      8,162
                              =======      =======  ========  =========  =========  =========
</TABLE>

<TABLE>
<CAPTION>
                                             As of June 30,
                          ----------------------------------------------------
                                                                  1999
                                                           -------------------
                           1995    1996    1997     1998    Actual   Pro Forma
                          ------- ------- ------- -------- --------- ---------
                                        (In thousands)
<S>                       <C>     <C>     <C>     <C>      <C>       <C>
Consolidated Balance
 Sheet Data:
Cash, cash equivalents
 and short-term
 investments............. $ 2,300 $ 5,848 $ 8,014 $ 33,464 $ 113,086 $102,789
Total assets.............   2,315   6,767   9,759   39,144   138,933  376,736
Equipment loan and
 capital lease
 obligations, less
 current portion.........      --      --      --      915       498      579
Total stockholders'
 equity..................   2,243   6,464   8,125   28,393    92,292  328,256
</TABLE>

                                       21
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   This section of this prospectus includes a number of forward-looking
statements, made within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934, that reflect our
current views with respect to future events and financial performance. We use
words such as "anticipates," "believes," "expects," "future," and "intends,"
and similar expressions to identify forward-looking statements. You should not
place undue reliance on these forward-looking statements, which apply only as
of the date of this prospectus. These forward-looking statements are subject to
risks and uncertainties that could cause actual results to differ materially
from historical results or our predictions. These risks are described in "Risk
Factors" and elsewhere in this prospectus. See "Special Note Regarding Forward-
Looking Statements."

Overview

   We were incorporated in December 1994 and, from inception until June 1996,
our operations consisted primarily of various start-up activities, including
development of technologies central to our business, recruiting personnel and
raising capital. In 1995, we developed our initial technology, which enables
the delivery of Internet-based services to wireless telephones. In 1996, we
introduced and deployed our first products based on this technology. We first
recognized license revenues in August 1996, and generated license revenues of
approximately $80,000, $522,000 and $5.2 million for the fiscal years ended
June 30, 1997, 1998 and 1999, respectively. We incurred net losses of
approximately $8.0 million, $10.6 million and $20.8 million for the fiscal
years ended June 30, 1997, 1998 and 1999, respectively. As of June 30, 1999, we
had an accumulated deficit of approximately $42.0 million.

   To provide a worldwide standard for the delivery of Internet-based services
over mass-market wireless telephones, we formed the WAP Forum in close
cooperation with Ericsson, Motorola and Nokia, the world's three largest
manufacturers of wireless telephones. In February 1998, the WAP Forum published
technical specifications for application development and product
interoperability based substantially on Phone.com's technology and on Internet
standards. Leading network operators, telecommunications device and equipment
manufacturers and software companies worldwide have sanctioned the
specifications promulgated by the WAP Forum.

   We generate revenues from licenses, maintenance and support services and
consulting services. We receive license revenues from licensing our UP.Link
Server Suite software directly to network operators and indirectly through
value-added resellers. From our inception through June 30, 1999, cumulative
revenues from licensing our UP.Link Server Suite software represented 51% of
total cumulative revenues, inclusive of installation, training and support
services provided to network operators. Maintenance and support services
revenues also include engineering and support services provided to wireless
telephone manufacturers. Cumulative engineering and support services fees from
UP.Browser agreements with wireless telephone manufacturers represented 34% of
our total cumulative revenues from inception through June 30, 1999. Consulting
services revenues are derived from consulting services provided to network
operator customers either directly by us or indirectly through resellers.

   In September 1999, we introduced MyPhone, our mobile Internet portal
platform. We expect to incur significant additional expenses in developing and
commercializing the MyPhone service, including costs relating to operating the
portal, as well as sales and marketing and research and development expenses.
We expect to incur these costs and expenses in advance of generating revenues
from this service and cannot be certain that our business model for the MyPhone
service will result in significant revenues or profitability.

   On October 21, 1999, we announced our operating results for the quarter
ended September 30, 1999. Total revenues were $8.5 million for the quarter,
while net loss was $4.9 million, or $0.16 per share. Deferred revenue was $38.4
million as of September 30, 1999. As of September 30, 1999, we had cash and
short-term investments of $117.8 million, total assets of $136.8 million and
total stockholders' equity of $87.6 million.

                                       22
<PAGE>

   In October 1999, we completed the acquisition of the outstanding share
capital of APiON Telecoms Ltd., a company based in Belfast, Northern Ireland.
APiON is a provider of WAP software products to GSM network operators in Europe
and has expertise in GSM Intelligent Networks, wireless data and WAP
technology. In connection with this transaction, we acquired all of the
outstanding shares of capital stock of APiON in exchange for an aggregate of
approximately 1,196,513 shares of our common stock. A portion of these shares
are held in escrow for a period of one year to indemnify us against potential
liabilities of APiON and its former shareholders.

   In addition, we also agreed to issue cash and common stock to current and
former employees of APiON. Current employees of APiON will receive cash in the
aggregate amount of approximately $2.5 million, less applicable withholdings
for taxes and insurance, upon the closing of this offering, and will receive
shares of common stock equal in value to approximately $2.5 million, less
applicable withholdings for taxes and insurance, on each of the first two
anniversaries of the closing of the APiON acquisition, subject to their
continued employment. Former employees of APiON who were engaged in APiON's
services business, which we did not acquire in the transaction, will receive
cash in the aggregate amount of approximately $2.2 million, less applicable
withholdings for taxes and insurance, upon the closing of this offering, and
will receive shares of common stock equal in value to approximately $4.3
million, less applicable withholdings for taxes and insurance, on the
anniversary of the closing of the APiON acquisition, subject to forfeiture upon
the occurrence of certain events.

   In connection with the APiON acquisition, we will record a significant
amount of goodwill and deferred compensation that will significantly increase
our net loss for the foreseeable future. We expect to record goodwill of
approximately $244.6 million and additional deferred stock-based compensation
of approximately $5.1 million, to be amortized over a three-year period and a
two-year period, respectively. In addition, we expect that operating expenses
will increase as a result of the acquisition, due primarily to the additional
personnel and the costs of operating a European subsidiary. For example, as a
result of the addition of APiON's technical, sales and customer engineering
personnel, we expect that research and development expenses and sales and
marketing expenses may increase by as much as $5 million in the aggregate for
the fiscal year ended June 30, 2000.

   Our future success depends on our ability to increase revenues from sales of
products and services to new and existing network operator customers. If the
market for Internet-based services via wireless telephones fails to develop or
develops more slowly than expected, then our business would be materially and
adversely affected. In addition, because there is a relatively small number of
network operators worldwide, any failure to sell our products to network
operator customers successfully could result in a shortfall in revenues that
could not be readily offset by other revenue sources. We also anticipate that
network operators may defer commercial launches of services based on our
product and services as they divert their resources and efforts to ensure year
2000 compliance.

   Our business strategy also relies to a significant extent on the widespread
propagation of UP.Browser-enabled telephones through our relationships with
network operators and wireless telephone manufacturers. In order to encourage
adoption of UP.Browser-enabled wireless telephones, we license our UP.Browser
software to wireless telephone manufacturers free of per-unit royalties and
other license fees and provide maintenance and support services for an annual
flat fee. As of September 1999, we had licensed UP.Browser to 25 wireless
telephone manufacturers. As of September 1999, 10 wireless telephone
manufacturer customers had made commercial shipments of telephones with the
UP.Browser embedded. In addition, as of September 1999, we are currently
providing engineering support services in connection with 60 browser
integration projects.

   During the year ended June 30, 1998, AT&T Wireless Services, which owned
approximately 2.5% of our common stock as of June 30, 1999, and Matsushita
Communication Industrial accounted for approximately 22% and 18%, respectively,
of our total revenues. For the year ended June 30, 1999, AT&T Wireless Services
accounted for approximately 17% of our total revenues, and DDI Corporation,
which owned approximately 0.6% of our common stock as of June 30, 1999,
accounted for approximately 14% of our total revenues. The foregoing
calculations are based on revenues derived from direct and indirect sales to
these customers.


                                       23
<PAGE>

   For agreements entered into prior to July 1, 1998, we recognized revenues in
accordance with the provisions of the American Institute of Certified Public
Accountants' Statement of Position No. 91-1, Software Revenue Recognition.
Effective July 1, 1998, we adopted SOP 97-2, Software Revenue Recognition, as
amended. SOP 97-2 generally requires revenue earned on software arrangements
involving multiple elements to be allocated to each element based on the
relative fair value of the elements.

   We license our UP.Link Server Suite products to network operators through
our direct sales force and indirectly through our channel partners. Our license
agreements do not provide for a right of return. Allowances for future
estimated warranty costs are provided at the time revenue is recognized.
Licenses can be purchased on an as-deployed basis or on a prepaid basis. For
licenses purchased on an as-deployed basis, license revenue is recognized as
subscribers are activated to use the services that are based on our UP.Link
Server Suite products. We have no obligation to provide standards-compliant
products once a subscriber has been activated. For licenses purchased on a
prepaid basis, prepaid license fees are recognized under subscription
accounting due to our commitment to provide standards-compliant products for
each license covered by the prepaid arrangement. This subscription revenue is
recognized ratably over the contractual term of the prepaid arrangement (i.e.,
the date the prepaid licenses expire if not used), commencing at the beginning
of the month in which delivery and acceptance occur by the network operator.
The prepaid license period is generally twelve to thirty months. Licenses
expire if not activated prior to the end of the prepaid license term. We
recognize revenues from maintenance and support services provided to network
operators ratably over the term of the agreement, generally one year, and
recognize revenues from consulting services provided to network operators as
the services are performed.

   We recognize revenues from UP.Browser agreements with wireless telephone
manufacturers ratably over the period during which the services are performed,
generally one year. We provide our wireless telephone manufacturer customers
with support associated with their efforts to port our UP.Browser software to
their wireless telephones, software error corrections and new releases as they
become commercially available.

   Deferred revenue was $36.8 million as of June 30, 1999, comprised of $33.6
million in prepaid fees charged to wireless network operators and $3.2 million
in prepaid maintenance and other service fees charged to wireless telephone
manufacturers. We expect that deferred revenue will decline in the long term as
network operators deploy services based on our products. In particular, we
began recognizing license revenue in the third quarter of fiscal 1999 in
connection with the launch by CEGETEL/SFR of commercial services based on our
products and the acceptance of our products by DDI Corporation. Relating to our
sales to CEGETEL/SFR, we recognized previously deferred license revenues of
$541,000 for the year ended June 30, 1999 and will recognize approximately
$400,000 in each of the quarters ending September 30, 1999, December 31, 1999
and March 31, 2000. With regard to sales to DDI Corporation, we recognized
license revenues of $1.5 million for the year ended June 30, 1999, and will
recognize approximately $2.4 million in each of the quarters ending September
30, 1999 and December 31, 1999, and $1.6 million in each of the quarters ending
March 31, 2000 through March 31, 2001, and $1.1 million in the quarter ending
June 30, 2001. The revenues recognized and deferred for DDI Corporation include
direct sales and sales through an indirect channel partner, Itochu Techno
Science Corporation. We also began recognizing license revenue in the fourth
quarter of fiscal 1999 in connection with the launches by two other wireless
network operator customers. With respect to these customers, we recognized
license revenue of $441,000 in the fourth quarter of fiscal 1999, and will
recognize substantially all of the remaining deferred revenue by September 30,
2001.

   Under an agreement with AT&T Wireless Services, initially entered into in
May 1996, AT&T Wireless Services prepaid $4.7 million for the right to deploy
up to a fixed number of licenses through December 1999. Due to the early nature
of the commercial deployments of our products by network operators and because
we believed we would assume additional obligations to assist AT&T Wireless
Services in deploying the software licenses if difficulties were encountered
during the deployment, the license portion of the prepaid fee was recognized as
licenses were deployed. Between August 1997 and December 1998, $484,000 was
recognized relating to this prepayment. In connection with an amendment to the
agreement entered into in March 1999, AT&T Wireless Services agreed that we
would not be further obligated to assist them in the deployment of the prepaid
licenses discussed above. Therefore, the remaining deferred revenue of
approximately $4.2 million as

                                       24
<PAGE>

of the date of the contract amendment in March 1999 that related to the
prepayment is being recognized as revenue ratably over the remaining
contractual term of the prepaid arrangement. Accordingly, we recognized revenue
of $1.9 million for the year ending June 30, 1999 and will recognize
approximately $1.25 million in each of the quarters ending September 30, 1999,
and December 31, 1999, associated with the prepayment.

   We expect that our gross profit on revenues derived from sales through
indirect channel partners will be less than the gross profit on revenues from
direct sales. Our success, in particular in international markets, depends in
part on our ability to increase sales of our products and services through
value-added resellers and to expand our indirect distribution channels. In
addition, our agreements with our distribution partners generally do not
restrict the sale of products that are competitive with our products and
services, and each of our partners can cease marketing our products and
services at their option.

   International sales of products and services accounted for 7%, 44% and 66%
of our total revenues in the years ended June 30, 1997, 1998 and 1999,
respectively. We expect international sales to continue to account for a
significant portion of our revenues, although the percentage of our total
revenues derived from international sales may vary. In particular, a number of
manufacturers have delayed commercial release of WAP-compliant wireless
telephones, particularly affecting European and other markets based on the GSM
standard. Risks inherent in our international business activities, include:

  .  failure by us and/or third parties to develop localized content and
     applications that are used with our products;
  .  costs of localizing our products for foreign markets;
  .  difficulties in staffing and managing foreign operations;
  .  longer accounts receivable collection time;
  .  political and economic instability;
  .  fluctuations in foreign currency exchange rates;
  .  reduced protection of intellectual property rights in some foreign
     countries;
  .  contractual provisions governed by foreign laws;
  .  export restrictions on encryption and other technologies;
  .  potentially adverse tax consequences; and
  .  the burden of complying with complex and changing regulatory
     requirements.

   Since early 1997, we have invested substantially in research and
development, marketing, domestic and international sales channels, professional
services and our general and administrative infrastructure. These investments
have significantly increased our operating expenses, contributing to net losses
in each fiscal quarter since our inception. Our limited operating history makes
it difficult to forecast future operating results. Although our revenues have
grown in recent quarters, our revenues may not increase at a rate sufficient to
achieve and maintain profitability, if at all. We anticipate that our operating
expenses will increase substantially in absolute dollars for the foreseeable
future as we expand our product development, sales and marketing, professional
services and administrative staff. Even if we were to achieve profitability in
any period, we may not sustain or increase profitability on a quarterly or
annual basis.

Fiscal Years Ended June 30, 1997, 1998 and 1999

   License Revenues

   License revenues increased from $80,000 in the fiscal year ended June 30,
1997 to $522,000 in the fiscal year ended June 30, 1998, and $5.2 million in
the fiscal year ended June 30, 1999. The increase in license revenues was due
primarily to the launch of wireless Internet-based services by network
operators. The increase in license revenues in fiscal 1999 was due primarily to
the launch by CEGETEL/SFR, DDI and other network operators of commercial
services based on our products and the satisfaction of our deployment
obligations related to AT&T. License revenues recognized in fiscal 1999 with
respect to these three customers were $709,000, $1.5 million and $1.6 million,
respectively.

                                       25
<PAGE>

   Maintenance and Support Services Revenues

   Maintenance and support services revenues increased from $212,000 in the
fiscal year ended June 30, 1997 to $1.7 million in the fiscal year ended June
30, 1998, and $5.9 million in the fiscal year ended June 30, 1999. The increase
in maintenance and support services revenues reflects an increase in services
provided to wireless telephone manufacturers and increased installation and
support fees from network operators. Of the increase from fiscal 1998 to fiscal
1999, approximately $3.1 million was attributable primarily to increased demand
for maintenance and engineering support services by wireless telephone
manufacturers, and approximately $1.1 million was attributable to trials of our
UP.Link Server Suite software by wireless network operators.

   Consulting Services Revenues

   Consulting services revenues were $2.3 million for the fiscal year ended
June 30, 1999. No consulting services were performed in fiscal 1997 or fiscal
1998.

   Cost of License Revenues

   Cost of license revenues consists primarily of third-party license and
support fees. Cost of license revenues increased from $87,000 in the fiscal
year ended June 30, 1997 to $95,000 in the fiscal year ended June 30, 1998, and
$371,000 in the fiscal year ended June 30, 1999. As a percentage of license
revenues, cost of license revenues in the fiscal years ended June 30, 1997,
1998 and 1999 was 109%, 18% and 7%, respectively. Costs of license revenues in
the fiscal year ended June 30, 1997 included $74,000 attributable to non-
recurring third-party software license and software customization fees. The
decrease as a percentage of license revenues for fiscal 1999 was attributable
primarily to higher license revenues for fiscal 1999 and to the amortization of
fixed maintenance fees relating to third party software licenses. We expect
that cost of license revenues will vary as a percentage of license revenues
from period to period.

   Cost of Maintenance and Support Services Revenues

   Cost of maintenance and support services revenues consists of compensation
and related overhead costs for personnel engaged in the delivery of
installation, training and support services to network operators and
engineering and support services to wireless telephone manufacturers. The
engineering and support services performed for wireless telephone manufacturers
include assistance relating to integrating our UP.Browser software into the
manufacturers' wireless telephones. Cost of maintenance and support services
revenues increased from $266,000 in the fiscal year ended June 30, 1997 to $1.1
million in the fiscal year ended June 30, 1998, and $3.0 million in the fiscal
year ended June 30, 1999. As a percentage of maintenance and support services
revenues, cost of maintenance and support services revenues in the fiscal years
ended June 30, 1997, 1998 and 1999 was 125%, 63% and 51%, respectively. The
growth in cost of maintenance and support services revenues was attributable
primarily to an increase in personnel dedicated to support a larger number of
wireless telephone manufacturer customers, which increased costs by
approximately $1.1 million from fiscal 1998 to fiscal 1999, and increased
staffing in anticipation of growth in the number of network operator customers,
which increased costs by approximately $824,000 during the same period. Gross
profit on maintenance and support services increased from fiscal 1998 to fiscal
1999 due to the increase in the number of browser integration assignments for
wireless telephone manufacturers, which had the effect of spreading our costs
over a greater revenue base. In addition, the number of trials in progress by
network operators increased during this period. We anticipate that the cost of
maintenance and support services revenues will increase in absolute dollars in
future operating periods.

   Cost of Consulting Services Revenues

   Cost of consulting services revenues consists of compensation and
independent consultant costs for personnel engaged in our consulting services
operations and related overhead. We commenced our consulting operations in
fiscal 1999. Cost of consulting services revenues for the fiscal year ended
June 30, 1999 was

                                       26
<PAGE>

$1.1 million. No consulting services were performed in fiscal 1997 or fiscal
1998. As a percentage of consulting services revenues, cost of consulting
services revenues for the fiscal year ended June 30, 1999 was 50%. Gross profit
on consulting services revenues is impacted by the mix of company personnel and
independent consultants assigned to projects. The gross profit we achieve is
also impacted by the contractual terms of the consulting assignments we
undertake, and the gross profit on fixed price contracts typically is more
susceptible to fluctuation than contracts performed on a time-and-materials
basis. We anticipate that the cost of consulting services revenues will
increase in absolute dollars as we continue to invest in the growth of our
consulting services operations.

   Research and Development Expenses

   Research and development expenses consist primarily of compensation and
related costs for research and development personnel. Research and development
expenses increased 45% from $4.0 million in the fiscal year ended June 30, 1997
to $5.7 million in the fiscal year ended June 30, 1998 and increased 128% to
$13.1 million in the fiscal year ended June 30, 1999. The increases were
attributable primarily to the addition of personnel in our research and
development organization associated with product development. We expect to
continue to make substantial investments in research and development and
anticipate that research expenses will continue to increase in absolute
dollars.

   Sales and Marketing Expenses

   Sales and marketing expenses consist primarily of compensation and related
costs for sales and marketing personnel, sales commissions, marketing programs,
public relations, promotional materials, travel expenses and trade show exhibit
expenses. Sales and marketing expenses increased 57% from $3.2 million in the
fiscal year ended June 30, 1997 to $5.0 million in the fiscal year ended June
30, 1998 and increased 116% to $10.8 million in the fiscal year ended June 30,
1999. The increases reflected the addition of personnel in our sales and
marketing organizations, as well as costs associated with increased selling
efforts to develop market awareness of our products and services. We anticipate
that sales and marketing expenses will increase in absolute dollars as we
increase our investment in these areas.

   General and Administrative Expenses

   General and administrative expenses consist primarily of salaries and
related expenses, accounting, legal and administrative expenses, professional
service fees and other general corporate expenses. General and administrative
expenses increased 46% from $1.2 million in the fiscal year ended June 30, 1997
to $1.8 million in the fiscal year ended June 30, 1998 and increased 146% to
$4.4 million in the fiscal year ended June 30, 1999. The increases were due
primarily to the addition of personnel performing general and administrative
functions and, to a lesser extent, legal expenses associated with increased
product licensing and patent activity. We expect general and administrative
expenses to increase in absolute dollars as we add personnel and incur
additional expenses related to the anticipated growth of our business and
operation as a public company.

   Stock-Based Compensation

   Some stock options granted and restricted stock sold during the fiscal years
ended June 30, 1998 and 1999 have been deemed to be compensatory. Total
deferred stock-based compensation associated with these equity arrangements
through June 30, 1999 amounted to $2.4 million related to stock options granted
and restricted stock issued from October 1997 through March 1999. These amounts
are being amortized over the respective vesting periods of these equity
arrangements in a manner consistent with Financial Accounting Standards Board
Interpretation No. 28. Of the total deferred stock-based compensation, $108,000
and $1.0 million was amortized in the fiscal years ended June 30, 1998 and
1999, respectively. We anticipate that we may issue stock options with exercise
prices below the then fair market value, which would increase deferred stock-
based compensation in the future. We expect amortization of approximately
$696,000, $375,000, $185,000 and $62,000 in the fiscal years ending June 30,
2000, 2001, 2002 and 2003, respectively. We recorded no deferred stock based
compensation for the fiscal year ended June 30, 1997.

                                       27
<PAGE>

   Interest Income, Net

   Net interest income was $464,000, $982,000 and $1.8 million in the fiscal
years ended June 30, 1997, 1998 and 1999, respectively. The year-to-year
increases resulted primarily from earnings on rising cash, cash equivalent and
short-term investment balances as a result of our private placement financings
in February 1998 and March 1999 and our initial public offering in June 1999,
partially offset in the fiscal years ended June 30, 1998 and 1999 by interest
expense related to obligations under capital leases and our equipment loan.

   Income Taxes

   Income tax expense of $2.1 million for the fiscal year ended June 30, 1999,
consisted of foreign withholding taxes. Since inception, we have incurred net
losses for federal and state tax purposes and have not recognized any tax
provision or benefit. As of June 30, 1999, we had net operating loss
carryforwards of approximately $36.0 million, for both federal and California
income tax purposes. These carryforwards, if not utilized, expire beginning in
the year 2004 through 2019. We also had research and development credit
carryforwards of approximately $400,000 and $303,000 for federal and California
income tax purposes, respectively. We also have a foreign tax credit
carryforward of $2.0 million, which expires in 2004. Federal and California tax
laws impose significant restrictions on the utilization of net operating loss
carryforwards in the event of a shift in our ownership that constitutes an
"ownership change," as defined in Section 382 of the Internal Revenue Code. If
we have an ownership change, the ability to utilize the stated carryforwards
could be significantly reduced. See Note 6 of Notes to Consolidated Financial
Statements.

   As of June 30, 1999, we had deferred tax assets of $19.2 million, which were
fully offset by a valuation allowance. Deferred tax assets consist principally
of the federal and state net operating loss carryforwards, capitalized start-up
expenditures, accruals and reserves not currently deductible for tax purposes,
research and development credits and foreign tax credit carryforwards. We have
provided a valuation allowance due to the uncertainty of generating future
profits that would allow for the realization of these deferred tax assets.
Accordingly, no tax benefit was recorded in the accompanying consolidated
statements of operations.

                                       28
<PAGE>

Quarterly Results of Operations

   The following table sets forth our consolidated operating results for each
of the eight quarters ended June 30, 1999. This data has been derived from
unaudited consolidated financial statements that, in the opinion of our
management, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of this information when read in
conjunction with our annual audited consolidated financial statements and notes
thereto appearing elsewhere in this prospectus. These operating results are not
necessarily indicative of results of any future period.

<TABLE>
<CAPTION>
                                                         Quarter Ended
                          -------------------------------------------------------------------------------------
                          Sept. 30,  Dec. 31,   March 31,  June 30,   Sept. 30,  Dec. 31,   March 31,  June 30,
                            1997       1997       1998       1998       1998       1998       1999       1999
                          ---------  --------   ---------  --------   ---------  --------   ---------  --------
                                             (In thousands, except per share data)
<S>                       <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Revenues:
 License................   $    17   $   158     $   114   $   233     $   202   $    64     $ 1,264   $ 3,699
 Maintenance and support
  services..............        94       222         319     1,048       1,005     1,327       1,454     2,135
 Consulting services....        --        --          --        --         161       426         814       891
                           -------   -------     -------   -------     -------   -------     -------   -------
 Total revenues.........       111       380         433     1,281       1,368     1,817       3,532     6,725
                           -------   -------     -------   -------     -------   -------     -------   -------
Cost of revenues:
 License................         5        25          29        36          62        26          84       199
 Maintenance and support
  services..............       175       245         295       348         433       676         767     1,146
 Consulting services....        --        --          --        --          58        77         511       500
                           -------   -------     -------   -------     -------   -------     -------   -------
 Total cost of
  revenues..............       180       270         324       384         553       779       1,362     1,845
                           -------   -------     -------   -------     -------   -------     -------   -------
 Gross profit (loss)....       (69)      110         109       897         815     1,038       2,170     4,880
                           -------   -------     -------   -------     -------   -------     -------   -------
Operating expenses:
 Research and
  development...........     1,072     1,381       1,418     1,861       2,446     2,492       3,468     4,676
 Sales and marketing....       837     1,128       1,342     1,704       1,801     2,074       2,629     4,336
 General and
  administrative........       341       403         441       616         684       955       1,092     1,701
 Stock-based
  compensation..........        --         6          39        63         249       255         280       227
                           -------   -------     -------   -------     -------   -------     -------   -------
 Total operating
  expenses..............     2,250     2,918       3,240     4,244       5,180     5,776       7,469    10,940
                           -------   -------     -------   -------     -------   -------     -------   -------
 Operating loss.........    (2,319)   (2,808)     (3,131)   (3,347)     (4,365)   (4,738)     (5,299)   (6,060)
Interest income, net....        96        76         356       454         415       365         359       664
                           -------   -------     -------   -------     -------   -------     -------   -------
 Loss before income
  taxes.................    (2,223)   (2,732)     (2,775)   (2,893)     (3,950)   (4,373)     (4,940)   (5,396)
Income taxes............        --        --          --        --          --        --         710     1,394
                           -------   -------     -------   -------     -------   -------     -------   -------
 Net loss...............   $(2,223)  $(2,732)    $(2,775)  $(2,893)    $(3,950)  $(4,373)    $(5,650)  $(6,790)
                           =======   =======     =======   =======     =======   =======     =======   =======
Basic and diluted net
 loss per share.........   $ (0.44)  $ (0.53)    $ (0.53)  $ (0.53)    $ (0.71)  $ (0.78)    $ (0.99)  $ (0.62)
                           =======   =======     =======   =======     =======   =======     =======   =======
Shares used in computing
 basic and diluted net
 loss per share.........     5,050     5,147       5,230     5,459       5,539     5,617       5,699    11,023
                           =======   =======     =======   =======     =======   =======     =======   =======
As a Percentage of Total
 Revenues
Revenues:
 License................        15%       42%         26%       18%         15%        4%         36%       55%
 Maintenance and support
  services..............        85        58          74        82          73        73          41        32
 Consulting services....        --        --          --        --          12        23          23        13
                           -------   -------     -------   -------     -------   -------     -------   -------
 Total revenues.........       100       100         100       100         100       100         100       100
                           -------   -------     -------   -------     -------   -------     -------   -------
Cost of revenues:
 License................         4         7           7         3           4         2           2         3
 Maintenance and support
  services..............       158        64          68        27          32        37          23        17
 Consulting services....        --        --          --        --           4         4          14         7
                           -------   -------     -------   -------     -------   -------     -------   -------
 Total cost of
  revenues..............       162        71          75        30          40        43          39        27
                           -------   -------     -------   -------     -------   -------     -------   -------
 Gross profit (loss)....       (62)       29          25        70          60        57          61        73
                           -------   -------     -------   -------     -------   -------     -------   -------
Operating expenses:
 Research and
  development...........       966       363         327       145         179       137          98        70
 Sales and marketing....       754       297         310       133         132       114          74        64
 General and
  administrative........       307       106         102        48          50        53          31        26
 Stock-based
  compensation..........        --         2           9         5          18        14           8         3
                           -------   -------     -------   -------     -------   -------     -------   -------
 Total operating
  expenses..............     2,027       768         748       331         379       318         211       163
                           -------   -------     -------   -------     -------   -------     -------   -------
 Operating loss.........    (2,089)     (739)       (723)     (261)       (319)     (261)       (150)      (90)
Interest income, net....        86        20          82        35          30        20          10        10
                           -------   -------     -------   -------     -------   -------     -------   -------
 Loss before income
  taxes.................    (2,003)     (719)       (641)     (226)       (289)     (241)       (140)      (80)
Income taxes............        --        --          --        --          --        --          20        21
                           -------   -------     -------   -------     -------   -------     -------   -------
 Net loss...............    (2,003)%    (719)%      (641)%    (226)%      (289)%    (241)%      (160)%    (101)%
                           =======   =======     =======   =======     =======   =======     =======   =======
As a Percentage of
 Related Revenues
Cost of license
 revenues...............        29%       16%         25%       15%         31%       41%          7%        5%
Cost of maintenance and
 support services
 revenues...............       186%      110%         92%       33%         43%       51%         53%       54%
Cost of consulting
 services revenues......        --        --          --        --          36%       18%         63%       56%
</TABLE>

                                       29
<PAGE>

   During the six quarters ended December 31, 1998, our license revenues were
not significant and varied widely, as we continued to make substantial
investments in our business. In the quarters ended March 31, 1999 and June 30,
1999 our license revenues increased substantially to $1.3 million and $3.7
million, respectively, as we recognized previously deferred revenue under
agreements with CEGETEL/SFR, DDI Corporation and AT&T Wireless Services and due
to the launch of commercial services by other network operators.

   Revenues from maintenance and support services were not significant through
the quarter ended March 31, 1998. Beginning in the quarter ended June 30, 1998,
our revenues from maintenance and support services increased substantially due
principally to increasing UP.Browser license activity with wireless telephone
manufacturers and UP.Link Server Suite trial agreements with network operators.

   Cost of license revenues increased from $26,000 in the quarter ended
December 31, 1998 to $84,000 in the quarter ended March 31, 1999, and $199,000
in the quarter ended June 30, 1999. As a percentage of license revenues, cost
of license revenues was 41%, 7% and 5% in the quarters ended December 31, 1998,
March 31, 1999 and June 30, 1999, respectively. The decrease as a percentage of
license revenues was attributable primarily to higher license revenues in the
quarters ended March 31, 1999 and June 30, 1999, and to the amortization of
fixed maintenance fees relating to third party software licenses. Because this
fixed cost has been amortized over revenues that vary from quarter to quarter,
our cost of license revenues as a percentage of license revenues has fluctuated
historically. We expect that cost of license revenues will vary as a percentage
of license revenues from period to period.

   Cost of maintenance and support services as a percentage of related revenues
declined from 186% for the quarter ended September 30, 1997 to 33% for the
quarter ended June 30, 1998 as increased efficiencies were realized as revenues
increased over the corresponding period. Cost of maintenance and support
services as a percentage of related revenues increased from 33% for the quarter
ended June 30, 1998 to 54% for the quarter ended June 30, 1999 as personnel
were added in anticipation of increased demand for maintenance and support
services.

   Cost of consulting services revenues increased from $77,000 in the quarter
ended December 31, 1998 to $511,000 in the quarter ended March 31, 1999, and
declined to $500,000 in the quarter ended June 30, 1999. As a percentage of
consulting services revenues, cost of consulting services revenues was 18%, 63%
and 56% in the quarters ended December 31, 1998, March 31, 1999 and June 30,
1999, respectively. The increase reflects a higher mix of consulting services
performed on a time and materials basis during the later periods, and we expect
that cost of consulting services revenues will vary as a percentage of
consulting services revenues from period to period.

   The total number of our employees grew from 47 at September 30, 1997 to 217
at June 30, 1999. As a result of the growth in the number of employees in our
research and development, sales and marketing, and general and administrative
organizations, our research and development, sales and marketing, and general
and administrative expenses have increased on a quarter-to-quarter basis.

   We believe that period-to-period comparisons of our operating results are
not necessarily meaningful. You should not rely on them to predict future
performance. The amount and timing of our operating expenses generally may
fluctuate significantly in the future as a result of a variety of factors. We
face a number of risks and uncertainties encountered by early stage companies,
particularly those in rapidly evolving markets such as the wireless
telecommunications and the Internet software industries. We may not be able to
successfully address these risks and difficulties. In addition, although we
have experienced revenue growth recently, our revenue growth may not continue,
and we may not achieve or maintain profitability in the future.

   Our quarterly revenues and operating results are difficult to predict and
may fluctuate significantly from quarter to quarter due to a number of factors,
some of which are outside of our control. These factors include, but are not
limited to:

  .  delays in market acceptance or implementation by our customers of our
     products and services;
  .  changes in demand by our customers for additional products and services;

                                       30
<PAGE>

  .  our lengthy sales cycle, our concentrated target market and the
     potentially substantial effect on total revenues that may result from
     the gain or loss of business from each incremental network operator
     customer;
  .  introduction of new products or services by us or our competitors;
  .  delays in developing and introducing new products and services;
  .  changes in our pricing policies or those of our competitors or
     customers;
  .  changes in our mix of domestic and international sales;
  .  risks inherent in international operations;
  .  changes in our mix of license, consulting and maintenance and support
     services revenues;
  .  changes in accounting standards, including standards relating to revenue
     recognition, business combinations and stock-based compensation; and
  .  the impact of year 2000 concerns on the timing of capital expenditures
     by network operators and their launches of commercial services utilizing
     our products and services.

   Our sales cycle, which is lengthy--typically between nine and twelve
months--contributes to fluctuations in our quarterly operating results. Many
factors outside our control add to the lengthy education and customer approval
process for our products. For example, many of our prospective customers have
neither budgeted expenses for the provision of Internet-based services to
wireless subscribers nor specifically dedicated personnel for the procurement
and implementation of our products and services. Further, the emerging and
evolving nature of the market for Internet-based services via wireless
telephones may lead prospective customers to postpone their purchasing
decisions. In addition, general concerns regarding year 2000 compliance may
further delay purchase decisions by prospective customers.

   Most of our expenses, such as employee compensation and lease payments for
facilities and equipment, are relatively fixed. In addition, our expense levels
are based, in part, on our expectations regarding future revenues. As a result,
any shortfall in revenues relative to our expectations could cause significant
changes in our operating results from quarter to quarter. Due to the foregoing
factors, we believe period to period comparisons of our revenue levels and
operating results are not meaningful. You should not rely on our quarterly
revenues and operating results to predict our future performance.

Liquidity and Capital Resources

   Since inception, we have financed our operations through private sales of
convertible preferred stock which totaled $66.0 million in aggregate net
proceeds through March 31, 1999, through our initial public offering in June
1999 which generated net proceeds of $66.8 million, and through an equipment
loan and a capitalized lease, which totaled $922,000 in principal amount
outstanding at June 30, 1999. As of June 30, 1999, we had $79.8 million of cash
and cash equivalents and $33.3 million of short-term investments, and working
capital of $88.3 million.

   Net cash used for operating activities was $6.6 million, $5.1 million and
$917,000 for the fiscal years ended June 30, 1997, 1998 and 1999, respectively.
For each of the fiscal years ended June 30, 1997, 1998 and 1999, cash used for
operating activities was attributable primarily to net losses and an increase
in accounts receivable offset in part by depreciation and amortization,
increases in accounts payable and accrued liabilities, and increases in
deferred revenue. For the fiscal year ended June 30, 1999, accounts receivable
increased by approximately $17.8 million. This increase was due to increased
sales to both wireless telephone manufacturers and network operators. To date,
we have had no write-offs of accounts receivable and we have not recorded any
allowance for doubtful accounts. Accrued liabilities increased by approximately
$5.3 million for the fiscal year ended June 30, 1999, which was primarily due
to an increase of $1.3 million in accruals of incentive compensation for sales
personnel reflective of the increased billings of license prepayments from
network operators and increased fees from wireless telephone manufacturers in
the quarter ended June 30, 1999, the accrual of approximately $471,000 of costs
associated with the initial public offering completed in June 1999 and an
increase in accrued consulting costs of approximately $1.0 million. Deferred
revenue increased by approximately $29.8 million for the fiscal year ended June
30, 1999, as a result of increased deferred license

                                       31
<PAGE>

prepayments by network operators of approximately $27.5 million and increased
deferred fees from wireless telephone manufacturers of approximately $2.3
million.

   Net cash used for investing activities was $4.8 million, $18.0 million and
$15.2 million for the fiscal years ended June 30, 1997, 1998 and 1999,
respectively. For each of the fiscal years, cash used in investing activities
reflects purchases of property and equipment, with increased purchases of
short-term investments in the fiscal years ended June 30, 1997, 1998 and 1999.

   Net cash provided by financing activities was $9.7 million, $31.7 million
and $83.2 million for the fiscal years ended June 30, 1997, 1998 and 1999,
respectively. Cash provided by financing activities in fiscal 1997 and 1998 was
attributable to proceeds from the issuance of preferred stock, and for the
fiscal year ended June 30, 1998, cash provided by financing activities also was
attributable in part to proceeds from our equipment loan. In March 1999 we
completed the sale of 2,458,543 shares of Series E convertible preferred stock
at a purchase price of $7.24 per share, which resulted in net proceeds to us of
approximately $16.7 million. In June 1999, we completed an initial public
offering of 4,600,000 shares of our common stock at a public offering price of
$16.00 per share, which resulted in net proceeds to us of approximately $66.8
million. All of the outstanding shares of convertible preferred stock were
automatically converted into shares of common stock upon the closing of the
initial public offering in June 1999.

   As of June 30, 1999, our principal commitments consisted of obligations
outstanding under operating leases, our equipment loan and capitalized lease
obligations. Although we have no material commitments for capital expenditures,
we expect to increase capital expenditures and lease commitments consistent
with our anticipated growth in operations, infrastructure and personnel. We
also may increase our capital expenditures as we expand into additional
international markets. See Notes 3, 4 and 5 of Notes to Consolidated Financial
Statements.

   We believe that our current cash, cash equivalents and short-term
investments, will be sufficient to meet our anticipated cash needs for working
capital and capital expenditures for at least the next twelve months. If cash
generated from operations is insufficient to satisfy our liquidity
requirements, we may seek to sell additional equity or debt securities or to
obtain a credit facility. If additional funds are raised through the issuance
of debt securities, these securities could have rights, preferences and
privileges senior to holders of common stock, and the terms of any debt could
impose restrictions on our operations. The sale of additional equity or
convertible debt securities could result in additional dilution to our
stockholders, and additional financing may not be available in amounts or on
terms acceptable to us, if at all. If we are unable to obtain this additional
financing, we may be required to reduce the scope of our planned product
development and marketing efforts, which could harm our business, financial
condition and operating results.

Year 2000 Readiness Disclosure

   Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These systems and
software products will need to accept four digit entries to distinguish 21st
century dates from 20th century dates. This problem may result in software
failures or the creation of erroneous results.

   We have conducted a year 2000 readiness review for the current versions of
our products. The review includes assessment, implementation (including
remediation, upgrading and replacement of some product versions), validation
testing, and contingency planning. We have largely completed all phases of this
plan, except for contingency planning, for the current versions of our
products. As a result, we believe all current versions of our products are
capable of properly distinguishing between 20th and 21st century dates, when
configured and used in accordance with the related documentation, and provided
that the underlying operating system of the host machine and any other software
used with our products are also capable of properly distinguishing between 20th
and 21st century dates. We have not tested all noncurrent versions of our
products and do not intend to do so. However, we have delivered software
releases containing corrections to all identified

                                       32
<PAGE>

year 2000 errors in our UP.Link Server Suite software to our network operator
customers with our software in production and expect that those releases will
be implemented by our customers prior to December 31, 1999.

   We are testing software obtained from third parties (licensed software,
shareware, and freeware) that is incorporated into our products, and we have
contacted our vendors to confirm that licensed software is capable of properly
distinguishing between 20th and 21st century dates. We have been informed by
many of our vendors that their products that we use are capable of properly
distinguishing between 20th and 21st century dates. Despite testing by us and
by current and potential customers, and assurances from developers of products
incorporated into our products, our products may contain undetected errors or
defects associated with year 2000 date functions. Known or unknown errors or
defects in our products could result in delay or loss of revenues, diversion of
development resources, damage to our reputation, or increased service and
warranty costs, any of which could materially and adversely affect our
business, operating results or financial condition. Some commentators have
predicted significant litigation regarding year 2000 compliance issues, and we
are aware of lawsuits against other software vendors. Because of the
unprecedented nature of this litigation, it is uncertain whether or to what
extent we may be affected by it.

   Our internal systems include our information technology, or IT, non-IT
systems and embedded systems. We have completed an assessment of our material
internal IT, non-IT and embedded systems, including both our own software
products and third-party software and hardware technology. We expect to
complete validation testing of our IT systems and related contingency planning
by October 1999. To the extent that we are not able to test the technology
provided by third-party vendors, we are seeking assurances from vendors that
their systems are year 2000 compliant. We are not currently aware of any
material operational issues associated with preparing our internal IT, non-IT
and embedded systems for the year 2000. However, we may experience material
unanticipated problems or additional costs caused by undetected errors or
defects in the technology used in our internal IT, non-IT and embedded systems.

   We do not currently have any information concerning the year 2000 compliance
status of our customers. Our network operator customers face implementation and
support challenges in introducing Internet-based services via wireless
telephones. Historically, network operators have been relatively slow to
implement new complex services, such as Internet-based services, and year 2000
compliance issues could slow adoption or implementation of our products. If our
current or future customers fail to achieve year 2000 compliance or if they
divert technology expenditures, especially technology expenditures that were
earmarked for our products, to address year 2000 compliance problems, our
business could suffer.

   We have funded our year 2000 plan from available cash and have not
separately accounted for these expenses in the past. To date, these expenses
have not been material. Most of our expenses have related to, and are expected
to continue to relate to, the operating costs associated with time spent by
employees and management consultants in the evaluation process and year 2000
compliance matters generally. We expect to incur approximately $500,000 to
verify that our IT, non-IT and embedded systems are capable of properly
distinguishing between 20th century and 21st century dates. In addition, we may
experience material problems and expenses associated with year 2000 compliance
that could adversely affect our business, results of operations, and financial
condition. Finally, we are also subject to external forces that might generally
affect industry and commerce, such as year 2000 compliance failures by utility
or transportation companies and related service interruptions.

Quantitative and Qualitative Disclosures About Market Risk

   Foreign Currency Hedging Instruments

   We transact business in various foreign currencies and, accordingly, we are
subject to exposure from adverse movements in foreign currency exchange rates.
To date, the effect of changes in foreign currency exchange rates on revenues
and operating expenses have not been material. Substantially all of our
revenues are earned in U.S. dollars. Operating expenses incurred by our
European and Japanese subsidiaries are denominated primarily in U.K. pounds
sterling and Japanese yen, respectively.

                                       33
<PAGE>

   We currently do not use financial instruments to hedge operating expenses in
the U.K. or Japan denominated in their respective local currency. We intend to
assess the need to utilize financial instruments to hedge currency exposures on
an ongoing basis.

   We do not use derivative financial instruments for speculative trading
purposes, nor do we currently hedge our foreign currency exposure to offset the
effects of changes in foreign exchange rates.

   Fixed Income Investments

   Our exposure to market risks for changes in interest rates relates primarily
to corporate debt securities. We place our investments with high credit quality
issuers and, by policy, limit the amount of the credit exposure to any one
issuer.

   Our general policy is to limit the risk of principal loss and ensure the
safety of invested funds by limiting market and credit risk. All highly liquid
investments with a maturity of less than three months at the date of purchase
are considered to be cash equivalents; all investments with maturities of three
months or greater are classified as available-for-sale and considered to be
short-term investments.

                                       34
<PAGE>

                                    BUSINESS

Phone.com, Inc.

   We are a leading provider of software that enables the delivery of Internet-
based services to mass-market wireless telephones. Using our software, network
operators can provide Internet-based services to their wireless subscribers,
and wireless telephone manufacturers can turn their mass-market wireless
telephones into mobile Internet appliances. Wireless subscribers thus have
access to Internet- and corporate intranet-based services, including email,
news, stocks, weather, travel and sports. In addition, subscribers have access
via their wireless telephones to network operators' intranet-based telephony
services, which may include over-the-air activation, call management, billing
history information, pricing plan subscription and voice message management.
Our software platform consists of the UP.Link Server Suite, which is installed
on network operators' systems, and UP.Browser, which is embedded in wireless
telephones. As of August 1999, 31 network operators have licensed our software
and have commenced or announced commercial service or are in market or
laboratory trials. In addition, 25 wireless telephone manufacturers have
licensed UP.Browser.

   In September 1999, we announced the MyPhone service, our mobile portal
platform that is complementary to our existing business. The MyPhone service
enables network operators to rapidly deploy branded portal sites for their
wireless subscribers. With MyPhone, network operators can provide their
subscribers with a customized set of information services and applications that
are optimized for the mobile user, thereby enhancing subscriber loyalty and
capturing new revenue opportunities.

Industry Background

Growth of the Internet

   The Internet has emerged as a global communications medium enabling millions
of people to share information and conduct business electronically.
International Data Corporation, or IDC, estimates that there were approximately
159 million users of the Internet worldwide at the end of 1998 and that the
number of users will grow to 410 million by the end of 2002. We cannot assure
you that this estimate will be achieved. The dramatic growth in the number of
business and consumer Internet users has led to a proliferation of useful
information and services on the Internet, including email, news, electronic
commerce, educational and entertainment applications and a multitude of other
value-added services. As a result, the Internet has become a primary and
ubiquitous daily resource for millions of people.

Growth of Wireless Telecommunications

   Worldwide use of wireless telecommunications has grown rapidly as cellular
and other emerging wireless communications services have become more widely
available and affordable for the mass business and consumer markets. Advances
in technology, changes in telecommunications regulations and the allocation and
licensing of additional radio spectrum have contributed to this growth
worldwide. Dataquest estimates that there were approximately 187 million
digital wireless subscribers worldwide at the end of 1998 and that the number
of subscribers will grow to 590 million by the end of 2002. We cannot assure
you that this estimate will be achieved.

The Wireless Network Operator Environment

   As a result of deregulation, new radio frequency spectrum licenses,
privatizations and rapid network expansion by new entrants, the competitive
environment among network operators in major markets worldwide has become
intense. Efforts to attract and retain subscribers have resulted in significant
price-based competition. Increased competition has in turn raised the costs
associated with acquiring new subscribers, has lowered average revenues per
subscriber, and has increased the propensity of subscribers to switch from one
network operator to another. For these reasons, network operators are looking
for new revenue sources in the form of value-added services they can deliver to
their wireless subscribers. They are also looking for ways to differentiate
their product offerings in an effort to retain subscribers. Finally, they are
focused on finding and deploying solutions that enable them to deliver and
support their services in a more cost-effective manner.

                                       35
<PAGE>

The Convergence of the Internet and Mobile Telephony

   As people have become increasingly dependent on email services, remote
access to corporate intranets, and other Internet-based services, mass-market
wireless telephones that provide mobile access to these resources have become
increasingly useful tools. Phone.com was a pioneer in the convergence of the
Internet and mobile telephony. In 1995, Phone.com developed its initial
technology, which enables the delivery of Internet-based services to wireless
telephones. In 1996, Phone.com introduced and deployed its first products based
on this technology.

   To provide a worldwide open standard enabling the delivery of Internet-based
services to mass-market wireless telephones, Phone.com, Ericsson, Motorola and
Nokia formed the Wireless Application Protocol Forum. In 1998, the WAP Forum
published technical specifications for application and content development and
product interoperability based on Internet technology and standards. By
complying with WAP specifications, wireless telephone manufacturers, network
operators, content providers and application developers can provide Internet-
based products and services that are interoperable.

   In 1998, the WAP Forum published the Wireless Markup Language, or WML. WML
is compliant with the Extensible Markup Language, or XML, specification
published by the World Wide Web Consortium. XML is a programming language that
provides a means of describing and exchanging data in an open format. Content
providers and application developers use WML to optimize the display of, and
interaction with, Web-based data on wireless telephones. Based substantially on
technology that Phone.com contributed to the public domain, WML is optimized
for delivery of Internet content to mass-market wireless telephones, which have
numeric keypads instead of full keyboards, small screens, and limited memory
capacity, processing power, battery life and bandwidth. In the same manner that
the programming language known as Hypertext Markup Language, or HTML, has
provided an open standard that has fueled the development of Internet
applications and content for personal computers, WML is designed to be an
industry standard that will encourage the development of Internet applications
and content for wireless telephones.

   Leading network operators, telecommunications device and equipment
manufacturers, and software and services companies worldwide have sanctioned
the specifications promulgated by the WAP Forum. Charles Parrish, Executive
Vice President of Phone.com, currently serves as the Vice Chairman of the WAP
Forum, which has grown to over 150 members as of September 1999, including the
following companies:

                                 Board Members
<TABLE>
----------------------------------------------------------------------------
  <S>                         <C>
  Phone.com                   Motorola
  Alcatel                     Nokia Mobile Phones
  CEGETEL/SFR (Societe        NTT Mobile Communications Network (NTT DoCoMo)
   Francaise du Radio
   Telephone)                 SBC Communications
  DDI Corporation             Sprint PCS
  Ericsson Mobile
   Communications AB          Telstra Corporation
  IBM
  Matsushita Communication
   Industrial

                               Network Operators
----------------------------------------------------------------------------
  AT&T Wireless Services      Mannesmann
  Bell Atlantic Mobile        Nextel Communications
  BellSouth Cellular          Omnitel
  Bouygues Telecom            One 2 One
  Cable & Wireless            Orange Communications
  Cellnet Communications      Radiolinja
  CoCoNet Global Interchange  Rogers Cantel Mobile Communications
  Connect Austria             SK Telecom
</TABLE>

                                       36
<PAGE>

<TABLE>
  <S>                                      <C>
  Deutsche Telecom Mobilnet GmbH           Sonera Corporation
  FarEasTone Telecommunications            SWISSCOM LTD.
  Finnet                                   Telefonica Servicios Moviles
  France Telecom                           Telia Mobile AB
  Giesecke & Devrient                      Tokyo Digital Phone
  Hongkong Telecom Mobile Services         Telecom Italia Mobile
  IDO Corporation                          Telenor Mobil Group
  Japan Telecom                            TU-KA Cellular Tokyo
  KPN                                      Vodafone
  LG TeleCom

                       Device and Equipment Manufacturers
------------------------------------------------------------------------------
  Acer Peripherals                         ORGA Kartensysteme GmbH
  Bosch Telecom Danmark A/S                Philips Consumer Communications
  Bull CP8                                 Pioneer
  CMG Telecommunications & Utilities       Qualcomm
  De La Rue Card Systems                   RTS Wireless
  DENSO                                    Samsung Electronics
  Gemplus                                  Schlumberger Industries S.A.
  Hewlett-Packard                          Sema Group Telecom
  Hitachi                                  Sharp
  ICO Global Communications                Siemens AG
  Intel Corporation                        Sony International (Europe) GmbH
  LG Information & Communications          Tecnomen Oy
  Logica Aldiscon                          Telital S.p.A.
  Lucent Technologies                      Toshiba
  Mitsubishi Wireless Communications       Uniden
  NEC Technologies (UK)                    Unisys
  Nissan Communications Systems
  Nortel

                        Software and Services Companies
------------------------------------------------------------------------------
  @MOTION                                  M.D. Communications
  Advance Systems Limited                  Merita Bank
  Aether Systems                           Microsoft
  Agency.com                               Mobile Services Group
  ApiON                                    Myalertcom
  AU-System Mobile                         Oracle Corporation
  Baltimore Technologies                   Peramon Technology
  BEA Systems                              ProxiNet
  Bussan Systems Integration Company       Puma Technology
  Certicom                                 RSA Data Security
  Charles Schwab & Co.                     Saraide
  Comverse Network Systems                 Sendit AB
  CCL (Computer & Communications           Scandinavian Softline Technology Oy
  Research Laboratories, ITRI)             Softline
  CTC (Itochu Techno-Science Corporation)  Spyglass
  CycleLogic                               Symbian
  Dr. Materna GmbH                         Systems Engineering Consultants
  Digital Mobility                         TANTAU Software
</TABLE>

                                       37
<PAGE>

<TABLE>
  <S>                           <C>
  Diversinet                    Tegic Communications
  Dolphin Telecommunications    TWS
  Evolving Systems              Union Bank of Switzerland
  Fantastic Corporation         Usha Communications Technology
  Fujitsu Software Corporation  VTT Information Technology
  Geoworks Corporation          VeriSign
  Glenayre Technologies         Visa International
  Lexacom                       WapIT
  LPG Innovations               Wireless Knowledge
  MapQuest.com
</TABLE>

The Market Opportunity

   In response to an increasingly competitive environment, network operators
are seeking to deliver Internet-based services to their wireless subscribers as
a means to generate revenues from new sources, differentiate their service
offerings, and reduce subscriber turnover and operating costs. To do this,
network operators require a scalable turnkey software and services solution to
deliver Internet-based services and content to their wireless subscribers.

The Phone.com Solution

   We provide a leading software infrastructure platform that enables the
delivery of Internet-based services to mass-market wireless telephones. Using
our scalable platform, network operators can provide Internet-based content,
applications and services to their wireless subscribers, and wireless telephone
manufacturers can turn their mass-market wireless telephones into mobile
Internet appliances. Wireless subscribers thus have access to Internet- and
corporate intranet-based services, including email, news, stocks, weather,
travel and sports. In addition, the MyPhone service, our mobile Internet portal
platform, is designed to enable network operators to rapidly deploy branded
portal sites for their wireless subscribers and deliver Internet content and
applications optimized for the mobile user.


 [Diagram depicting components of UP.Link platform and relationships of various
         systems, including wireless telephones, servers and Internet]

   Our infrastructure platform consists of the UP.Link Server Suite and
UP.Browser software products. The UP.Link Server Suite includes:

  .  a means of exchanging data between the Internet and mass-market wireless
     telephones, commonly referred to as a gateway;
  .  a service platform that performs subscriber management and service
     provisioning functions, as well as communicating with the network
     operator's customer care and billing systems; and
  .  Internet-based applications such as email and personal information
     management software.

                                       38
<PAGE>

The UP.Browser is a browser and messaging software product that is designed and
optimized for mass-market wireless telephones. In addition, as of August 1999,
approximately 10,700 third-party developers have registered to use our UP.SDK
software development kit, and a variety of third-party content is currently
available for wireless telephones equipped with UP.Browser, including
information from ABCNews.com, Bloomberg, Reuters, Quote.com and ESPN
Sportszone.

   With the introduction of the next version of our software solution,
currently available as a beta release, our products will provide an open,
interoperable, WAP-compliant platform for the delivery of Internet-based
services. Our software solution supports all major digital wireless telephony
standards in use around the world:

  .  CDMA (Code Division Multiple            .  GSM (Global System for Mobile
     Access)                                    Communication)
  .  TDMA (Time Division Multiple            .  CDPD (Cellular Digital Packet
     Access)                                    Data)
  .  iDEN (Integrated Digital Enhanced       .  PDC (Personal Digital Cellular)
     Network)
  .  PHS (Personal Handyphone System)

   The MyPhone service is complementary to our infrastructure platform and is
designed to allow network operators to rapidly deploy customized, branded
Internet portals for their wireless subscribers. MyPhone offers a framework for
the delivery of Internet applications, content and services optimized for
wireless telephones. Initial information services available through MyPhone
will include news feeds and financial information, as well as email, address
book and calendar functionality. The MyPhone service can be customized to
enable network operators to offer their wireless subscribers a branded portal
with a differentiated look and feel, content, customer care functionality and
other unique features. Wireless subscribers will also be able to access the
information services and applications available on MyPhone through a standard
PC web browser. MyPhone's extensible architecture is designed to facilitate the
development of new applications and services. MyPhone will be hosted by
Phone.com, and we expect to operate all back-end systems involved in offering
this service.

   Key benefits of our products and services for network operators include the
following:

  .  Opportunity to generate incremental revenues. Network operators can
     generate additional revenues by offering value-added Internet-based
     services. They can also charge for the increased data and voice airtime
     that these applications encourage. For example, a user can access an
     email message via UP.Mail and initiate a voice call to any phone number
     appearing in the message with the press of one button.

  .  Ability to differentiate services and improve subscriber
     retention. Using our products and services, network operators can offer
     new Internet-based services to wireless subscribers. In addition, by
     enabling wireless subscribers to store personal contact information in
     their networks and to personalize the selection and presentation of
     Internet content such as stock quotes, sports scores and news, network
     operators can enhance subscriber retention.

  .  Opportunity to reduce operating costs. Our UP.Link Server Suite can also
     be used by network operators to reduce operating costs. For example,
     network operators' call centers are burdened by high rates of calls from
     subscribers inquiring about billing, service availability, usage and
     other service-related matters. Our software platform enables network
     operators to leverage standards-based Internet technology to allow
     subscribers to make many of these inquiries using their wireless
     telephones without assistance by customer care representatives. By
     bypassing the call center infrastructure for these activities, network
     operators can reduce their operating costs.

  .  Ability to rapidly deploy a branded mobile Internet portal site. MyPhone
     is designed to allow network operators to rapidly deploy a customized
     and branded Internet portal for its wireless subscribers. We believe
     that by aggregating content and applications optimized for mobile users
     in a customized, branded portal service, network operators will be able
     to increase subscriber loyalty and generate new revenue opportunities.
     MyPhone's extensible architecture will facilitate new application
     development, allowing network operators to continue to deliver new and
     enhanced services to their subscribers.

                                       39
<PAGE>

The Phone.com Strategy

   Our objective is to be the leading supplier to network operators of software
and services that enable the convergence of the Internet and mobile telephony.
Key elements of our strategy include:

  .  Focus on Providing Products and Services to Network Operators. We focus
     on providing comprehensive solutions that enable network operators to
     deliver Internet-based services to their wireless subscribers. Our close
     working relationships with network operators provide us with a valuable
     understanding of our customers' technology and operations, which we
     intend to leverage to accelerate time to market of our products and
     identify new sales opportunities. In order to drive revenues from our
     UP.Link Server software and related services, we utilize direct and
     indirect sales channels. Our direct sales force focuses on selling
     products and consulting services and assists our indirect channel
     partners in selling our products and services. Our indirect sales
     channel partners are currently Alcatel, Itochu Techno-Science
     Corporation, Sema Group and Siemens. These partners sell our products
     and services as an integral part of their product and service offerings
     to network operators primarily in international markets. We intend to
     add new partners to our indirect sales channel to serve customers in key
     markets and expect that sales through our indirect sales channel
     partners will represent an increasing portion of our revenues. In
     addition, we intend to invest significantly in the development of new
     mobile Internet applications and services for the MyPhone service.

  .  Continue to Invest in our Technology. Network operators have stringent
     requirements for server software performance, scalability and
     reliability. Extensive technical expertise is required to integrate
     these solutions with the network operators' complex systems. We also
     expect that network operators will demand regular upgrades that include
     new functions and features. Consequently, we intend to continue to
     invest heavily in research and product development. We also intend to
     maintain our technology leadership by leveraging our role in prominent
     industry standard-setting organizations such as the WAP Forum and the
     World Wide Web Consortium.

  .  Drive the Sale and Development of Internet-Based Applications and
     Services. Network operators that offer Internet-based services by using
     our UP.Link Server Suite generally seek new value-added applications to
     offer to their subscribers. We currently offer the following Internet-
     based applications:

    .  UP.Mail, which delivers email to wireless telephones,
    .  UP.Organizer, a personal information management application, and
    .  UP.Web, which enables subscribers to access, manage and update their
       personal information and configuration for UP.Mail and UP.Organizer
       from their personal computers.

   We are continuously enhancing our existing products and developing new
   applications and services to provide additional functionality for network
   operators and wireless subscribers. In September 1999, we announced the
   MyPhone service, a turnkey solution designed to provide network operators
   a means to rapidly deploy customized mobile Internet portals. We intend
   to market this service aggressively through our existing sales channels.
   We believe that the adoption of our MyPhone service by network operators
   will accelerate the adoption by subscribers of Internet-based services
   using their wireless telephones as well as the development of new WAP-
   compatible information services and applications.

  .  Propagate Widespread Use of UP.Browser in Mass-Market Wireless
     Telephones. We believe that increasing the number of wireless telephone
     manufacturers that incorporate UP.Browser into their mass-market
     wireless telephones enhances the attractiveness of our UP.Link server
     software to network operators. Therefore, in order to drive widespread
     adoption, we license UP.Browser to wireless telephone manufacturers,
     free of per-unit royalties. As of September 1999, we have licensed
     UP.Browser to 25 wireless telephone manufacturers.

  . Promote the Development of Internet-Based Services Over Mass-Market
    Wireless Telephones. To encourage the growth of our business, we actively
    encourage Internet content and application developers to create WML
    applications. In connection with this activity, we provide our UP.SDK
    software

                                       40
<PAGE>

   development kit and support to Internet content and application developers
   free of charge. As of August 1999, there were approximately 10,700
   registered developers in our Developer Program. Internet content providers
   that currently deliver content for wireless telephones equipped with
   UP.Browser include ABCNews.com, BizTravel.com, Bloomberg, Data
   Broadcasting Corporation, ESPN Sportszone, InfoSpace.com, Quote.com,
   Reuters and Sportsfeed.

Products and Services

Products

   Our software products enable the delivery of Internet-based services to
mass-market wireless telephones. Our software products include:

  . UP.Link Server Suite--a product that network operators use to connect
    their subscribers' mass-market wireless telephones to Internet services
  . UP.Browser--a browser that is embedded in mass-market wireless telephones
    and enables wireless subscribers to access Internet services
  . UP.Smart--a suite of software applications that delivers personal digital
    assistant features to smartphones
  . UP.SDK--a software development kit that Internet content providers and
    third-party developers use to create WML-compliant applications

UP.Link Server Suite

   UP.Link Server Suite is a turnkey software solution with features and
applications that enable network operators to offer Internet-based services to
their wireless subscribers. UP.Link Server Suite connects data-enabled
wireless telephones to applications and content hosted by Web servers on the
Internet or private intranets. UP.Link Server Suite also provides network
operators with subscriber provisioning and network management functions on a
robust and scalable software platform. The UP.Link Server Suite consists of
the following components:

 Components        Description
-------------------------------------------------------------------------------

<TABLE>
  <S>             <C>
  Gateway         UP.Link Gateway provides the network-layer functions of the UP.Link
                  Server Suite, and connects Internet- and intranet-based services to
                  wireless networks and wireless telephones. UP.Link Gateway connects
                  the multiple protocols for wireless data communications to the open
                  standards of the Internet, thereby enabling Web servers to
                  recognize a wireless telephone as an Internet standards- compliant
                  client.

  Administration  The UP.Link administration component provides a Web-based
                  administration control system to keep the network operator's
                  Internet-based network components up and running, assess system
                  status and provision new subscribers.

                  The UP.Link Provisioning Application Programming Interface, or
                  PAPI, enables integration of UP.Link with the network operator's
                  existing customer care, help desk and billing systems.

  Services        The services component provides an open application programming
                  framework with interfaces, or APIs, that standardize the way that
                  the services component interacts with applications. These services
                  include:

                  . Push Server--allows applications to push information to wireless
                    subscribers. For example, an email application can use the Push
                    Server to notify a wireless subscriber of new messages.
                  . Fax Server--enables the forwarding of email attachments and other
                    data content to fax machines for printing.
</TABLE>

                                      41
<PAGE>

<TABLE>
  <S>           <C>
                . Identity Server--maintains a subscriber registry that retains
                  wireless subscribers' service settings and allows network
                  operators to track their subscribers' service usage.
                . Content Translation Framework--provides forward and backward
                  compatibility of content formats between different generations of
                  browsers and wireless telephones. Translates between
                  international character sets in real-time. Also translates
                  standard HTML Web pages into WML pages for viewing on wireless
                  telephones.
                . Application Registry--provides a structure for the
                  interoperability of different applications. For example, third-
                  party applications can retrieve and store contact records in the
                  UP.Organizer's address book or pass an email address to UP.Mail.

  Applications  UP.Applications is a suite of wireless Internet-based applications,
                including:

                . UP.Mail--provides access to the same email account through both
                  wireless telephones and personal computers.
                . UP.Organizer--provides a suite of synchronized Internet-based
                  personal information management applications, including an
                  address book, calendar and to-do list.
                . UP.Web--a Web-based user interface that allows subscribers to use
                  their personal computers to perform many of the same tasks they
                  perform on their wireless telephones with UP.Organizer.
</TABLE>

UP.Browser

   UP.Browser is a browser and messaging software product that is designed and
optimized for mass-market wireless telephones. Using UP.Browser, subscribers
can access Web-based information and services that are hosted on network
operators' or third-party Web servers. Due to its open and highly portable
architecture, UP.Browser can be embedded into different types of wireless
telephones and utilize each telephone's specific display and input
characteristics, such as graphical displays and programmable keys. Key features
of UP.Browser include:

 Components         Description
--------------------------------------------------------------------------------

<TABLE>
  <S>                <C>
  Browsing           UP.Browser displays WML-designed pages from any Web or intranet
                     site. In addition, UP.Browser incorporates text-input software from
                     Tegic Communications.

  Universal Inbox    Notifies subscribers with a visual or audible indication when a Web
                     page or other data has been proactively "pushed" to their wireless
                     telephones. Universal Inbox also integrates in a single local
                     mailbox diverse alert types, including email and voice mail, as
                     well as Web-based content such as stock quotes, traffic alerts and
                     flight information.

  Local Application  Allows access to important information when out of network
  Environment        coverage. Increases efficiency of applications and minimizes
                     perceived delay when used over bandwidth-constrained networks.

  Security           UP.Browser employs the same encryption technology used by many
                     commercial Web sites. Consequently, all interaction between the
                     wireless telephone and a Web site can be authenticated and
                     encrypted.
</TABLE>



                                       42
<PAGE>

 UP.Smart

   UP.Smart is a suite of software applications that augments UP.Browser with a
set of popular functions commonly found on personal digital assistants.
UP.Smart includes address book, calendar, to-do list and memo functions.
UP.Smart also utilizes Puma Technology's synchronization software to enable a
user to synchronize UP.Smart with PC-based personal information management
applications by connecting the UP.Smart-equipped wireless telephone to a
personal computer through a serial cable. The information is stored both on the
wireless telephone and personal computer, making it accessible even when the
wireless telephone is not connected to the network.

UP.SDK

   Our software development kit, known as UP.SDK, provides tools and
documentation for Internet content providers and developers to create and
maintain WML-based Internet services. UP.SDK consists of the following
components:

  . The UP.Simulator, a Windows-based application that simulates the behavior
    of UP.Browser-equipped wireless telephones, allowing developers to more
    easily test WML services.

  . Specialized functions and libraries that simplify the process of
    generating WML applications.

  . Tools for establishing secure communications between WML applications and
    UP.Link Servers.

  . Sample WML files and application source code.

Services

   We offer consulting services to network operators and wireless telephone
manufacturers. Our consulting services help us to shorten our software license
sales cycle, accelerate deployment of our technology and deepen our
understanding of our customers' networks. We also provide both customer support
and custom software development services for network operators, as well as
software consulting services to wireless telephone manufacturers that license
UP.Browser.

New Services and Products under Development

 MyPhone

   In September 1999, we announced the MyPhone service, our mobile portal
platform that is complementary to our existing business. The MyPhone service
enables network operators to rapidly deploy branded portal sites for their
wireless subscribers. With MyPhone, network operators can provide their
subscribers with a customized set of information services and applications that
are optimized for the mobile user, thereby enhancing subscriber loyalty and
capturing new revenue opportunities. MyPhone offers a framework for the
delivery of Internet applications, content and services optimized for wireless
telephones. Initial information services available through MyPhone will include
news feeds and financial information, as well as email, address book and
calendar functionality. The MyPhone service can be customized to enable network
operators to offer their wireless subscribers a branded portal with a
differentiated look and feel, content, customer care functionality and other
unique features. Wireless subscribers will also be able to access the
information services and applications available on MyPhone through a standard
PC web browser. MyPhone's extensible architecture is designed to facilitate the
development of new applications and services. MyPhone will be hosted by
Phone.com, and we expect to operate all back-end systems involved in offering
this service.

 Over-the-Air Provisioning

   In July 1999, we announced a collaborative effort with Bell Atlantic Mobile
and Motorola to develop WAP-based over-the-air provisioning technology. Through
this collaboration, we are designing a system capable of delivering
provisioning information as well as electronic customer care to Bell Atlantic
Mobile's

                                       43
<PAGE>

subscribers via CDMA wireless telephones. The system is being designed to
automatically update wireless telephones with current versions of network
information such as roaming lists, area code information, and other data
parameters. In addition, the system is being designed to enable subscribers to
check their bill and interactively manage their individual account features
directly from their wireless telephones.

Customers

 Wireless Network Operators

   We sell our UP.Link Server Suite and related technical support to network
operators worldwide to enable them to offer a variety of wireless Internet
services to their subscribers. These network operators have licensed our
software and have either announced a commercial service launch or are in a
market or laboratory trial phase.

   As of August 1999, 31 network operators, including the following companies,
have licensed our software:

 Name                              Stage              Technology    Country
<TABLE>
--------------------------------------------------------------------------------------
  <S>                     <C>                                  <C>        <C>
  AT&T Wireless Services         Deployed in July 1996            CDPD         USA
  Bell Atlantic Mobile         Deployed in September 1996         CDPD         USA
  GTE Wireless                    Deployed in May 1997            CDPD         USA
  SFR/CEGETEL                    Deployed in March 1999           GSM        France
  DDI Corporation                Deployed in April 1999           CDMA        Japan
  IDO Corporation                Deployed in April 1999           CDMA        Japan
  Bell Mobility                   Deployed in May 1999            CDMA       Canada
  LG Telecom                     Deployed in June 1999            CDMA     South Korea
  Omnitel                        Deployed in June 1999            GSM         Italy
  Sprint PCS                   Deployed in September 1999         CDMA         USA
  Mannesmann Mobilfunk        Announced Commercial Launch         GSM        Germany
   (D2)                           (expected fall 1999)
  Nextel Communications       Announced Commercial Launch         iDEN         USA
                                  (expected fall 1999)
  Southern LINC               Announced Commercial Launch         iDEN         USA
                                  (expected fall 1999)
  Shinsegi Telecom            Announced Commercial License        CDMA        Korea
  US West                     Announced Commercial License        CDMA         USA
  Telstra Corporation         Announced Commercial License        GSM       Australia
  Deutsche Telekom                       Trial                    GSM        Germany
   Mobilnet GmbH (T-
   Mobile)
  France Telecom Mobile                  Trial                    GSM        France
  Telecom Italia Mobile                  Trial                    GSM         Italy
</TABLE>

   We also provide our network operator customers with consulting services
that enable them to rapidly adopt our technology and bring wireless Internet-
based services to market. Our consulting services focus on those areas where
our products interface with the network operators' internal systems such as
billing, provisioning and customer care. We also provide our network operator
customers with assistance in choosing the appropriate content and applications
for their subscribers and creating the promotion and pricing strategies for
their service.

   Our agreements with network operators provide these customers with a non-
exclusive license to use our UP.Link Server Suite software in connection with
providing Internet-based services to their subscribers. Pricing

                                      44
<PAGE>

and payment terms for these licenses are negotiated with the customer based on
the number of subscriber licenses purchased by the network operator, and the
licenses can be purchased on an as-deployed basis or on a prepaid basis. While
these agreements do not provide for a right of return, these agreements
typically provide for a six-month warranty, indemnification against
intellectual property infringement claims, a commitment to provide standards-
compliant products, and a source code escrow. In addition, we typically provide
fee-based maintenance and support services to these customers, under which they
receive error corrections and remote support. They can also elect to receive
new releases of UP.Link Server Suite for an additional fee.

Wireless Telephone Manufacturers

   We license our UP.Browser software to wireless telephone manufacturers, who
embed UP.Browser into their products. In order to encourage these manufacturers
to include UP.Browser in their wireless telephone models, no per-unit royalty
is charged. In addition, we provide engineering and support services to
accelerate the introduction of new wireless telephone models that contain
UP.Browser. These services are provided to manufacturers on an annual flat-fee
basis per digital wireless telephony standard.

   As of September 1999, 25 wireless telephone manufacturers have licensed
UP.Browser, and the following manufacturers have publicly announced products
that will include UP.Browser:

<TABLE>
   <S>                                <C>
   . Alcatel                          .Nokia
   . Bosch                            .Panasonic (Matsushita)
   . Casio                            .Philips
   . Hitachi                          .Qualcomm
   . Hyundai Electronics              .Sagem
   . IGS                              .Samsung Electronics
   . Kyocera                          .Sharp
   . LG Information & Communications  .Siemens
   . Mitsubishi                       .Sony
   . Motorola                         .Toshiba
   . NEC                              .3Com (Palm Computing division)
   . Neopoint
</TABLE>

   Additionally, Ericsson has announced that it will introduce wireless
telephones that will be compatible with our UP.Link Server Suite. As of
September 1999, ten wireless telephone manufacturer customers had made
commercial shipments of telephones with the UP.Browser embedded. In addition,
we are currently providing engineering support services in connection with 60
browser integration projects.

   Our agreements with wireless telephone manufacturers generally provide these
customers with a non-exclusive, royalty-free license to sell wireless
telephones containing UP.Browser. These agreements typically provide for a 90-
day warranty, indemnification against intellectual property infringement claims
and a source code escrow. In addition, customers can elect to receive varying
levels of maintenance and support services for a fee.

   For the year ended June 30, 1999, AT&T Wireless Services and DDI Corporation
accounted for approximately 17% and 14%, respectively, of our total revenues.
For the year ended June 30, 1998, AT&T Wireless Services and Matsushita
Communication Industrial accounted for approximately 22% and 18%, respectively,
of our total revenues. The foregoing calculations are based on revenues derived
from direct and indirect sales to these customers.

Research and Product Development

   We continue to enhance the features and performance of our existing products
and introduce new products. For example, we have recently released in beta
version the fourth generation of our UP.Link Server Suite and UP.Browser
products. These products are expected to be compliant with version 1.1 of the
specifications promulgated by the WAP Forum. We are currently developing other
applications, including a

                                       45
<PAGE>

secure provisioning server, which enables network operators to automate
customer provisioning, and compatibility with two-way short messaging service
systems. In addition, we continue to develop the My Phone service to provide
outsourced application development and services to our network operator
customers.

   Our success depends on a number of factors, which include our ability to
identify and respond to emerging technological trends in our target markets,
develop and maintain competitive products, enhance our existing products by
adding features and functionality that differentiate them from those of our
competitors and bring products to market on a timely basis and at competitive
prices. As a result, we have made, and we intend to continue to make,
significant investments in research and product development. Our research and
development expenses were $4.0 million, $5.7 million and $13.1 million for the
years ended June 30, 1997, 1998 and 1999, respectively. As of August 31, 1999,
we had 129 employees engaged in research and product development activities. We
are recruiting additional skilled engineers for research and product
development, and our business could be adversely affected if we are unable to
hire these engineers on a timely basis.

Technology

   Our technology has contributed both to driving open standards for the
delivery of Internet-based services to mass-market wireless telephones and to
providing network operators and wireless telephone manufacturers with software
solutions that are robust and scalable, and take into account the specific
characteristics of wireless telephony networks and telephones.

Wireless Application Protocol and Wireless Markup Language

   Phone.com, along with Ericsson, Motorola and Nokia, founded the WAP Forum in
1997, and published open standards-based technical specifications for
application and content development, as well as product interoperability based
on Internet technology and standards. Leading network operators,
telecommunications device and equipment manufacturers, and software companies
worldwide have joined the WAP Forum, which has grown to over 150 members as of
September 1999.

   The WAP specifications consist of the following components:

  . A Transport Specification, which defines the way in which data is
    exchanged between the network operator's server and the wireless
    telephone. The WAP Transport Specification mirrors the Internet-standard
    secure HTTP protocol, but is optimized for wireless telephone networks.
    For example, on a typical PC-based Internet connection, all functions
    such as security provisioning and application downloading and interaction
    are performed on the PC. In the WAP Transport Specification, functions
    are divided between the wireless telephone and the network operator's
    server because of the bandwidth constraints over the wireless network and
    the wireless telephone's limited processing power.

  . A Wireless Markup Language (WML), which optimizes the display of and
    interaction with Web-based content on wireless telephones and allows
    Internet applications to take advantage of the voice capabilities of the
    wireless telephony network. WML is compliant with the Extensible Markup
    Language, or XML, specification published by the World Wide Web
    Consortium.

  . WML Script, which enables a developer to add procedural logic to WML
    pages.

   In order to implement interoperability with Internet-based content, the WAP
Transport Specification and WML use the open standards-based Internet model of
interaction, in which content and applications reside on Web servers that are
physically distributed, and requests for the data on these servers are sent via
open-standard Internet addresses, commonly known as URLs.

   On standard Internet Web servers, content typically resides in databases,
but is provided to users via a number of content formats, including HTML and
Java. WML and WML Script function as standard content formats, so Internet
content providers can add WML and WML Script access to their servers without
having to

                                       46
<PAGE>

change the underlying data. WML and WML Script applications deliver content in
a format that is optimized for wireless telephone interfaces.

Components of UP.Link Technology

   Our UP.Link Server Suite is designed to be modular, expandable, flexible,
scalable and reliable. Using an architecture based on scalable, object-oriented
technology, the UP.Link Server Suite typically runs on a large, distributed set
of servers. The UP.Link Server Suite, which runs on Sun Microsystems' Solaris
operating system, is designed to meet the stringent performance, scalability
and reliability requirements of network operators.

   Server Side Agents. Since wireless networks have limited bandwidth and
wireless telephones have limited processing power and memory, programs called
agents that reside on the server are used to provide processing power and other
computing resources to UP.Browser-enabled wireless telephones. These agents
allow some operations to be offloaded from the wireless telephone to the
UP.Link server. This means that the duties that are typically performed by the
Web browser on standard personal computers can be divided between the browser
on the wireless telephone and a "proxy" running in the agent. The exact split
of functionality can vary depending on the particular capabilities of the
wireless telephone. The agent can perform many functions, including translating
wireline Internet protocols such as HTTP to wireless Internet protocols such as
WAP, as well as compiling Internet content so that it is more compact to
transmit and easier to display on the wireless telephone.

   Dispatcher. At the core of our scalable server architecture is a dispatcher
that dynamically load balances user proxies between a number of agents. The
dispatcher is much like the line at a bank that funnels a queue of customers to
the next available teller. The dispatcher also provides a basic level of
protection against faults by automatically rerouting subscriber requests if a
proxy server malfunctions.

   Messenger. The UP.Link messenger server provides store-and-forward messaging
capabilities from Web servers to UP.Browser-enabled wireless telephones over a
wide range of wireless protocols such as Short Message Service and Cellular
Digital Packet Data. Store-and-forward means that if a wireless telephone is
turned off or out of its coverage area, the message will be stored and
delivered once the wireless telephone is connected to the network. The
messenger accepts data through standard Web interfaces such as HTTP and
converts the data for transmittal over the wireless network without requiring
modifications to the Web server.

   Narrow Band Router. The Narrow Band Router provides a common interface to a
wide range of narrow band, or low-bandwidth, wireless networks. This feature
makes the protocol-specific components of message addressing, routing and
delivery transparent to Internet applications, enabling developers to easily
create applications for wireless networks without customizing their
applications to work with each individual protocol. Thus the same application
can work across a number of wireless data networks and protocols in a
transparent manner.

   Translation Framework. Wireless telephones are different than personal
computers in that they are mass-market consumer devices with software that is
embedded in the wireless telephone at the factory and very difficult and costly
to modify in the field. The WML specification, however, is regularly evolving
as features and functionality are introduced and refined. To address this
issue, the translation framework enables the translation of content in real-
time. Software translators can be implemented that transparently translate
content based on newer versions of WML to make it compatible with wireless
telephones that contain older versions of UP.Browser, or vice versa.

Sales and Marketing

   We sell our products through both a direct sales force and third-party
resellers, currently Alcatel, Itochu Techno Science Corporation, Sema Group and
Siemens. In addition, we have a joint sales and marketing

                                       47
<PAGE>

relationship with Lucent Technologies. As of August 31, 1999, we had 47 persons
in sales and marketing serving the United States market, and 20 persons in
sales and marketing outside the United States. We plan to significantly expand
this group over the next 12 months. In addition, we have offices in London and
Tokyo. Our direct sales force focuses on selling products and consulting
services and assists our indirect channel partners in selling our products and
services. International sales of products and services accounted for 44% and
66% of our total revenues for the years ended June 30, 1998 and 1999,
respectively. We expect international revenues to continue to account for a
significant portion of our revenues, although the percentage of our total
revenues derived from international sales may vary. Our international sales
strategy is to partner with leading distributors and systems integrators that
have strong industry backgrounds and market presence in their respective
markets and geographic regions.

   Our success depends in part on our ability to increase sales of our products
and services through value-added resellers and to expand our indirect
distribution channels. Under the arrangements that we make with our value-added
resellers, a value-added reseller sells, installs and services our products to
wireless network operators. These agreements are not exclusive and do not have
territorial restrictions. Our value-added resellers generally are not
restricted from selling products that are competitive with our products, and
each of our partners can cease marketing our products and services at their
option.

   We believe that customer service and ongoing technical support is an
essential part of the sales process in the wireless communications industry. In
order to provide high levels of customer service, senior management and
assigned account managers play a role in ongoing account management and
relationships. We believe these customer relationships enable us to improve
customer satisfaction and develop products to meet specific customer needs. Our
agreements with our network operator customers provide for 24 hour per day
support seven days per week.

   We actively recruit content and application developers to our platform and
provide to them free of charge our software developer's kit, UP.SDK. We also
provide them with free membership in our Developer Program, free email-based
support and the opportunity to participate in our Alliances Program. As of
August 1999, approximately 10,700 registered developers in our Developer
Program have downloaded UP.SDK, including:

<TABLE>
   <S>                              <C>
   . 724 Solutions                  .Lotus
   . biztravel.com                  .Mapquest.com
   . BroadVision                    .NewsAlert
   . CableData                      .Reuters
   . Comverse Network Systems       .SmartServOnline
   . Data Broadcasting Corporation  .Sportsfeed.com
   . eDispatch.com                  .StockTips
   . InfoSpace.com                  .Vantive
   . Internet Travel Network        .The Weather Underground
   . KLELine                        .Webraska Mobile Technologies
   . Lightbridge
</TABLE>

   Our Alliances Program is comprised of a select group of our content and
application developers. We screen applications to our Alliances Program based
on the availability and quality of the content or applications produced by the
partner. We perform joint marketing activities with the partner, as well as
provide introductions between our wireless network operators and our Alliances
Program members.

Competition

   The market for our products and services is becoming increasingly
competitive. The widespread adoption of open industry standards such as the WAP
specifications may make it easier for new market entrants and existing
competitors to introduce products that compete with our software products. In
addition, a number of our competitors, including Nokia, have announced or are
expected to announce enhanced features and

                                       48
<PAGE>

functionality as proprietary extensions to the WAP protocol. Furthermore, some
of our competitors, such as NTT, have introduced or may introduce services
based on proprietary wireless protocols that are not compliant with the WAP
specifications.

   We expect that we will compete primarily on the basis of price, time-to-
market, functionality, quality and breadth of product and service offerings.
Our current and potential competitors include the following:

  . Wireless equipment manufacturers, such as Ericsson and Nokia, which are
    developing and marketing competitive server, browser and application
    software products. These companies already sell billions of dollars of
    wireless telephones and other telecommunications products to network
    operators which are our existing and potential customers.
  . Microsoft, which recently announced plans to deliver a wireless portal
    designed to work with handheld devices, wireless telephones and
    interactive pagers via Microsoft's MSN network of Internet services.
    Nextel is Microsoft's first customer for these services. Nextel plans to
    use a co-branded version of Microsoft's MSN portal to enable Nextel
    customers to access a customized set of Internet services. This
    arrangement also provides for Microsoft to invest $600 million in Nextel
    to support Nextel's development of wireless Internet services. In
    addition, Microsoft has announced that it intends to enable its Windows
    CE operating system to run on wireless handheld devices, including
    wireless telephones, and to develop and market its own browser for these
    devices.
  . Wireless Knowledge, a joint venture of Microsoft and Qualcomm, which has
    announced its intention to introduce products and services that may
    compete directly with our UP.Link and UP.Browser products, as well as our
    UP.Applications.
  . Systems integrators, such as CMG, and software companies, such as Oracle
    Corporation, which are developing and marketing server software that is
    compliant with the specifications promulgated by the WAP Forum.
  . Providers of Internet software applications and content, electronic
    messaging applications and personal information management software
    solutions, any of whom could offer products and services that compete
    with ours.

   As we enter new markets and introduce new services, such as the MyPhone
service, we will face additional competitors. These competitors may include
telecommunications companies such as Lucent Technologies, traditional Internet
portals such as AOL, InfoSpace, Microsoft and Yahoo!, Internet infrastructure
software companies and several private mobile Internet portal companies.

   Many of our existing competitors as well as potential competitors have
substantially greater financial, technical, marketing and distribution
resources than we do. Several of these companies also have greater name
recognition and more well-established relationships with our target customers.
Furthermore, these competitors may be able to adopt more aggressive pricing
policies and offer more attractive terms to customers than we can. We may face
increasing price pressure from our network operator customers. In addition,
current and potential competitors have established or may establish cooperative
relationships among themselves or with third parties to compete more
effectively. Finally, existing and potential competitors may develop
enhancements to, or future generations of, competitive products that will have
better performance features than our products.

Intellectual Property Rights

   Our performance depends significantly on our ability to protect our
proprietary rights to the technologies used in our products. If we are not
adequately protected, our competitors could use the intellectual property that
we have developed to enhance their products and services, which could harm our
business. As of August 1999, we had three issued United States patents. We also
had one United States patent application with allowed claims and 73 pending
United States patent applications, as well as foreign counterparts with respect
to many of these applications. In addition, we rely on a combination of
copyright and trademark laws, trade secrets, confidentiality provisions and
other contractual provisions to protect our proprietary rights, but these legal

                                       49
<PAGE>

means afford only limited protection. Despite any measures taken to protect our
intellectual property, unauthorized parties may attempt to copy aspects of our
products or to obtain and use information that we regard as proprietary. In
addition, the laws of some foreign countries may not protect our proprietary
rights as fully as do the laws of the United States. Thus, the measures we are
taking to protect our proprietary rights in the United States and abroad may
not be adequate. Finally, our competitors may independently develop similar
technologies.

   The telecommunications and Internet software industries are characterized by
the existence of a large number of patents and frequent litigation based on
allegations of patent infringement. As the number of entrants into our market
increases, the possibility of an infringement claim against us grows. For
example, we may be inadvertently infringing a patent of which we are unaware.
In addition, because patent applications can take many years to issue, there
may be a patent application now pending of which we are unaware, which will
cause us to be infringing when it issues in the future. To address any patent
infringement claims, we may have to enter into royalty or licensing agreements
on disadvantageous commercial terms. A successful claim of product infringement
against us, and our failure to license the infringed or similar technology,
would harm our business. In addition, any infringement claims, with or without
merit, would be time-consuming and expensive to litigate or settle and could
divert management attention from administering our core business.

   We rely on a license of encryption technology from RSA Data Security, Inc.
The license from RSA is perpetual unless terminated by either party as the
result of a material breach or insolvency or, at our election, for convenience.

   As a member of the WAP Forum, we have agreed to license our intellectual
property to other WAP members on fair and reasonable terms to the extent that
the license is required to develop noninfringing products under the
specifications promulgated by the WAP Forum. Each other member of the WAP Forum
has entered into a reciprocal agreement.

Employees

   As of August 31, 1999, we had a total of 233 employees. None of our
employees is covered by any collective bargaining agreements. We believe that
our relations with our employees are good. In addition, we expect to add 114
employees in connection with the APiON acquisition.

Facilities

   Our principal offices are located in Redwood City, California in two
buildings aggregating 65,000 square feet under a lease expiring in May 2006,
with a renewal option for an additional five-year term. We also lease space for
our offices in London, Belfast, Dublin and Tokyo.

Legal Proceedings

   We are not currently subject to any material legal proceedings; however, we
may from time to time become a party to various legal proceedings arising in
the ordinary course of our business.

                                       50
<PAGE>

                                   MANAGEMENT

Executive Officers and Directors

   Our executive officers and directors and their ages as of September 30, 1999
are as follows:

<TABLE>
<CAPTION>
 Name                 Age Position
 ----                 --- --------
 <C>                  <C> <S>
 Alain Rossmann......  43 Chairman and Chief Executive Officer

 Charles Parrish ...   52 Executive Vice President and Director

 Alan Black..........  39 Vice President, Finance and Administration, Chief
                           Financial Officer
                           and Treasurer

 Andrew Laursen......  41 Vice President, Product Development and Engineering

 Benjamin Linder.....  33 Vice President, Marketing

 Maurice Jeffery.....  35 Vice President, North America Sales

 Tony Miranzadeh.....  36 Vice President of Sales and Business Development,
                           Asia Pacific and
                           Latin America

 Malcolm Bird........  43 Managing Director, Phone.com (Europe) Ltd.

 Roger Evans(1)(2)...  54 Director

 Reed Hundt..........  51 Director

 David Kronfeld(1)...  51 Director

 Andrew Verhalen(2)..  43 Director
</TABLE>
--------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.

   Alain Rossmann. Mr. Rossmann is the founder, Chairman and Chief Executive
Officer of Phone.com. Prior to founding Phone.com in December 1994, he was
Chief Executive Officer of EO Corporation, a pioneer in personal digital
assistant devices, from 1991 to 1993, when it was sold to AT&T. Prior to his
involvement with EO, he was Vice President of Operations for C-Cube
Microsystems Inc., a semiconductor design company, from 1989 to 1991. From 1986
to 1989, Mr. Rossmann co-founded and served as Vice President of Marketing and
Sales at Radius, Inc., a developer of digital video products. From 1983 to
1986, Mr. Rossmann was manager of the third-party developer group at Apple
Computer, Inc. Mr. Rossmann holds an M.S. degree in Mathematics from the Ecole
Polytechnique, an M.S. degree in Civil Engineering from Ecole Nationale des
Ponts et Chaussees and an M.B.A. degree from Stanford University.

   Charles Parrish. Mr. Parrish joined Phone.com as President and a director in
June 1995, and was appointed Executive Vice President in June 1997. Mr. Parrish
was General Manager of the Mobile Data Division of GTE Mobile Communications, a
telecommunications company, from 1994 to June 1995, and Vice President of
Marketing for GTE, from 1991 to 1994. Prior to working for GTE, Mr. Parrish was
Senior Vice President of Operations for Contel Cellular, a telecommunications
company, from July 1990 to 1991, when Contel was acquired by GTE. Prior to
serving at Contel, he was the co-Founder, President and Chief Executive Officer
of AmeriCom Corporation, a telecommunications equipment company, from 1984 to
June 1990. Mr. Parrish served as Executive Assistant to the Secretary of the
United States Department of the Interior under the Carter Administration. Mr.
Parrish holds a B.S. degree in Industrial Management from the Georgia Institute
of Technology.

   Alan Black. Mr. Black joined Phone.com as Vice President of Finance and
Administration and Chief Financial Officer in August 1997 and was appointed to
the additional office of Treasurer in September 1997. Mr. Black was Chief
Financial Officer of Vicor, Inc., a provider of Internet information capture
and delivery systems for financial services firms, from August 1992 to August
1997. Prior to his tenure at Vicor, Mr. Black

                                       51
<PAGE>

was with KPMG LLP between 1982 and 1992, most recently with the firm's High
Technology practice. Mr. Black holds a Bachelor of Commerce and a graduate
diploma in Public Accountancy from McGill University. Mr. Black is a member of
the California Society of Certified Public Accountants and the Canadian
Institute of Chartered Accountants.

   Andrew Laursen. Mr. Laursen joined Phone.com as Vice President of Product
Development and Engineering in June 1996, after working from August 1986 to
June 1996 at Oracle Corporation, most recently as the Vice President and
general manager of the Network Computer Division. Prior to this position, he
pioneered Oracle's efforts in the area of digital video and worked in various
management and development roles in the database server division. Before
working at Oracle, Mr. Laursen was employed with Tolerant Systems, a computer
systems company, where he was responsible for the development of their fault-
tolerant UNIX file system. Mr. Laursen began his career at AT&T Bell
Laboratories. He holds a B.S. degree in Computer Science from Michigan State
University and an M.S. degree in Computer Science from the University of
Illinois.

   Benjamin Linder. Mr. Linder joined Phone.com in January 1996 as Vice
President of Product Management and was appointed as Vice President of
Marketing in October 1996. From July 1987 to December 1995 Mr. Linder worked at
Oracle Corporation, where he most recently served as Vice President of
Marketing, co-founding Oracle's New Media Division in 1992. Prior to working in
the New Media division of Oracle, Mr. Linder was Director of Technical Services
for the massively parallel processing technology at Oracle. He holds B.S.
degrees in Electrical Engineering and Computer Science from the Massachusetts
Institute of Technology.

   Maurice Jeffery. Mr. Jeffery joined Phone.com in August 1996 as Director of
Business Development and was promoted to Vice President of North American Sales
in August 1997. Prior to joining Phone.com, Mr. Jeffery held various management
positions, including European Managing Director, at General Magic, Inc., a
telecommunications software and services infrastructure company, from September
1994 to August 1996. Prior to working at General Magic, he held various
management positions in technical support, business development and marketing
at Hewlett-Packard Company from September 1984 to September 1994. Mr. Jeffery
holds a B.S. degree in Computer Science and Commercial Studies from GCAT,
England.

   Tony Miranzadeh. Tony Miranzadeh joined Phone.com as Vice President of Sales
and Business Development, Asia Pacific and Latin America in March 1999. From
April 1984 to February 1999, Mr. Miranzadeh held various management positions
with Lucent Technologies, including Director of Business Development and
Strategy in the United Kingdom, where he was responsible for the
commercialization and introduction of third generation wireless technologies.
Mr. Miranzadeh also held the position of Director of Sales and Business
Development for GSM and CDMA network technologies for the Asia Pacific region.
Mr. Miranzadeh holds a B.S. degree in Electrical Engineering from the
University of Illinois and an M.S. degree in Electrical and Computer
Engineering from the Illinois Institute of Technology.

   Malcolm Bird. Prior to joining Phone.com as Vice President of Europe in
September 1997, Mr. Bird worked at Acorn Computer Group, Plc., a computer
company, from November 1989 to April 1997, serving most recently as divisional
chief executive for the network computing and online media divisions. While at
Acorn, Mr. Bird directed the design of Oracle's Network Computer, launched
Acorn's entry into the emerging interactive television market and co-founded
Advanced RISC Machines, Ltd. (ARM), a joint venture between Acorn, Apple
Computer and VLSI Technology. Before working at Acorn, Mr. Bird worked with the
PA Consulting Group, a consulting company. Mr. Bird holds a B.S. degree in
Mechanical Engineering from Imperial College, London University.

   Roger Evans. Mr. Evans has been a director of Phone.com since September
1995. Mr. Evans has been associated with Greylock Management Corporation, a
Boston-based venture capital firm, since 1989, serving as a general partner
since January 1991. He also serves as a director of Maker Communications, Inc.,
a communications semiconductor company, and several other privately-held
companies.

                                       52
<PAGE>

   Reed Hundt. Mr. Hundt has been a director of Phone.com since April 1999.
Since November 1998, Mr. Hundt has been a senior advisor on information
industries to McKinsey & Company, a worldwide management consulting firm. He
has also been a principal of Charles Ross Partners, LLC, a Bethesda, Maryland
firm that provides consulting and investment advice on telecommunications,
since November 1997. From November 1993 to November 1997, Mr. Hundt was
Chairman of the Federal Communications Commission. Prior to joining the FCC,
Mr. Hundt was a partner at the law firm of Latham & Watkins. Mr. Hundt serves
on the boards of directors of Allegiance Telecom, Inc., NorthPoint
Communications, Inc., and Novell, Inc.

   David Kronfeld. Mr. Kronfeld has been a director of Phone.com since February
1998. Mr. Kronfeld founded JK&B Capital in January 1996 and is the managing
member. Mr. Kronfeld is also a general partner at Boston Capital Ventures,
where he specializes in the telecommunications and software industries. Before
joining Boston Capital Ventures in October 1989, Mr. Kronfeld was the Vice
President of Acquisitions and Venture Investments at Ameritech, a
telecommunications company, from October 1984 to October 1989. Prior to working
for Ameritech, Mr. Kronfeld was a Senior Manager at Booz Allen & Hamilton, an
international management consulting firm, from 1977 to 1981. Mr. Kronfeld is a
director of SCC Communications, Inc., a 911 service provider, MGC
Communications, Inc., a local exchange carrier, and 21st Century Telecom Group,
a telecommunications company. He holds a B.S. degree in Electrical Engineering
and an M.S. degree in Computer Science from Stevens Institute of Technology and
an M.B.A. degree from The Wharton School of Business.

   Andrew Verhalen. Mr. Verhalen has been a director of Phone.com since
September 1995. Mr. Verhalen is a general partner of Matrix Partners, a venture
capital firm, which he joined in 1992. From 1986 to 1991, Mr. Verhalen worked
at 3Com Corporation, a network equipment manufacturer, initially as a Vice
President of Marketing, then as Vice President and General Manager of the
Network Adapter Division. Prior to joining 3Com, he worked for five years in
the Microprocessor Group at Intel Corporation, in various marketing, management
and strategic planning roles. He currently is a director of Alteon WebSystems,
an Internet equipment manufacturer, Copper Mountain Networks, a network
equipment manufacturer, WatchGuard Technologies, a network security company,
and several private technology companies. Mr. Verhalen holds a B.S. degree in
Electrical Engineering, an M. Eng. degree in Electrical Engineering and an
M.B.A. degree from Cornell University.

Board Composition

   Our bylaws currently provide for a board of directors consisting of six
members. The term of each of our current directors will expire at the next
annual meeting of stockholders. Commencing at the first annual meeting of
stockholders following the annual meeting of stockholders when we shall have
had at least 800 stockholders, the board of directors will be divided into
three classes, each serving staggered three-year terms: Class I, whose term
will expire at the first annual meeting of stockholders following the annual
meeting of stockholders when we shall have had at least 800 stockholders; Class
II, whose term will expire at the second annual meeting of stockholders
following the annual meeting of stockholders when we shall have had at least
800 stockholders; and Class III, whose term will expire at the third annual
meeting of stockholders following the annual meeting of stockholders when we
shall have had at least 800 stockholders. As a result, only one class of
directors will be elected at each annual meeting of our stockholders, with the
other classes continuing for the remainder of their respective terms.

Board Compensation

   Except for reimbursement for reasonable travel expenses relating to
attendance at board meetings and the grant of stock options, directors are not
compensated for their services as directors. Directors who are employees of
Phone.com are eligible to participate in our 1995 and 1996 stock plans and in
our employee stock purchase plan. Directors who are not employees of Phone.com
are eligible to participate in our 1996 stock plan and in our directors' stock
option plan.

   1999 Directors' Stock Option Plan. The directors' stock option plan was
adopted by the board of directors in March 1999 and was approved by our
stockholders in May 1999. A total of 600,000 shares of

                                       53
<PAGE>

common stock has been reserved for issuance under the directors' stock option
plan, all of which remain available for future grants. The directors' stock
option plan provides for the grant of nonstatutory stock options to nonemployee
directors. The directors' stock option plan is designed to work automatically
without administration; however, to the extent administration is necessary, it
will be performed by the board of directors. To the extent they arise, it is
expected that conflicts of interest will be addressed by abstention of any
interested director from both deliberations and voting regarding matters in
which a director has a personal interest.

   The directors' stock option plan provides that each person who becomes a
nonemployee director or will be granted a nonstatutory stock option to purchase
33,333 shares of common stock on the date on which the individual first becomes
a nonemployee director. Thereafter, on the first board of directors meeting
date of each calendar quarter beginning on or after October 1, 2000, each
nonemployee director who was a member of the board of directors prior to our
initial public offering in June 1999 will be granted an option to purchase
2,500 shares of common stock. In addition, on the first board of directors
meeting date of each calendar quarter that begins at least one year following
the initial option grant to a nonemployee director who becomes a director after
the completion of our initial public offering in June 1999, but in no event
earlier than October 1, 2000, the director will be granted an option to
purchase 2,500 shares of common stock.

   The directors' stock option plan sets neither a maximum nor a minimum number
of shares for which options may be granted to any one nonemployee director, but
does specify the number of shares that may be included in any grant and the
method of making a grant. No option granted under the directors' stock option
plan is transferable by the optionee other than by will or the laws of descent
or distribution or pursuant to a qualified domestic relations order, and each
option is exercisable, during the lifetime of the optionee, only by the
optionee. All options granted under the directors' stock option plan shall vest
in full immediately upon grant of the option. If a nonemployee director ceases
to serve as a director for any reason other than death or disability, he or she
may, but only within 90 days after the date he or she ceases to be a director,
exercise options granted under the directors' stock option plan. If he or she
does not exercise the option within the 90-day period, the option shall
terminate. The exercise price of all stock options granted under the directors'
stock option plan shall be equal to the fair market value of a share of our
common stock on the date of grant of the option. Options granted under the
directors' stock option plan have a term of five years.

   In the event of a sale of all or substantially all of our assets, our merger
with or into another corporation or any other reorganization of Phone.com in
which more than 50% of the shares of Phone.com entitled to vote are exchanged,
each nonemployee director shall have either (i) a reasonable time within which
to exercise the option prior to the effectiveness of the dissolution,
liquidation, sale, merger or reorganization, at the end of which time the
option shall terminate, or (ii) the right to exercise the option or receive a
substitute option with comparable terms, as to an equivalent number of shares
of stock of the corporation succeeding Phone.com or acquiring its business. Our
board of directors may amend or terminate the directors' stock option plan as
long as this action does not adversely affect any outstanding option, and we
shall obtain stockholder approval for any amendment to the extent required by
applicable law.

Board Committees

   The compensation committee currently consists of Messrs. Evans and Verhalen.
The compensation committee:

  . reviews and approves the compensation and benefits for our executive
    officers and grants stock options under our stock option plans; and
  . makes recommendations to the board of directors regarding executive
    compensation matters.

   The audit committee currently consists of Messrs. Kronfeld and Evans. The
audit committee:

  . makes recommendations to the board of directors regarding the selection
    of independent auditors.
  . reviews the results and scope of the audit and other services provided by
    our independent auditors; and
  . reviews and evaluates our audit and control functions.

                                       54
<PAGE>

Compensation Committee Interlocks and Insider Participation

   The members of our compensation committee are currently Messrs. Evans and
Verhalen, neither of whom has at any time been an officer or employee of
Phone.com. We have issued and sold in private placement transactions shares of
preferred stock to Greylock Equity Limited Partnership and to Matrix Partners
IV, L.P. and Matrix IV Entrepreneurs Fund. Mr. Evans is a general partner of
Greylock Equity GP Limited Partnership, the general partner of Greylock Equity
Limited Partnership, and Mr. Verhalen is a general partner of Matrix Partners,
the general partner of Matrix Partners IV, L.P. and of Matrix IV Entrepreneurs
Fund. The following summarizes these transactions:

Greylock Equity Limited Partnership

  . June 1995: 1,999,999 shares of Series A preferred stock at $0.50 per
    share.
  . January 1996: 786,566 shares of Series B preferred stock at $1.68 per
    share.
  . October 1996: 78,718 shares of Series C preferred stock at $3.81 per
    share.
  . January 1998: 78,716 shares of Series D preferred stock at $5.08 per
    share.

Entities affiliated with Matrix Partners
  . June 1995: 1,999,998 shares of Series A preferred stock at $0.50 per
    share.
  . January 1996: 786,565 shares of Series B preferred stock at $1.68 per
    share.
  . October 1996: 78,718 shares of Series C preferred stock at $3.81 per
    share.
  . January 1998: 78,715 shares of Series D preferred stock at $5.08 per
    share.

Executive Compensation

   Summary Compensation. The following table sets forth compensation awarded
to, earned by, or paid to our Chief Executive Officer and the four other most
highly compensated executive officers whose total cash compensation exceeded
$100,000 during the years ended June 30, 1998 and 1999 (collectively, the
"named executive officers").

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                           Long-Term
                                                          Compensation
                                Annual Compensation          Awards
                                ----------------------    ------------
                                                           Securities
   Name and Principal    Fiscal                            Underlying     All Other
        Position          Year  Salary($)    Bonus($)      Options(#)  Compensation($)
   ------------------    ------ ---------    ---------    ------------ ---------------
<S>                      <C>    <C>          <C>          <C>          <C>
Alain Rossmann            1999  $200,000            --           --        $ 1,092
Chairman and Chief
 Executive Officer......  1998   157,500            --           --        $   806(1)

Charles Parrish           1999   180,000     $  42,840(2)    60,000          1,090(1)
Executive Vice
 President..............  1998   167,500       107,352(3)   106,666            935(1)

Andrew Laursen            1999   180,000            --       63,333          1,030(1)
Vice President, Product
 Development and
 Engineering............  1998   145,000            --       66,666            833(1)

Maurice Jeffery           1999   120,000       511,922(4)    20,000            704(1)
Vice President, North
 American Sales.........  1998   118,508        56,667(4)    55,000            600(1)

Malcolm Bird              1999   132,480(5)    139,548(4)    13,333         18,000(7)
Managing Director,
 Phone.com (Europe)
 Ltd....................  1998   103,000(6)    137,224(4)   120,000         15,000(7)
</TABLE>
--------
(1) Consists of life insurance premiums paid by Phone.com.
(2) Consists of monthly payments for housing expenses pursuant to relocation
    agreement.
(3) Consists of sales commissions, payments for moving and relocation costs and
    monthly payments for housing expenses pursuant to relocation agreement.

                                       55
<PAGE>

(4) Consists of sales commissions.
(5) Includes auto allowance of approximately $12,480.
(6) Includes auto allowance of approximately $3,000.
(7) Consists of contribution to pension plan.

   Option Grants. The following table shows information regarding stock options
granted to the Named Executive Officers during the fiscal year ended June 30,
1999. No stock appreciation rights were granted to these individuals during the
year.

                       Option Grants in Last Fiscal Year

<TABLE>
<CAPTION>
                                                                    Potential Realizable Value
                         Number of   Percentage                     at Assumed Annual Rates Of
                           Shares     of Total  Exercise             Stock Price Appreciation
                         Underlying   Options    Price                  for Option Term(1)
                          Options    Granted to   per    Expiration ---------------------------
                          Granted    Employees   Share      Date         5%            10%
Name                     ----------  ---------- -------- ---------- ------------ --------------
<S>                      <C>         <C>        <C>      <C>        <C>          <C>
Alain Rossmann..........       --        --          --         --            --             --
Charles Parrish.........   60,000(2)    2.7%     $16.00  6/10/2009       603,739      1,529,993
Andrew Laursen..........   63,333(2)    2.9       16.00  6/10/2009       637,277      1,614,984
Maurice Jeffrey.........   20,000(2)    0.9       16.00  6/10/2009       201,246        509,998
Malcolm Bird............   13,333(2)    0.6       16.00  6/10/2009       134,161        339,990
</TABLE>
--------
(1) The 5% and 10% assumed annual rates of compounded stock price appreciation
    are mandated by the Securities and Exchange Commission. There is no
    assurance provided to any executive officer or any other holder of our
    securities that the actual stock price appreciation over the 10-year option
    term will be at the assumed 5% and 10% levels or at any other defined
    level.
(2) These stock options, which were granted under the 1996 stock plan, become
    exercisable as to an aggregate of 5% of the total number of shares on a
    monthly basis during the first year after grant, as to an aggregate of 10%
    of the total number of shares on a monthly basis during the second year
    after grant, as to an aggregate of 45% of the shares on a monthly basis
    during the third, fourth and fifth years after grant and as to an aggregate
    of 40% of the shares on a monthly basis during the sixth and seventh years
    after grant., as long as the optionee remains an employee with, consultant
    to, or director of Phone.com.

   Aggregate Option Exercises and Holdings. The following table provides
certain summary information concerning the shares of common stock represented
by outstanding stock options held by each of the Named Executive Officers as of
June 30, 1999.

<TABLE>
<CAPTION>
                                              Number of Securities
                                             Underlying Unexercised     Value of Unexercised
                                               Options at June 30,    In- the-Money Options at
                                                     1999(#)             June 30, 1999($)(1)
                                            ------------------------- -------------------------
                  Number of
                   Shares
                 Acquired on     Value
Name             Exercise(#) Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
----             ----------- -------------- ----------- ------------- ----------- -------------
<S>              <C>         <C>            <C>         <C>           <C>         <C>
Alain Rossmann         -            -
Charles Parrish        -            -              -       166,666              -  $8,109,298
Andrew Laursen         -            -         83,333       213,332    $ 4,634,148  10,735,766
Maurice Jeffery        -            -         21,146        74,273      1,174,996   3,773,272
Malcolm Bird           -            -         43,750        89,583      2,432,938   4,731,833
</TABLE>
                         Fiscal Year-End Option Values

--------
(1) The amount set forth represents the difference between the fair market
    value of the underlying common stock at June 30, 1999 and the exercise
    price of the option.

   We have entered into agreements with each of our executive officers which
provide that if the officer's employment is terminated involuntarily other than
for cause within 18 months following a change of control transaction, then
subject to limitations, the vesting of any stock option or restricted stock
held by the officer shall be automatically accelerated so that the option or
restricted stock becomes completely vested.

Stock Plans

   1995 Stock Plan. Our 1995 stock plan provides for the grant of incentive
stock options to employees and nonstatutory stock options and stock purchase
rights to employees, directors and consultants. The purposes of

                                       56
<PAGE>

the 1995 stock plan are to attract and retain the best available personnel, to
provide additional incentives to our employees and consultants and to promote
the success of our business. The 1995 stock plan was originally adopted by our
board of directors in October 1995 and approved by our stockholders in October
1995. Unless terminated earlier by the board of directors, the 1995 stock plan
shall terminate in October 2005. A total of 1,649,462 shares of common stock
have been reserved for issuance under the 1995 stock plan. As of June 30, 1999,
options to purchase 401,343 shares of common stock were outstanding at a
weighted average exercise price of $0.16 per share, 1,248,136 shares had been
issued upon exercise of outstanding options or pursuant to restricted stock
purchase agreements, and no shares remained available for future grant.

   The administrator of the 1995 stock plan may be either the board of
directors or a committee of the board. The administrator determines the terms
of options granted under the 1995 stock plan, including the number of shares
subject to the option, exercise price, term and exercisability. Incentive stock
options granted under the 1995 stock plan must have an exercise price of at
least 100% of the fair market value of the common stock on the date of grant
and at least 110% of the fair market value in the case of an optionee who holds
more than 10% of the total voting power of all classes of our stock.
Nonstatutory stock options granted under the 1995 stock plan must have an
exercise price of at least 85% of the fair market value of the common stock on
the date of grant (or at least 110% of the fair market value in the case of an
optionee who holds more than 10% of the total voting power of all classes of
our stock). Payment of the exercise price may be made in cash or other
consideration as determined by the administrator.

   The administrator determines the term of options, which may not exceed 10
years (or five years in the case of an option granted to a holder of more than
10% of the total voting power of all classes of our stock). No option may be
transferred by the optionee other than by will or the laws of descent or
distribution. Each option may be exercised during the lifetime of the optionee
only by the optionee. The administrator determines when options become
exercisable. Options granted under the 1995 stock plan generally must be
exercised within 60 days after the termination of the optionee's status as an
employee, director or consultant of Phone.com, or within 12 months if
termination is due to the death or disability of the optionee, but in no event
later than the expiration of the option's term. Options granted under the 1995
stock plan generally vest at the rate of 1/4 of the total number of shares
subject to the option 12 months after the date of grant, and 1/48 of the total
number of shares subject to the option each month thereafter.

   In the event of our merger with or into another corporation, each option may
be assumed or an equivalent option substituted by the successor corporation.
The administrator has the authority to amend or terminate the 1995 stock plan
provided that no action that impairs the rights of any holder of an outstanding
option may be taken without the holder's consent. In addition, stockholder
approval will be obtained for any amendment to the extent required by
applicable law.

   In addition to stock options, the administrator may issue stock purchase
rights under the 1995 stock plan to employees, directors and consultants. The
administrator determines the number of shares, price, terms, conditions and
restrictions related to a grant of stock purchase rights. The purchase price of
a stock purchase right granted under the 1995 stock plan must be at least 85%
of the fair market value of the shares as of the date of the offer. The period
during which the stock purchase right is held open is determined by the
administrator, but in no case shall this period exceed 30 days. Unless the
administrator determines otherwise, the recipient of a stock purchase right
must execute a restricted stock purchase agreement granting Phone.com an option
to repurchase unvested shares at cost upon termination of the recipient's
relationship with us.

   1996 Stock Plan. Our 1996 stock plan provides for the grant of incentive
stock options to employees and nonstatutory stock options and stock purchase
rights to employees, directors and consultants. The purposes of the 1996 stock
plan are to attract and retain the best available personnel, to provide
additional incentives to our employees and consultants and to promote the
success of our business. The 1996 stock plan was originally adopted by our
board of directors in September 1996 and approved by our stockholders in
October 1996. The 1996 stock plan was amended by our board of directors in
March 1999 to increase the total number of shares reserved for issuance by
4,250,000 shares and to incorporate other changes. This amendment to the 1996
stock

                                       57
<PAGE>

plan was approved by our stockholders in May 1999. Unless terminated earlier by
the board of directors, the 1996 stock plan shall terminate in September 2006.
A total of 7,734,425 shares of common stock have been reserved for issuance
under the 1996 stock plan. In addition, the number of shares reserved under the
plan will automatically be increased each year, beginning on July 1, 2000 in an
amount equal to the lesser of (a) 1,500,000 shares, (b) four percent of the
shares outstanding on the last day of the preceding fiscal year or (c) a lesser
number of shares as is determined by the board of directors. As of June 30,
1999, options to purchase 4,349,846 shares of common stock were outstanding at
a weighted average exercise price of $6.92 per share, 447,753 shares had been
issued upon exercise of outstanding options or pursuant to restricted stock
purchase agreements, and 2,936,826 shares remained available for future grant.

   The administrator of the 1996 stock plan may be either the board of
directors or a committee of the board. The administrator determines the terms
of options granted under the 1996 stock plan, including the number of shares
subject to the option, exercise price, term and exercisability. In no event,
however, may an individual receive option grants for more than 1,000,000 shares
under the 1996 plan in any fiscal year. Incentive stock options granted under
the 1996 stock plan must have an exercise price of at least 100% of the fair
market value of the common stock on the date of grant and at least 110% of the
fair market value in the case of an optionee who holds more than 10% of the
total voting power of all classes of our stock. Nonstatutory stock options
granted under the 1996 stock plan must have an exercise price of at least 85%
of the fair market value of the common stock on the date of grant. Payment of
the exercise price may be made in cash or other consideration as determined by
the administrator.

   The administrator determines the term of options, which may not exceed 10
years (or five years in the case of an option granted to a holder of more than
10% of the total voting power of all classes of our stock). No option may be
transferred by the optionee other than by will or the laws of descent or
distribution provided, however, that the administrator may in its discretion
provide for the transferability of nonstatutory stock options granted under the
1996 stock plan. Each option may be exercised during the lifetime of the
optionee only by the optionee or permitted transferee. The administrator
determines when options become exercisable. Options granted under the 1996
stock plan generally must be exercised within 30 to 90 days, as determined by
the administrator, after the termination of the optionee's status as an
employee, director or consultant of Phone.com, or within 12 months if
termination is due to the death or disability of the optionee, but in no event
later than the expiration of the option's term. Options granted under the 1996
stock plan generally vest over a period of four or five years.

   In the event of our merger with or into another corporation, each option may
be assumed or an equivalent option substituted by the successor corporation.
However, if the successor corporation does not agree to assume or substitute
the option, the option will terminate. The administrator has the authority to
amend or terminate the 1996 stock plan provided that no action that impairs the
rights of any holder of an outstanding option may be taken without the holder's
consent. In addition, stockholder approval is required to increase the number
of shares subject to the 1996 stock plan, to change the designation of the
class of persons eligible to be granted options or to increase the individual
grant limitation.

   In addition to stock options, the administrator may issue stock purchase
rights under the 1996 stock plan to employees, directors and consultants. The
administrator determines the number of shares, price, terms, conditions and
restrictions related to a grant of stock purchase rights. The purchase price of
a stock purchase right granted under the 1996 stock plan must be at least 85%
of the fair market value of the shares as of the date of the offer. The period
during which the stock purchase right is held open is determined by the
administrator, but in no case shall this period exceed 30 days. Unless the
administrator determines otherwise, the recipient of a stock purchase right
must execute a restricted stock purchase agreement granting Phone.com an option
to repurchase the unvested shares at cost upon termination of the recipient's
relationship with us.

   1999 Employee Stock Purchase Plan. Our employee stock purchase plan was
adopted by the board of directors in March 1999 and was approved by our
stockholders in May 1999. A total of 600,000 shares of common stock has been
reserved for issuance under the employee stock purchase plan, plus an automatic
annual

                                       58
<PAGE>

increase on the first day of each of our fiscal years beginning in 2000, 2001,
2002, 2003 and 2004 equal to the lesser of 500,000 shares or 1% of our
outstanding common stock on the last day of the immediately preceding fiscal
year. Unless terminated earlier by the board of directors, the employee stock
purchase plan shall terminate in March 2019.

   The employee stock purchase plan, which is intended to qualify under Section
423 of the Code, will be implemented by a series of overlapping offering
periods of approximately 24 months' duration, with new offering periods (other
than the first offering period) commencing on May 1 and November 1 of each
year. Each offering period will generally consist of four consecutive purchase
periods of six months' duration, at the end of which an automatic purchase will
be made for participants. The initial offering period commenced on June 11,
1999 and will end on April 30, 2001; the initial purchase period began on June
11, 1999 and will end on January 31, 2000, with subsequent purchase periods
ending on April 30, 2000, October 31, 2000 and April 30, 2001. The employee
stock purchase plan will be administered by the board of directors or by a
committee appointed by the board. Our employees (including officers and
employee directors), or of any majority-owned subsidiary designated by the
board, are eligible to participate in the employee stock purchase plan if they
are employed by us or a subsidiary of ours for at least 20 hours per week and
more than five months per year. The employee stock purchase plan permits
eligible employees to purchase common stock through payroll deductions, which
in any event may not exceed 20% of an employee's base salary. The purchase
price is equal to the lower of 85% of the fair market value of the common stock
at the beginning of each offering period or at the end of each purchase period.
Employees may end their participation in the employee stock purchase plan at
any time during an offering period, and participation ends automatically on
termination of employment.

   An employee cannot be granted an option under the employee stock purchase
plan if immediately after the grant the employee would own stock and/or hold
outstanding options to purchase stock equaling 5% or more of the total voting
power or value of all classes of our stock or stock of our subsidiaries, or if
the option would permit an employee to purchase stock under the employee stock
purchase plan at a rate that exceeds $25,000 of fair market value of stock for
each calendar year in which the option is outstanding. In addition, no employee
may purchase more than 2,500 shares of common stock under the employee stock
purchase plan in any one purchase period. If the fair market value of the
common stock on a purchase date is less than the fair market value at the
beginning of the offering period, each participant in that offering period
shall automatically be withdrawn from the offering period as of the end of the
purchase date and re-enrolled in the new twenty-four month offering period
beginning on the first business day following the purchase date.

   If we merge or consolidate with or into another corporation or sell all or
substantially all of our assets, each right to purchase stock under the
employee stock purchase plan will be assumed or an equivalent right substituted
by the successor corporation. However, the board of directors will shorten any
ongoing offering period so that employees' rights to purchase stock under the
employee stock purchase plan are exercised prior to the transaction in the
event that the successor corporation refuses to assume each purchase right or
to substitute an equivalent right of the acquiring corporation. The board of
directors has the power to amend or terminate the employee stock purchase plan
and to change or terminate offering periods as long as this action does not
adversely affect any outstanding rights to purchase stock thereunder. However,
the board of directors may amend or terminate the employee stock purchase plan
or an offering period even if it would adversely affect outstanding options in
order to avoid our incurring adverse accounting charges.

Limitation of Liability and Indemnification Matters

   Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that a director
of a corporation will not be personally liable for monetary damages for breach
of an individual's fiduciary duties as a director except for liability:

  .  for any breach of a director's duty of loyalty to Phone.com or to its
     stockholders,
  .  for acts or omissions not in good faith or that involve intentional
     misconduct or a knowing violation of law,

                                       59
<PAGE>

  .  for unlawful payments of dividends or unlawful stock repurchases or
     redemptions as provided in Section 174 of the Delaware General
     Corporation Law or
  .  for any transaction from which a director derives an improper personal
     benefit.

   Our bylaws provide that Phone.com shall indemnify its directors and
executive officers and may indemnify its officers, employees and other agents
to the full extent permitted by law. We believe that indemnification under our
bylaws covers at least negligence and gross negligence on the part of an
indemnified party. Our bylaws also permit us to advance expenses incurred by an
indemnified party in connection with the defense of any action or proceeding
arising out of a party's status or service as a director, officer, employee or
other agent of Phone.com upon an undertaking by the party to repay the advances
if it is ultimately determined that he or she is not entitled to
indemnification.

   We have entered into separate indemnification agreements with each of our
directors and officers. These agreements require us to, among other things,
indemnify the director or officer against expenses (including attorney's fees),
judgments, fines and settlements paid by the individual in connection with any
action, suit or proceeding arising out of the individual's status or service as
a director or officer of Phone.com (other than liabilities arising from willful
misconduct or conduct that is knowingly fraudulent or deliberately dishonest)
and to advance expenses incurred by the individual in connection with any
proceeding against the individual with respect to which he or she may be
entitled to indemnification by us. We believe that our certificate of
incorporation and bylaw provisions and indemnification agreements are necessary
to attract and retain qualified persons as directors and officers. We also
maintain directors' and officers' liability insurance.

   At present we are not aware of any pending litigation or proceeding
involving any director, officer, employee or agent of Phone.com where
indemnification will be required or permitted. Furthermore, we are not aware of
any threatened litigation or proceeding that might result in a claim for
indemnification.

                                       60
<PAGE>

                              CERTAIN TRANSACTIONS

   Some stock option grants to directors and executive officers of Phone.com
are described herein under the caption "Management--Executive Compensation."

   Since our inception, we have issued, in private placement transactions,
shares of preferred stock as follows: an aggregate of 4,731,997 shares of
Series A Preferred Stock at $0.50 per share in June 1995, an aggregate of
3,999,987 shares of Series B Preferred Stock at $1.68 per share in December
1995, January 1996 and February 1996, an aggregate of 2,538,766 shares of
Series C Preferred Stock at $3.81 per share in October 1996, an aggregate of
6,444,877 shares of Series D Preferred Stock at $5.08 per share in January and
February 1998 and an aggregate of 2,458,543 shares of Series E Preferred Stock
at $7.24 per share in March 1999. The following table summarizes the shares of
preferred stock purchased by named executive officers, directors and 5%
stockholders of Phone.com and persons and entities associated with them in the
private placement transactions:

<TABLE>
<CAPTION>
                                        Series A  Series B  Series C  Series D
                                        Preferred Preferred Preferred Preferred
Investor                                  Stock     Stock     Stock     Stock
--------                                --------- --------- --------- ---------
<S>                                     <C>       <C>       <C>       <C>
Alain Rossmann........................    132,000       --       --         --
Greylock Equity Limited Partnership
 (Roger Evans)........................  1,999,999  786,566   78,718     78,716
Entities Affiliated with Matrix
 Partners (Andrew Verhalen)...........  1,999,998  786,565   78,718     78,715
Entities Affiliated with JK&B Capital,
 L.P. (David Kronfeld)................         --       --       --    590,370
</TABLE>

   Shares held by affiliated persons and entities have been aggregated. See
"Principal Stockholders."

   The following officers and one director issued full recourse promissory
notes to us to purchase restricted stock under the 1995 stock plan and the 1996
stock plan. The full principal amount and accrued interest under each note
remain outstanding. The terms of the notes are summarized below:

<TABLE>
<CAPTION>
                                             Principal                  Interest
Name                          Date of Note    Amount       Date Due       Rate
----                        ---------------- --------- ---------------- --------
<S>                         <C>              <C>       <C>              <C>
Alan Black................. October 31, 1997 $ 52,000  October 31, 2001   6.24%
                            July 20, 1998    $123,750  July 20, 2002      5.49%
Andrew Laursen............. July 11, 1996    $ 85,000  July 11, 2000      6.48%
Benjamin Linder............ July 11, 1996    $ 23,800  July 11, 2000      6.48%
Reed Hundt................. April 16, 1999   $200,000  April 16, 2004     5.28%
</TABLE>

   We have entered into indemnification agreements with our officers and
directors containing provisions requiring us to, among other things, indemnify
our officers and directors against liabilities that may arise by reason of our
status or service as officers or directors (other than liabilities arising from
willful misconduct of a culpable nature) and to advance their expenses incurred
as a result of any proceeding against them as to which they could be
indemnified.

   We have entered into agreements with each of our executive officers which
provide that if the officer's employment is terminated involuntarily other than
for cause within 18 months following a change of control transaction, then
subject to limitations, the vesting of any stock option or restricted stock
held by the officer shall be automatically accelerated so that the option or
restricted stock becomes completely vested.

   We entered into a relocation agreement with Charles Parrish on December 23,
1996 pursuant to which we have agreed to pay Mr. Parrish a housing allowance of
$3,570 per month starting in September 1996 through the earlier of August 2003
or the date that Mr. Parrish's terminates employment with Phone.com. We have
also entered into a loan agreement with Mr. Parrish on December 23, 1996, under
which we have agreed to lend Mr. Parrish $300,000 less the aggregate amount of
all payments made to him under the relocation agreement

                                       61
<PAGE>

upon Mr. Parrish's request before August 1, 2003 in order to assist him in
purchasing a residence. In addition, we have agreed to pay Mr. Parrish a
severance payment equal to six months of his base salary if Mr. Parrish's
employment with us is involuntarily terminated. We have entered into a letter
agreement with Malcolm Bird on August 18, 1997, which provides that if Mr.
Bird's employment with us is involuntarily terminated by us other than for
cause, he will receive a severance payment equal to six months of his base
salary and continue to receive his medical insurance benefits for a period of
six months following his termination.

   In connection with Mr. Hundt's appointment as a director in April 1999, he
received a stock option to purchase 33,333 shares of common stock at an
exercise price of $12.00 per share under our 1996 stock plan. This option is
fully exercisable as of the date of grant. In addition, in April 1999, we
issued and sold 16,667 shares of common stock to Mr. Hundt at a purchase price
of $12.00 shares under our 1996 stock plan. The aggregate purchase price of
$200,000 was paid by Mr. Hundt through the issuance of a full recourse
promissory note, which bears interest at the rate of 5.28% per annum. The
principal and interest under this note become due and payable on the earlier of
April 16, 2004 or the date of termination of Mr. Hundt's employment or
consulting relationship with Phone.com.

                                       62
<PAGE>

                       PRINCIPAL AND SELLING STOCKHOLDERS

   The following table sets forth certain information with respect to
beneficial ownership of our common stock as of September 30, 1999, and as
adjusted to reflect the sale of 1,000,000 shares of common stock offered by
Phone.com in this offering, as to:

  .  each person (or group of affiliated persons) known by us to own
     beneficially more than 5% of our outstanding common stock,
  .  each of our directors,
  .  each of the executive officers named in the summary compensation table,
     and
  .  the selling stockholders.

   Except as indicated in the footnotes to this table and under applicable
community property laws, to our knowledge, the persons named in the table have
sole voting and investment power with respect to all shares of common stock.
Options exercisable on or before November 30, 1999, are included as shares
beneficially owned. For the purposes of calculating percent ownership, as of
June 30, 1999, 31,213,094 shares were issued and outstanding, and, for any
individual who beneficially owns shares represented by options exercisable on
or before November 30, 1999, these shares are treated as if outstanding for
that person, but not for any other person. Unless otherwise indicated, the
address of each of the individuals named below is: c/o Phone.com, Inc., 800
Chesapeake Drive, Redwood City, California 94063.

<TABLE>
<CAPTION>
                                                                 Shares
                                        Shares                Beneficially
                                  Beneficially Owned          Owned After
                                  Prior to Offering  Shares     Offering
                                  ------------------  Being  --------------
Name of Beneficial Owners          Number    Percent Offered Number Percent
-------------------------         ---------- ------- ------- ------ -------
<S>                               <C>        <C>     <C>     <C>    <C>     <C>
Alain Rossmann (1)...............  3,723,582  11.9%
Roger Evans (2)..................  3,037,476   9.7%
 c/o Greylock Management
 One Federal Street
 Boston, MA 02110
Andrew Verhalen (3)..............  3,037,475   9.7%
 c/o Matrix Partners
 Bay Colony Corporate Center
 1000 Winter Street, Suite 4500
 Waltham, MA 02154
Greylock Equity Limited
 Partnership ....................  3,004,143   9.6%
 c/o Greylock Management
 One Federal Street
 Boston, MA 02110
Entities Affiliated with Matrix
 Partners (4) ...................  3,004,142   9.6%
 c/o Matrix Partners
 Bay Colony Corporate Center
 1000 Winter Street, Suite 4500
 Waltham, MA 02154
Charles Parrish (5)..............    754,072   2.4%
David Kronfeld (6) ..............    635,763   2.0%
 c/o JK&B Capital
 205 North Michigan Avenue, Suite
  808
 Chicago, IL 60601
Andrew Laursen (7)...............    598,677   1.9%
Malcolm Bird (8).................     55,195     *
Reed Hundt (9)...................     49,999     *
Maurice Jeffery (10).............     43,437     *
All directors and executive
 officers as a group (12
 persons)........................ 12,396,300  39.2%
</TABLE>
--------
*  Less than 1%.

                                       63
<PAGE>

(1) Includes 74,832 shares held by Platane Fund and 32,584 held by Mr.
    Rossmann's minor children. Mr. Rossmann is the manager of Platane Fund, and
    disclaims beneficial ownership of these shares except to the extent of his
    pecuniary interest therein.
(2) Consists of 33,333 shares issuable upon exercise of outstanding options
    exercisable on or before November 30, 1999 and 3,004,143 shares held by
    Greylock Equity Limited Partnership. Mr. Evans is a director of Phone.com
    and a general partner of Greylock Equity GP Limited Partnership, the
    general partner of Greylock Equity Limited Partnership. Mr. Evans disclaims
    beneficial ownership of these shares except to the extent of his pecuniary
    interest therein. The other general partners of Greylock Equity GP Limited
    Partnership with whom Mr. Evans shares voting and dispositive powers over
    these shares are Henry F. McCance, Howard E. Cox, Jr., David N. Strohm,
    William W. Helman and William S. Kaiser.
(3) Consists of 33,333 shares issuable upon exercise of outstanding options
    exercisable on or before November 30, 1999, 2,853,936 shares held by Matrix
    Partners IV, L.P. and 150,206 shares held by Matrix IV Entrepreneurs Fund.
    Mr. Verhalen is a director of Phone.com and a general partner of Matrix
    Partners, the general partner of each of Matrix Partners IV, L.P. and
    Matrix IV Entrepreneurs Fund. Mr. Verhalen disclaims beneficial ownership
    of these shares except to the extent of his pecuniary interest therein. The
    other general partners of Matrix Partners with whom Mr. Verhalen shares
    voting and dispositive powers over these shares are Paul J. Ferri,
    W. Michael Humphreys, Timothy A. Barrows and Andrew Marcuvitz.
(4) Consists of 2,853,936 shares held by Matrix Partners IV, L.P. and 150,206
    shares held by Matrix IV Entrepreneurs Fund. Mr. Verhalen is a director of
    Phone.com and a general partner of Matrix Partners, the general partner of
    each of Matrix Partners IV, L.P. and Matrix IV Entrepreneurs Fund. Mr.
    Verhalen disclaims beneficial ownership of these shares except to the
    extent of his pecuniary interest therein. The other general partners of
    Matrix Partners with whom Mr. Verhalen shares voting and dispositive powers
    over these shares are Paul J. Ferri, W. Michael Humphreys, Timothy A.
    Barrows and Andrew Marcuvitz.
(5) Includes 1,250 shares issuable upon exercise of outstanding options
    exercisable on or before November 30, 1999.
(6) Consists of 33,333 shares issuable upon exercise of outstanding options
    exercisable on or before November 30, 1999, 401,620 shares held by JK&B
    Capital, L.P. and 200,810 shares held by JK&B Capital II, L.P. Mr. Kronfeld
    is a director of Phone.com and general partner of JK&B Capital, the general
    partner of JK&B Capital, L.P. and JK&B Capital II, L.P. Mr. Kronfeld
    disclaims beneficial ownership of these shares except to the extent of his
    pecuniary interest therein. The other general partners of JK&B Capital with
    whom Mr. Kronfeld shares voting and dispositive powers over these shares
    are George Spencer and Eileen Richardson.
(7) Includes 3,332 shares held by Mr. Laursen's minor children and 102,013
    shares issuable upon exercise of outstanding options exercisable on or
    before November 30, 1999.
(8) Includes 54,445 shares issuable upon exercise of outstanding options
    exercisable on or before November 30, 1999.
(9) Includes 16,666 shares held by Charles Ross Investment Fund Number 6, which
    is affiliated with Charles Ross Partners, LLC, of which Mr. Hundt is a
    principal. Mr. Hundt disclaims beneficial ownership of such shares except
    to the extent of his pecuniary interest therein. Also includes 33,333
    shares issuable upon exercise of outstanding options exercisable on or
    before November 30, 1999.
(10) Includes 28,856 shares issuable upon exercise of outstanding options
     exercisable on or before November 30, 1999.

                                       64
<PAGE>

                          DESCRIPTION OF CAPITAL STOCK

   As of June 30, 1999, our authorized capital stock consisted of 100,000,000
shares of common stock, $0.001 par value, and 5,000,000 shares of preferred
stock, $0.001 par value.

Common Stock

   As of June 30, 1999, there were 31,213,094 shares of common stock
outstanding that were held of record by approximately 131 stockholders. There
will be 32,213,094 shares of common stock outstanding (assuming no exercise of
the underwriters' over-allotment option and no exercise or conversion of
outstanding convertible securities after June 30, 1999) after giving effect to
the sale of the shares of common stock offered hereby by us.

   The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may
be applicable to any outstanding preferred stock, the holders of common stock
are entitled to receive ratably any dividends that may be declared from time to
time by the board of directors out of funds legally available therefor. In the
event of a liquidation, dissolution or winding up of Phone.com, the holders of
common stock are entitled to share ratably in all assets remaining after
payment of liabilities, subject to prior rights of preferred stock, if any,
then outstanding. The common stock has no preemptive or conversion rights or
other subscription rights. There are no redemption or sinking fund provisions
available to the common stock. All outstanding shares of common stock are fully
paid and non-assessable.

Preferred Stock

   We are authorized to issue 5,000,000 shares of undesignated preferred stock.
The board of directors has the authority to issue the undesignated preferred
stock in one or more series and to determine the powers, preferences and rights
and the qualifications, limitations or restrictions granted to or imposed upon
any wholly unissued series of undesignated preferred stock and to fix the
number of shares constituting any series and the designation of a series,
without any further vote or action by the stockholders. The issuance of
preferred stock may have the effect of delaying, deferring or preventing a
change in control of Phone.com without further action by the stockholders and
may adversely affect the voting and other rights of the holders of common
stock. At present, we have no plans to issue any shares of preferred stock.

Registration Rights of Stockholders

   The holders of 20,174,170 shares of common stock or their transferees are
entitled to rights to register these shares, called "registrable securities,"
under the Securities Act. These rights are provided under the terms of an
agreement between Phone.com and the holders of registrable securities. Subject
to limitations in this agreement, the holders of the registrable securities may
require, on two occasions at any time after six months from the effective date
of our initial public offering in June 1999, that Phone.com use its best
efforts to register the registrable securities for public resale, provided that
the proposed aggregate offering price is in excess of $15,000,000. If we
register any of our common stock either for our own account or for the account
of other security holders, the holders of registrable securities are entitled
to include their shares of common stock in the registration. A holder's right
to include shares in an underwritten registration is subject to the ability of
the underwriters to limit the number of shares included in this offering. All
fees, costs and expenses of these registrations must be borne by us and all
selling expenses (including underwriting discounts, selling commissions and
stock transfer taxes) relating to registrable securities must be borne by the
holders of the securities being registered.

Anti-Takeover Provisions of Delaware Law and Charter Provisions

   We are subject to the provisions of Section 203 of the Delaware Law. In
general, the statute prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date that the person became an interested
stockholder unless

                                       65
<PAGE>

(with exceptions) the business combination or the transaction in which the
person became an interested stockholder is approved in a prescribed manner.
Generally, a "business combination" includes a merger, asset or stock sale or
other transaction resulting in a financial benefit to the stockholder, and an
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior, did own) 15% or more of the
corporation's outstanding voting stock. This provision may have the effect of
delaying, deferring or preventing a change in control of Phone.com without
further action by the stockholders. In addition, provisions of our charter
documents, including a provision eliminating the ability of stockholders to
take actions by written consent, may have the effect of delaying or preventing
changes in control or management of Phone.com, which could have an adverse
effect on the market price of our common stock. Our stock option and purchase
plans generally provide for assumption of our plans or substitution of an
equivalent option of a successor corporation or, alternatively, at the
discretion of the board of directors, exercise of some or all of the options
stock, including non-vested shares, or acceleration of vesting of shares issued
pursuant to stock grants, upon a change of control or similar event. The board
of directors has authority to issue up to 5,000,000 shares of preferred stock
and to fix the rights, preferences, privileges and restrictions, including
voting rights, of these shares without any further vote or action by the
stockholders. The rights of the holders of the common stock will be subject to,
and may be adversely affected by, the rights of the holders of any preferred
stock that may be issued in the future. The issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire a majority of our outstanding voting stock, thereby
delaying, deferring or preventing a change in control of Phone.com.
Furthermore, this preferred stock may have other rights, including economic
rights senior to the common stock, and, as a result, the issuance of preferred
stock could have a material adverse effect on the market value of the common
stock. We have no present plan to issue shares of preferred stock.

   Commencing at the first annual meeting of stockholders following the date on
which we shall have had at least 800 stockholders, the board of directors will
be divided into three classes, each serving staggered three-year terms: Class
I, whose term will expire at the first annual meeting of stockholders following
the annual meeting of stockholders when we shall have had at least 800
stockholders; Class II, whose term will expire at the second annual meeting of
stockholders following the annual meeting of stockholders when we shall have at
least 800 stockholders; and Class III, whose term will expire at the third
annual meeting of stockholders following the annual meeting of stockholders
when we shall have had at least 800 stockholders. As a result, only one class
of directors will be elected at each annual meeting of our stockholders, with
the other classes continuing for the remainder of their respective terms. These
provisions in our amended and restated certificate of incorporation may have
the effect of delaying or preventing changes in control or management of
Phone.com.

Warrants

   As of June 30, 1999, warrants were outstanding to purchase an aggregate of
31,486 shares of common stock at a weighted average exercise price of $3.81 per
share.

Transfer Agent and Registrar

   The transfer agent and registrar for our common stock is U.S. Stock Transfer
Corporation.

Listing

   Our common stock is traded on The Nasdaq Stock Market's National Market
under the trading symbol "PHCM."

                                       66
<PAGE>

                        SHARES ELIGIBLE FOR FUTURE SALE

   Future sales of substantial amounts of our common stock in the public
market, or the possibility of these sales occurring, could adversely affect
prevailing market prices for our common stock or our future ability to raise
capital through an offering of equity securities.

   Upon completion of this offering, we will have outstanding 32,213,094 shares
of common stock, based on shares outstanding as of June 30, 1999. Of these
shares, 2,800,000 shares to be sold by us and certain of the selling
stockholders in this offering (3,295,000 shares if the underwriters' over-
allotment option is exercised in full), as well as the 4,600,000 shares sold in
our initial public offering, are freely tradable in the public market without
restriction under the Securities Act, unless the shares are held by
"affiliates" of Phone.com, as that term is defined in Rule 144 under the
Securities Act. In addition, the 500,000 shares to be sold by the former APiON
shareholders in this offering will be freely tradable.

   The remaining          shares outstanding upon completion of this offering
will be "restricted securities" as that term is defined under Rule 144. We
issued and sold these restricted securities in private transactions in reliance
on exemptions from registration under the Securities Act. Restricted securities
may be sold in the public market only if they are registered or if they qualify
for an exemption from registration under Rule 144 or Rule 701 under the
Securities Act, as summarized below.

   Pursuant to "lock-up" agreements entered into in connection with our initial
public offering in June 1999, all the executive officers, directors and
stockholders of Phone.com agreed not to dispose of their shares for a period of
180 days following the initial public offering; provided, however, that Credit
Suisse First Boston Corporation has the right, in its sole discretion, to
release all or any portion of the shares subject to the lock-up agreements at
any time and without notice. For example, in October 1999, Credit Suisse First
Boston Corporation released a portion of these shares from the lock-up
agreements. As of October 27, 1999, an aggregate of approximately 2.0 million
shares had been so released from the lock-up agreements. All of the
stockholders participating in this partial release of the lock-up agreements
have entered into additional lock-up agreements pursuant to which they have
agreed not to offer, sell, contract to sell, grant any option to purchase or
otherwise dispose of any shares of Phone.com common stock, other than the
shares to by sold by these stockholders in this offering, for a period of 90
days from the date of this prospectus. As a result, these stockholders, who
collectively hold an aggregate of approximately 9,612,896 shares (less any
shares sold pursuant to the lock-up release and the shares to be sold by these
stockholders in this offering), as well as the other selling stockholders in
this offering, who now collectively hold an aggregate of approximately
10,198,879 shares (less the shares to by sold by these stockholders in this
offering), have entered into the additional 90-day lock-up agreements. However,
Credit Suisse First Boston Corporation may in its sole discretion, at any time
without notice, release all or any portion of the shares subject to these lock-
up agreements.

   Taking into account the lock-up agreements, and assuming Credit Suisse First
Boston does not release stockholders from these agreements, the following
shares will be eligible for sale in the public market at the following times:

  . On the date of this prospectus, the 3,300,000 shares sold in the offering
    will be immediately available for sale in the public market.
  . On December 8, 1999, approximately         shares will be eligible for
    sale,           of which     will be subject to volume, manner of sale
    and other limitations under Rule 144.
  . On     1999, approximately    shares will be eligible for sale, of which
        will be subject to volume, manner of sale and other limitations under
    Rule 144.
  . The remaining           shares will be eligible for sale under Rule 144
    upon the expiration of various one-year holding periods after the
    expiration of the lock-up period.

   Following the expiration of the lock-up period, shares issued upon exercise
of options we granted prior to the date of this prospectus will also be
available for sale in the public market pursuant to Rule 701 under the
Securities Act. In general, under Rule 144, after the expiration of the lock-up
period, a person who has

                                       67
<PAGE>

beneficially owned restricted securities for at least one year would be
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of:

  . 1% of the then-outstanding shares of common stock, or
  . the average weekly trading volume of the common stock during the four
    calendar weeks preceding the sale.

   Sales under Rule 144 are also subject to manner of sale and notice
requirements and to the availability of current public information about
Phone.com. Under Rule 144(k), a person who has not been our affiliate at any
time during the three months before a sale and who has beneficially owned the
shares proposed to be sold for at least two years can sell these shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.

   We have filed, a registration statement on Form S-8 to register
approximately 8,994,153 shares of common stock reserved for issuance under the
1995 stock plan, the 1996 stock plan, the employee stock purchase plan and the
directors' stock option plan. Shares issued under the foregoing stock and
option plans, after the filing of the registration statement on Form S-8, may
be sold in the open market, subject, in the case of some holders, to the Rule
144 limitations applicable to affiliates, the lock-up agreements and vesting
restrictions imposed by us.

   In addition, following this offering, the holders of           shares of
outstanding common stock will, under some circumstances, have rights to require
us to register their shares for future sale. See "Description of Capital
Stock--Registration Rights of Stockholders."

                                       68
<PAGE>

                                  UNDERWRITING

   Under the terms and subject to the conditions contained in an underwriting
agreement dated October   , 1999, we have agreed to sell to the underwriters
named below the following respective numbers of shares of common stock:

<TABLE>
<CAPTION>
                                                                       Number of
   Underwriter                                                          Shares
   -----------                                                         ---------
   <S>                                                                 <C>
   Credit Suisse First Boston Corporation.............................
   Goldman, Sachs & Co. ..............................................
   Hambrecht & Quist LLC .............................................
   BancBoston Robertson Stephens Inc. ................................
   U.S. Bancorp Piper Jaffray Inc. ...................................
                                                                       ---------
     Total............................................................ 3,300,000
                                                                       =========
</TABLE>

   The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.

   The underwriters have been granted a 30-day option to purchase up to 495,000
additional shares at the public offering price less the underwriting discounts
and commissions. The option may be exercised only to cover any over-allotments
of common stock.

   The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $     per share. The
underwriters and selling group members may allow a discount of $     per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to dealers may be changed by the
underwriters.

   The following table summarizes the compensation and estimated expenses we
will pay.

<TABLE>
<CAPTION>
                                         Per share                  Total
                               ----------------------------- -------------------
                                                              Without    With
                                  Without          With        Over-     Over-
                               Over-Allotment Over-Allotment Allotment Allotment
                               -------------- -------------- --------- ---------
   <S>                         <C>            <C>            <C>       <C>
   Underwriting discounts and
    commissions payable by
    Phone.com................
   Expenses payable by
    Phone.com................
   Underwriting discounts and
    commissions payable by
    the selling
    stockholders.............
</TABLE>

   We and certain of our stockholders have agreed that we and they will not
offer, sell, contract to sell, or publicly disclose the intention to make any
such offer, sale, pledge, disposition or filing, pledge or otherwise dispose
of, directly or indirectly, or file with the Commission a registration
statement under the Securities Act relating to, any additional shares of our
common stock or securities convertible into or exchangeable or exercisable for
any of our common stock without the prior written consent of Credit Suisse
First Boston Corporation for a period of 90 days after the date of this
prospectus, except in the case of issuances pursuant to the exercise of
employee stock options outstanding on the date hereof.

   We have agreed to indemnify the underwriters against liabilities under the
Securities Act or contribute to payments which the underwriters may be required
to make in that respect.

                                       69
<PAGE>

   Our common stock is traded on The Nasdaq Stock Market's National Market
under the symbol "PHCM."

   The representatives on behalf of the underwriters may engage in over-
allotment, stabilizing transactions, syndicate covering transactions, penalty
bids and "passive" market making in accordance with Regulation M under the
Securities Exchange Act of 1934.
  .  Over-allotment involves syndicate sales in excess of the offering size,
     which creates a syndicate short position.
  .  Stabilizing transactions permit bids to purchase the underlying security
     so long as the stabilizing bids do not exceed a specified maximum.
  .  Syndicate covering transactions involve purchases of the common stock in
     the open market after the distribution has been completed in order to
     cover syndicate short positions.
  .  Penalty bids permit the representatives to reclaim a selling concession
     from a syndicate member when the common stock originally sold by the
     syndicate member are purchased in a stabilizing or syndicate covering
     transaction to cover syndicate short positions.
  .  In "passive" market making, market makers in the securities who are
     underwriters or prospective underwriters may, subject to certain
     limitations, make bids for or purchases of the securities until the
     time, if any, at which a stabilizing bid is made.

   These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on The Nasdaq Stock Market's National Market or otherwise and, if
commenced, may be discontinued at any time.

   In March 1999, we issued an aggregate of 2,458,543 shares of our Series E
preferred stock at a per share price of $7.24. Credit Suisse First Boston
Corporation acted as the placement agent for this private placement of our
Series E preferred stock, for which it received a customary fee for its
services. In connection with this financing, a director of Credit Suisse First
Boston Corporation purchased 4,143 shares of Series E preferred stock in the
private placement and has agreed not to sell, pledge, transfer or hypothecate
his shares for a one year period after the date of our initial public offering
in June 1999.

   In connection with our acquisition of APiON Telecoms Ltd., which was
completed in October 1999, Credit Suisse First Boston Corporation acted as our
financial advisor. For these services, we will pay a customary fee to Credit
Suisse First Boston Corporation.

                                      70
<PAGE>

                          NOTICE TO CANADIAN RESIDENTS

Resale Restrictions

   The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we and the selling
stockholders prepare and file a prospectus with the securities regulatory
authorities in each province where trades of common stock are effected.
Accordingly, any resale of the common stock in Canada must be made in
accordance with applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made in accordance
with available statutory exemptions or pursuant to a discretionary exemption
granted by the applicable Canadian securities regulatory authority. Purchasers
are advised to seek legal advice prior to any resale of the common stock.

Representations of Purchasers

   Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us, the selling stockholders and
the dealer from whom such purchase confirmation is received that (i) such
purchaser is entitled under applicable provincial securities laws to purchase
such common stock without the benefit of a prospectus qualified under such
securities laws, (ii) where required by law, that such purchaser is purchasing
as principal and not as agent, and (iii) such purchaser has reviewed the text
above under "Resale Restrictions."

Rights of Action (Ontario Purchasers)

   The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission of rights of action under the civil liability provisions
of the U.S. federal securities laws.

Enforcement of Legal Rights

   All of the issuer's directors and officers as well as the experts named
herein and the selling stockholders may be located outside of Canada and, as a
result, it may not be possible for Canadian purchasers to effect service of
process within Canada upon the issuer or such persons. All or a substantial
portion of the assets of the issuer and such persons may be located outside of
Canada and, as a result, it may not be possible to satisfy a judgment against
the issuer or such persons in Canada or to enforce a judgment obtained in
Canadian courts against such issuer or persons outside of Canada.

Notice to British Columbia Residents

   A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser in this offering. This report must be
in the form attached to British Columbia Securities Commission Blanket Order
BOR #95/17, a copy of which may be obtained from us. Only one report must be
filed in respect of common stock acquired on the same date and under the same
prospectus exemption.

Taxation and Eligibility for Investment

   Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.

                                       71
<PAGE>

                                 LEGAL MATTERS

   The validity of the common stock offered hereby will be passed upon for
Phone.com by Venture Law Group, A Professional Corporation, Menlo Park,
California. The underwriters have been represented by Wilson Sonsini Goodrich &
Rosati, Professional Corporation, Palo Alto, California. Venture Law Group
attorneys and an entity affiliated with Venture Law Group hold an aggregate of
11,179 shares of our common stock.

                                    EXPERTS

   The consolidated balance sheets as of June 30, 1998 and 1999, and the
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended June 30, 1999 of Phone.com,
Inc., have been included in the Registration Statement in reliance upon the
report of KPMG LLP, independent auditors, and upon the authority of said firm
as experts in accounting and auditing.

   The statement of assets acquired and liabilities assumed as of March 31,
1999, and the statement of operations and cash flows for the period from May 1,
1998 (inception) through March 31, 1999 of the WAP business of APiON, have been
included in the Registration Statement in reliance upon the report of
PricewaterhouseCoopers, independent auditors, and upon the authority of said
firm as experts in accounting and auditing.

                      WHERE YOU CAN FIND MORE INFORMATION

   We have filed with the Securities and Exchange Commission a Registration
Statement (which term shall include any amendments thereto) on Form S-1 under
the Securities Act with respect to the common stock offered hereby. This
prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, some
items of which are contained in exhibits to the Registration Statement as
permitted by the rules and regulations of the Commission. For further
information with respect to Phone.com and the common stock offered hereby,
reference is made to the Registration Statement, including the exhibits
thereto, and the financial statements and notes filed as a part thereof.
Statements made in this prospectus concerning the contents of any document
referred to herein are not necessarily complete. With respect to each document
filed with the Commission as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved. The Registration Statement, including exhibits thereto and the
financial statements and notes filed as a part thereof, as well as reports and
other information filed with the Commission, may be inspected without charge at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, NY 10048,
and the Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of all or any part thereof may be obtained from
the Commission upon payment of fees prescribed by the Commission. These reports
and other information may also be inspected without charge at a Web site
maintained by the Commission. The address of the site is http://www.sec.gov.

                                       72
<PAGE>

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----

<S>                                                                        <C>
Phone.com, Inc. Consolidated Financial Statements
  Independent Auditors' Report............................................  F-2
  Consolidated Balance Sheets.............................................  F-3
  Consolidated Statements of Operations...................................  F-4
  Consolidated Statements of Stockholders' Equity.........................  F-5
  Consolidated Statements of Cash Flows...................................  F-6
  Notes to Consolidated Financial Statements..............................  F-7

WAP Business of APiON Limited Financial Statements
  Report of Independent Accountants....................................... F-18
  Statement of Operations................................................. F-19
  Statement of Assets Acquired and Liabilities Assumed.................... F-20
  Cash Flow Statement..................................................... F-21
  Notes to Financial Statements........................................... F-22

Pro Forma Combined Condensed Financial Statements
  Introduction to Unaudited Pro Forma Combined Condensed Financial
   Statements............................................................. F-26
  Unaudited Pro Forma Combined Condensed Balance Sheet.................... F-27
  Unaudited Pro Forma Combined Condensed Statement of Operations.......... F-28
  Notes to Unaudited Pro Forma Combined Condensed Financial Statements.... F-29
</TABLE>

                                      F-1
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Phone.com, Inc.:

   We have audited the accompanying consolidated balance sheets of Phone.com,
Inc. and subsidiaries (the Company) as of June 30, 1998 and 1999, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the three-year period ended June 30, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

   In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Phone.com,
Inc. and subsidiaries as of June 30, 1998 and 1999, and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 30, 1999, in conformity with generally accepted accounting
principles.

/s/ KPMG LLP
Mountain View, California
July 19, 1999

                                      F-2
<PAGE>

                        PHONE.COM, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
               (In thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                                                June 30,
                                                            ------------------
                                                              1998      1999
                                                            --------  --------
<S>                                                         <C>       <C>
                          ASSETS
Current assets:
  Cash and cash equivalents................................ $ 12,677  $ 79,803
  Short-term investments...................................   20,787    33,283
  Accounts receivable......................................    2,724    20,474
  Prepaid expenses and other current assets................      352       865
                                                            --------  --------
    Total current assets...................................   36,540   134,425
Property and equipment, net................................    1,336     3,014
Deposits and other assets..................................    1,268     1,494
                                                            --------  --------
                                                            $ 39,144  $138,933
                                                            ========  ========
           LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of equipment loan and capital lease
   obligations............................................. $    424  $    424
  Accounts payable.........................................      532     1,749
  Accrued liabilities......................................    1,877     7,173
  Deferred revenue.........................................    7,003    36,797
                                                            --------  --------
    Total current liabilities..............................    9,836    46,143
Equipment loan and capital lease obligations, less current
 portion...................................................      915       498
                                                            --------  --------
    Total liabilities......................................   10,751    46,641
                                                            --------  --------
Commitments
Stockholders' equity:
  Convertible preferred stock, $0.001 par value; 17,843,550
   and 5,000,000 shares authorized as of June 30, 1998 and
   1999, respectively; 17,715,627 and no shares issued and
   outstanding as of June 30, 1998 and 1999, respectively;
   aggregate liquidation preference of $51,299 and $-0- as
   of June 30, 1998 and 1999, respectively.................       18        --
  Common stock, $0.001 par value; 32,000,000 and
   100,000,000 shares authorized as of June 30, 1998 and
   1999, respectively; 6,542,398 and 31,667,261 shares
   issued and 6,192,398 and 31,213,094 shares outstanding
   as of June 30, 1998 and 1999, respectively..............        6        31
  Additional paid-in capital...............................   51,611   136,209
  Deferred stock-based compensation........................   (1,786)   (1,318)
  Treasury stock, 350,000 and 454,167 shares as of June 30,
   1998 and 1999, respectively.............................      (72)     (196)
  Notes receivable from stockholders.......................     (197)     (484)
  Accumulated deficit......................................  (21,187)  (41,950)
                                                            --------  --------
    Total stockholders' equity.............................   28,393    92,292
                                                            --------  --------
                                                            $ 39,144  $138,933
                                                            ========  ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>

                        PHONE.COM, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                     Year ended June 30,
                                                  ---------------------------
                                                   1997      1998      1999
                                                  -------  --------  --------
<S>                                               <C>      <C>       <C>
Revenues:
  License........................................ $    80  $    522  $  5,229
  Maintenance and support services...............     212     1,683     5,921
  Consulting services............................      --        --     2,292
                                                  -------  --------  --------
    Total revenues...............................     292     2,205    13,442
                                                  -------  --------  --------
Cost of revenues:
  License........................................      87        95       371
  Maintenance and support services...............     266     1,063     3,022
  Consulting services............................      --        --     1,146
                                                  -------  --------  --------
    Total cost of revenues.......................     353     1,158     4,539
                                                  -------  --------  --------
    Gross (loss) profit..........................     (61)    1,047     8,903
                                                  -------  --------  --------
Operating expenses:
  Research and development.......................   3,959     5,732    13,082
  Sales and marketing............................   3,198     5,011    10,840
  General and administrative.....................   1,237     1,801     4,432
  Stock-based compensation.......................      --       108     1,011
                                                  -------  --------  --------
    Total operating expenses.....................   8,394    12,652    29,365
                                                  -------  --------  --------
    Operating loss...............................  (8,455)  (11,605)  (20,462)
Interest income, net.............................     464       982     1,803
                                                  -------  --------  --------
    Loss before income taxes.....................  (7,991)  (10,623)  (18,659)
Income taxes.....................................      --        --     2,104
                                                  -------  --------  --------
    Net loss..................................... $(7,991) $(10,623) $(20,763)
                                                  =======  ========  ========
Basic and diluted net loss per share............. $ (1.67) $  (2.03) $  (2.98)
                                                  =======  ========  ========
Shares used in computing basic and diluted net
 loss per share..................................   4,776     5,221     6,966
                                                  =======  ========  ========
</TABLE>


          See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>

                       PHONE.COM, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                       (In thousands, except share data)

<TABLE>
<CAPTION>
                     Convertible                                                                Notes
                   preferred stock       Common stock     Additional   Deferred               receivable
                  -------------------  ------------------  paid-in   stock-based   Treasury      from      Accumulated
                    Shares     Amount    Shares    Amount  capital   compensation   stock    stockholders    deficit
                  -----------  ------  ----------  ------ ---------- ------------  --------  ------------  -----------
<S>               <C>          <C>     <C>         <C>    <C>        <C>           <C>       <C>           <C>
Balances as of
June 30, 1996....   8,731,984     $ 9   4,743,806     $ 5   $  9,023      $    --     $  --         $  --     $ (2,573)
 Issuance of
 common stock to
 officers and
 employees for
 notes
 receivable......          --      --   1,065,000       1        192           --        --          (193)          --
 Issuance of
 common stock to
 consultant......          --      --      10,360      --          2           --        --            --           --
 Stock options
 exercised.......          --      --      93,084      --          9           --        --            --           --
 Issuance of
 Series C
 convertible
 preferred stock,
 net of $32
 issuance costs..   2,538,766       3          --      --      9,638           --        --            --           --
 Repurchase of
 common stock in
 settlement of
 notes receivable
 from
 stockholders....          --      --    (200,000)     --         --           --       (46)           46           --
 Net loss........          --      --          --      --         --           --        --            --       (7,991)
                  -----------     ---  ----------     ---   --------      -------     -----         -----     --------
Balances as of
June 30, 1997....  11,270,750      12   5,712,250       6     18,864           --       (46)         (147)     (10,564)
 Issuance of
 common stock to
 officers and
 employees for
 notes
 receivable......          --      --     226,667      --         88           --        --           (88)          --
 Repayment of
 notes receivable
 from
 stockholders....          --      --          --      --         --           --        --            12           --
 Stock options
 exercised.......          --      --     403,481      --         87           --        --            --           --
 Issuance of
 Series D
 convertible
 preferred stock,
 net of $2,056
 issuance costs..   6,444,877       6          --      --     30,678           --        --            --           --
 Repurchase of
 common stock in
 settlement of
 notes receivable
 from
 stockholders....          --      --    (150,000)     --         --           --       (26)           26           --
 Deferred
 compensation
 related to stock
 option grants...          --      --          --      --      1,894       (1,894)       --            --           --
 Amortization of
 stock-based
 compensation....          --      --          --      --         --          108        --            --           --
 Net loss........          --      --          --      --         --           --        --            --      (10,623)
                  -----------     ---  ----------     ---   --------      -------     -----         -----     --------
Balances as of
June 30, 1998....  17,715,627      18   6,192,398       6     51,611       (1,786)      (72)         (197)     (21,187)
 Issuance of
 common stock to
 officers and
 employees for
 notes
 receivable......          --      --     106,667      --        422           --        --          (422)          --
 Stock options
 exercised.......          --      --     244,026      --        131           --        --            --           --
 Issuance of
 Series E
 convertible
 preferred stock,
 net of $1,100
 issuance costs..   2,458,543       2          --      --     16,698           --        --            --           --
 Issuance of
 common stock in
 initial public
 offering, net of
 offering costs
 of $6,791.......          --      --   4,600,000       5     66,804           --        --            --           --
 Conversion of
 convertible
 preferred stock
 into common
 stock........... (20,174,170)    (20) 20,174,170      20         --           --        --            --           --
 Repurchase of
 common stock in
 settlement of
 notes receivable
 from
 stockholders....          --      --    (104,167)     --         --           --      (124)          124           --
 Repayment of
 notes receivable
 from
 stockholders....          --      --          --      --         --           --        --            11           --
 Deferred
 compensation
 related to stock
 option grants...          --      --          --      --        543         (543)       --            --           --
 Amortization of
 stock-based
 compensation....          --      --          --      --         --        1,011        --            --           --
 Net loss........          --      --          --      --         --           --        --            --      (20,763)
                  -----------     ---  ----------     ---   --------      -------     -----         -----     --------
Balances as of
June 30, 1999....          --     $--  31,213,094     $31   $136,209      $(1,318)    $(196)        $(484)    $(41,950)
                  ===========     ===  ==========     ===   ========      =======     =====         =====     ========
<CAPTION>
                      Total
                  stockholders'
                     equity
                  --------------
<S>               <C>            <C>
Balances as of
June 30, 1996....       $ 6,464
 Issuance of
 common stock to
 officers and
 employees for
 notes
 receivable......            --
 Issuance of
 common stock to
 consultant......             2
 Stock options
 exercised.......             9
 Issuance of
 Series C
 convertible
 preferred stock,
 net of $32
 issuance costs..         9,641
 Repurchase of
 common stock in
 settlement of
 notes receivable
 from
 stockholders....            --
 Net loss........        (7,991)
                  --------------
Balances as of
June 30, 1997....         8,125
 Issuance of
 common stock to
 officers and
 employees for
 notes
 receivable......            --
 Repayment of
 notes receivable
 from
 stockholders....            12
 Stock options
 exercised.......            87
 Issuance of
 Series D
 convertible
 preferred stock,
 net of $2,056
 issuance costs..        30,684
 Repurchase of
 common stock in
 settlement of
 notes receivable
 from
 stockholders....            --
 Deferred
 compensation
 related to stock
 option grants...            --
 Amortization of
 stock-based
 compensation....           108
 Net loss........       (10,623)
                  --------------
Balances as of
June 30, 1998....        28,393
 Issuance of
 common stock to
 officers and
 employees for
 notes
 receivable......            --
 Stock options
 exercised.......           131
 Issuance of
 Series E
 convertible
 preferred stock,
 net of $1,100
 issuance costs..        16,700
 Issuance of
 common stock in
 initial public
 offering, net of
 offering costs
 of $6,791.......        66,809
 Conversion of
 convertible
 preferred stock
 into common
 stock...........            --
 Repurchase of
 common stock in
 settlement of
 notes receivable
 from
 stockholders....            --
 Repayment of
 notes receivable
 from
 stockholders....            11
 Deferred
 compensation
 related to stock
 option grants...            --
 Amortization of
 stock-based
 compensation....         1,011
 Net loss........       (20,763)
                  --------------
Balances as of
June 30, 1999....       $92,292
                  ============== ===
</TABLE>
         See acccompanying notes to consolidated financial statements.

                                      F-5
<PAGE>

                        PHONE.COM, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                       Year ended June 30,
                                                    ---------------------------
                                                     1997      1998      1999
                                                    -------  --------  --------
<S>                                                 <C>      <C>       <C>
Cash flows from operating activities:
  Net loss........................................  $(7,991) $(10,623) $(20,763)
  Adjustments to reconcile net loss to net cash
   used for operating activities:
    Depreciation and amortization.................      447       630     1,017
    Amortization of deferred stock-based
     compensation.................................       --       108     1,011
    Changes in operating assets and liabilities:
      Accounts receivable.........................     (126)   (2,598)  (17,750)
      Prepaid expenses and other assets...........     (233)     (427)     (739)
      Accounts payable............................       38       319     1,217
      Accrued liabilities.........................      462     1,312     5,296
      Deferred revenue............................      831     6,147    29,794
                                                    -------  --------  --------
        Net cash used for operating activities....   (6,572)   (5,132)     (917)
                                                    -------  --------  --------
Cash flows from investing activities:
  Purchases of property and equipment, net........     (914)     (367)   (2,695)
  Purchases of short-term investments.............   (3,924)  (32,338)  (54,125)
  Proceeds from sales and maturities of short-term
   investments....................................       --    15,475    41,629
  Other assets....................................       --      (800)       --
                                                    -------  --------  --------
        Net cash used for investing activities....   (4,838)  (18,030)  (15,191)
                                                    -------  --------  --------
Cash flows from financing activities:
  Net proceeds from sale of convertible preferred
   stock..........................................    9,641    30,684    16,700
  Issuance of common stock........................       11        87    66,940
  Repayment of notes receivable from
   stockholders...................................       --        12        11
  Proceeds from equipment loan....................       --     1,300        --
  Repayment of equipment loan and capital lease
   obligations....................................       --      (334)     (417)
                                                    -------  --------  --------
        Net cash provided by financing
         activities...............................    9,652    31,749    83,234
                                                    -------  --------  --------
Net (decrease) increase in cash and cash
 equivalents......................................   (1,758)    8,587    67,126
Cash and cash equivalents at beginning of year....    5,848     4,090    12,677
                                                    -------  --------  --------
Cash and cash equivalents at end of year..........  $ 4,090  $ 12,677  $ 79,803
                                                    =======  ========  ========
Supplemental disclosures of cash flow information:
  Property and equipment acquired under capital
   lease obligations..............................  $    --  $    373  $     --
                                                    =======  ========  ========
  Common stock issued to officers and employees
   for notes receivable...........................  $   193  $     88  $    422
                                                    =======  ========  ========
  Repurchase of common stock in settlement of
   notes receivable from stockholders.............  $    46  $     26  $    124
                                                    =======  ========  ========
  Deferred stock-based compensation...............  $    --  $  1,894  $    543
                                                    =======  ========  ========
  Conversion of convertible preferred stock into
   common stock...................................  $    --  $     --  $     20
                                                    =======  ========  ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-6
<PAGE>

                        PHONE.COM, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         June 30, 1997, 1998, and 1999

1. Organization and Significant Accounting Policies

   (a) Organization

   Phone.com, Inc. (the Company) was incorporated in Delaware in 1994 to
develop and market software that enables the delivery of Internet-based
services to mass-market wireless telephones. The Company was formerly known as
Unwired Planet, Inc., but changed its name to Phone.com, Inc. effective April
1999.

   (b) Basis of Consolidation

   The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries, Phone.com Japan, K.K. and
Phone.com (Europe) Limited. All significant intercompany accounts and
transactions have been eliminated in consolidation.

   (c) Revenue Recognition

   For agreements entered into prior to July 1, 1998, the Company recognized
revenues in accordance with the provisions of the American Institute of
Certified Public Accountants' Statement of Position (SOP) No. 91-1, Software
Revenue Recognition. Effective July 1, 1998, the Company adopted SOP 97-2,
Software Revenue Recognition, as amended by SOP 98-4 and SOP 98-9. SOP 97-2, as
amended, generally requires revenue earned on software arrangements involving
multiple elements to be allocated to each element based on the relative fair
value of the elements.

   The Company licenses its UP.Link Server Suite products to network operators
through its direct sales force and indirectly through its channel partners. The
Company's license agreements do not provide for a right of return. Allowances
for future estimated warranty costs are provided at the time revenue is
recognized. Licenses can be purchased on an as-deployed basis or on a prepaid
basis. For licenses purchased on an as-deployed basis, license revenue is
recognized as subscribers are activated to use the services that are based on
the Company's UP.Link Server Suite products. The Company has no obligation to
provide standards-compliant products once a subscriber has been activated. For
licenses purchased on a prepaid basis, prepaid license fees are recognized
under subscription accounting due to the Company's commitment to provide
standards-compliant products for each license covered by the prepaid
arrangement. This subscription revenue is recognized ratably over the
contractual term of the prepaid arrangement (i.e., the date the prepaid
licenses expire if not used), commencing at the beginning of the month delivery
and acceptance occur by the network operator. The prepaid license period is
generally 12 to 30 months. Licenses expire if not activated prior to the end of
the prepaid license term. The Company recognizes revenues from maintenance and
support services provided to network operators ratably over the term of the
agreement, generally one year, and recognizes revenues from consulting services
provided to network operators as the services are performed.

   The Company recognizes revenues from UP.Browser agreements with wireless
telephone manufacturers ratably over the period during which the services are
performed, generally one year. The Company provides its wireless telephone
manufacturer customers with support associated with their efforts to port its
UP.Browser software to their wireless telephones, software error corrections,
and new releases as they become commercially available.

   (d) Cash and Cash Equivalents

   Cash and cash equivalents consist of cash and highly liquid investments with
remaining maturities of less than 90 days at the date of purchase. The Company
is exposed to credit risk in the event of default by the

                                      F-7
<PAGE>

                        PHONE.COM, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                         June 30, 1997, 1998, and 1999

financial institutions or the issuers of these investments to the extent of the
amounts recorded on the balance sheet in excess of amounts that are insured by
the FDIC. As of June 30, 1998 and 1999, cash equivalents consisted principally
of money market funds and commercial paper.

   (e) Accounting for Certain Investments in Debt and Equity Securities

   The Company classifies its investments in debt securities as available-for-
sale. Available-for-sale securities are carried at fair value, which
approximates amortized cost.

   (f) Financial Instruments and Concentration of Credit Risk

   The carrying value of the Company's financial instruments, including cash
and cash equivalents, short-term investments, accounts receivable, and
equipment loans approximates fair value. Financial instruments that subject the
Company to concentrations of credit risk consist primarily of cash and cash
equivalents and trade accounts receivable.

   The Company sells its products and services principally to leading wireless
network operators and prominent wireless telephone manufacturers. Credit risk
is concentrated in North America and Japan. The Company performs ongoing credit
evaluations of its customers' financial condition and, generally, requires no
collateral from its customers. The Company has had no write-offs of accounts
receivable and, based on an ongoing evaluation of its accounts receivable
collectibility and customer creditworthiness, has recorded no allowance for
doubtful accounts receivable to date.

   (g) Property and Equipment

   Property and equipment are recorded at cost less accumulated depreciation
and amortization. Depreciation is calculated using the straight-line method
over the estimated useful lives of the respective assets, generally three to
five years. Leasehold improvements are amortized over the shorter of the
estimated useful lives of the assets or the lease term.

   (h) Impairment of Long-Lived Assets

   The Company evaluates its long-lived assets for impairment whenever events
or changes in circumstances indicate that the carrying amount of such assets
may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of any asset to future net cash
flows expected to be generated by the asset. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount or fair
value less costs to sell.

   (i) Research and Development

   Research and development costs are expensed as incurred until technological
feasibility has been established. To date, the Company's software has been
available for general release concurrent with the establishment of
technological feasibility and, accordingly, no development costs have been
capitalized.

   (j) Use of Estimates

   The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets

                                      F-8
<PAGE>

                       PHONE.COM, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                         June 30, 1997, 1998, and 1999

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

   (k) Income Taxes

   Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Valuation allowances are established when necessary to reduce
deferred tax assets to the amounts expected to be recovered.

   (l) Accounting for Stock-Based Compensation Plans

   The Company uses the intrinsic-value method to account for all of its
employee stock-based compensation plans. Expense associated with stock-based
compensation is being amortized on an accelerated basis over the vesting
period of the individual award consistent with the method described in
Financial Accounting Standards Board (FASB) Interpretation No. 28.

   (m) Foreign Currency Transactions

   The functional currency for the Company's foreign subsidiaries is the U.S.
dollar. Accordingly, such entities remeasure monetary assets and liabilities
at exchange rates in effect as of each reporting date while nonmonetary items
are remeasured at historical rates. Income and expense accounts are remeasured
at the average rates in effect during each such period, except for
depreciation which is remeasured at historical rates. Remeasurement
adjustments and transaction gains and losses are recognized in income in the
period of occurrence and have not been significant to date.

   (n) Comprehensive Income

   The Company has no material components of other comprehensive income (loss)
for all periods presented.

                                      F-9
<PAGE>

                        PHONE.COM, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                         June 30, 1997, 1998, and 1999


   (o) Net Loss Per Share

   Basic net loss per share is computed using the weighted-average number of
outstanding shares of common stock excluding shares of restricted stock subject
to repurchase summarized below. Diluted net loss per share is computed using
the weighted-average number of shares of common stock outstanding and, when
dilutive, potential shares of restricted common stock subject to repurchase,
common stock from options, and warrants to purchase common stock using the
treasury stock method and from convertible securities using the "as if
converted" basis. The following potential shares of common stock have been
excluded from the computation of diluted net loss per share for all periods
presented because the effect would have been antidilutive (in thousands):

<TABLE>
<CAPTION>
                                                           Year ended June 30,
                                                           -------------------
                                                            1997   1998  1999
                                                           ------ ------ -----
<S>                                                        <C>    <C>    <C>
Shares issuable under stock options.......................  2,071  2,877 4,751
Shares of restricted stock subject to repurchase..........    715    670   353
Shares issuable pursuant to warrants to purchase common
 stock....................................................     --     31    31
Shares of convertible preferred stock on an "as if
 converted" basis......................................... 11,271 17,716    --
</TABLE>

   The weighted-average exercise price of stock options was $0.28, $1.00, and
$6.35 for the years ended June 30, 1997, 1998, and 1999, respectively. The
weighted-average purchase price of restricted stock was $0.26, $0.30, and $0.59
for the years ended June 30, 1997, 1998, and 1999, respectively. The weighted-
average exercise price of warrants was $3.81 for both the fiscal years ended
June 30, 1998 and 1999. In June 1999, all outstanding shares of the Company's
convertible preferred stock were automatically converted into common stock upon
completion of the Company's initial public offering (See Note 4a).

   (p) Recent Accounting Pronouncements

   In June 1998, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities.
SFAS No. 133, as amended by SFAS No. 137, establishes accounting and reporting
standards for derivative financial instruments and hedging activities related
to those instruments, as well as other hedging activities. Because the Company
does not currently hold any derivative instruments and does not engage in
hedging activities, the Company expects that the adoption of SFAS No. 133, as
amended, will not have a material impact on its consolidated financial
position, results of operations, or cash flows. The Company will be required to
adopt SFAS No. 133 in fiscal 2001.

2. Balance Sheet Components

   (a) Short-Term Investments

   All of the Company's investments are considered available-for-sale
securities and consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                                                   June 30,
                                                               ----------------
                                                                 1998    1999
                                                               -------- -------
   <S>                                                         <C>      <C>
   Commercial paper........................................... $ 13,594 $ 7,982
   Corporate bonds............................................    9,213  30,299
   Certificates of deposit....................................    7,238      --
                                                               -------- -------
                                                               $ 30,045 $38,281
                                                               ======== =======
</TABLE>

   As of June 30, 1998 and 1999, $9,258,000 and $4,998,000, respectively, of
the Company's investments are included in cash and cash equivalents.

                                      F-10
<PAGE>

                        PHONE.COM, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                         June 30, 1997, 1998, and 1999


   All short-term investments as of June 30, 1999, contractually mature within
one year.

   (b) Property and Equipment

   Property and equipment, consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                                                   June 30,
                                                                 --------------
                                                                  1998    1999
                                                                 ------  ------
   <S>                                                           <C>     <C>
   Computer equipment and software.............................. $2,214  $4,785
   Furniture and equipment......................................    213     314
   Leasehold improvements.......................................     95     118
                                                                 ------  ------
                                                                  2,522   5,217
   Accumulated depreciation and amortization.................... (1,186) (2,203)
                                                                 ------  ------
                                                                 $1,336  $3,014
                                                                 ======  ======
</TABLE>

   Equipment under capital leases aggregated $373,000 as of June 30, 1998 and
1999. Accumulated amortization on the assets under capital leases aggregated
$42,000 and $167,000 as of June 30, 1998 and 1999, respectively.

3. Equipment Loan and Capital Lease Obligations

   In May 1997, the Company entered into a $2,000,000 credit facility with a
business credit corporation that consisted of a $1,300,000 equipment term loan
and a $700,000 lease line of credit. The equipment loan bears interest at 7.5%,
is collateralized by equipment, and is payable in 42 monthly installments of
$35,000 through January 2001. As of June 30, 1998 and 1999, $1,000,000 and
$712,000, respectively, was outstanding under the term loan. During fiscal
1998, the Company borrowed approximately $400,000 under the lease line of
credit with $339,000 and $210,000 outstanding as of June 30, 1998 and 1999,
respectively, bearing interest at an effective interest rate of 11.8%, and
payable in 42 monthly installments of $11,000 through December 2001. The unused
portion of the lease line of credit expired in July 1998.

   As of June 30, 1999, aggregate maturities for the equipment loan and capital
lease obligations for fiscal 2000, 2001, and 2002 are $424,000, $471,000, and
$27,000, respectively.

   In conjunction with the equipment loan and lease line of credit, the Company
issued warrants to purchase 20,466 and 11,020 shares, respectively, of the
Company's common stock at an exercise price of $3.81 per share. These warrants
expire in June 2004. The fair value of the warrants issued, calculated using
the Black-Scholes option pricing model, using the following assumptions: no
dividends; contractual life of 10 years; risk-free interest rate of 6.33%;
expected volatility of 60%, was not material.

4. Stockholders' Equity

   (a) Initial Public Offering

   On June 11, 1999, the Company completed an initial public offering (IPO) of
4,600,000 shares of its common stock at a price of $16.00 per share and
received net proceeds of approximately $66,809,000. At the IPO date, all
outstanding shares of the Company's convertible preferred stock were
automatically converted into common stock on a one-for-one basis.

                                      F-11
<PAGE>

                        PHONE.COM, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                         June 30, 1997, 1998, and 1999


   (b) Reverse Stock Split

   On June 7, 1999, the Company effected a two-for-three reverse stock split of
its convertible preferred stock and common stock. The accompanying consolidated
financial statements have been retroactively restated to give effect to the
reverse stock split.

   (c) Stock Plans

   The Company is authorized to issue up to 9,383,887 shares of common stock in
connection with its 1995 and 1996 stock option plans (the Plans) to directors,
employees, and consultants. The Plans provide for the issuance of stock
purchase rights, incentive stock options, or nonstatutory stock options.

   The stock purchase rights are subject to a restricted stock purchase
agreement whereby the Company has the right to repurchase the stock upon the
voluntary or involuntary termination of the purchaser's employment with the
Company at the original issuance cost. The Company's repurchase right lapses at
a rate determined by the stock plan administrator, but at a minimum rate of 20%
per year. Through June 30, 1999, the Company has issued 1,381,667 shares under
restricted stock purchase agreements, of which 454,167 shares have been
repurchased and 352,778 are subject to repurchase at a weighted-average price
of $0.59 per share. Certain of these restricted shares were issued to officers
of the Company for full recourse promissory notes with interest rates ranging
from 5.49% to 6.48% and terms of four to five years.

   Under the Plans, the exercise price for incentive stock options is at least
100% of the stock's fair value on the date of grant for employees owning less
than 10% of the voting power of all classes of stock, and at least 110% of the
fair value on the date of grant for employees owning more than 10% of the
voting power of all classes of stock. For nonstatutory stock options, the
exercise price is also at least 110% of the fair value on the date of grant for
employees owning more than 10% of the voting power of all classes of stock and
no less than 85% for employees owning less than 10% of the voting power of all
classes of stock.

   Under the Plans, options generally expire in 10 years. However, the term of
the options may be limited to 5 years if the optionee owns stock representing
more than 10% of the voting power of all classes of stock. Vesting periods are
determined by the Company's Board of Directors and generally provide for shares
to vest ratably over a 4- to 5-year period.

   As of June 30, 1999, there were -0- and 2,936,826 additional shares
available for grant under the 1995 and 1996 stock option plans, respectively.

   On March 26, 1999, the Company adopted the 1999 Employee Stock Purchase Plan
(the Purchase Plan) and reserved a total of 600,000 shares of the Company's
common stock for issuance thereunder plus an automatic annual increase for
fiscal 2000 through 2004 equal to the lesser of 500,000 shares or 1% of the
Company's outstanding common stock on the last day of the immediately preceding
fiscal year. The Purchase Plan permits eligible employees to purchase common
stock through payroll deductions at a purchase price of 85% of the lower of the
fair value of the common stock at the beginning or end of each offering period,
generally 24 months in length.

   On March 26, 1999, the Company adopted the 1999 Directors Stock Option Plan
(the Directors Plan) and reserved a total of 600,000 shares of the Company's
common stock for issuance thereunder. Each nonemployee director who becomes a
member of the Board of Directors will initially be granted an option for 33,333
shares of the Company's common stock and, thereafter, an option to purchase an
additional 2,500 shares of the

                                      F-12
<PAGE>

                        PHONE.COM, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                         June 30, 1997, 1998, and 1999

Company's common stock quarterly commencing in the fiscal quarter ending
September 30, 2000. Options granted under the Directors Plan vest immediately.
The exercise price of the options granted under the Directors Plan is equal to
the fair value of the Company's common stock on the date of grant.

   (d) Stock-Based Compensation

   The Company uses the intrinsic-value method in accounting for its employee
stock-based compensation plans. Accordingly, no compensation cost has been
recognized for any of its stock options granted or restricted stock sold
because the exercise price of each option or purchase price of each share of
restricted stock equaled or exceeded the fair value of the underlying common
stock as of the grant date for each stock option or purchase date of each
restricted stock share, except for stock options granted and restricted stock
sold from October 1997 through March 1999. With respect to the stock options
granted and restricted stock sold from October 1997 to March 1999, the Company
recorded deferred stock compensation of $2,437,000 for the difference at the
grant or issuance date between the exercise price of each stock option granted
or purchase price of each restricted share sold and the fair value of the
underlying common stock. This amount is being amortized on an accelerated basis
over the vesting period, generally four to five years, consistent with the
method described in FASB Interpretation No. 28. Had compensation costs been
determined in accordance with SFAS No. 123 for all of the Company's stock-based
compensation plans, net loss and basic and diluted net loss per share would
have been as follows (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                    Year ended June 30,
                                                ------------------------------
                                                  1997      1998       1999
                                                --------  ---------  ---------
<S>                                             <C>       <C>        <C>
Net loss:
  As reported.................................. $ (7,991) $ (10,623) $ (20,763)
  Pro forma.................................... $ (8,003) $ (10,656) $ (22,139)
Basic and diluted net loss per share:
  As reported.................................. $  (1.67) $   (2.03) $   (2.98)
  Pro forma.................................... $  (1.68) $   (2.04) $   (3.18)
</TABLE>

   The fair value of each option was estimated on the date of grant using the
minimum value method prior to the IPO and the Black-Scholes option pricing
model after the IPO, with no expected dividends and the following weighted-
average assumptions:
<TABLE>
<CAPTION>
                                                   Year ended June 30,
                                             ----------------------------------
                                                1997        1998        1999
                                             ----------  ----------  ----------
<S>                                          <C>         <C>         <C>
Expected life............................... 3.84 years  3.23 years  3.17 years
Risk-free interest rate.....................       6.50%       5.55%       5.38%
Volatility..................................         --          --          54%
</TABLE>

   The fair value of purchase rights granted under the Purchase Plan is
estimated on the date of grant using the Black-Scholes option pricing model
with the following weighted-average assumptions for grants in the year ended
June 30, 1999: no expected dividends; expected volatility of 80%; risk-free
interest rate of 5.26%; and expected life of 1.25 years. The weighted-average
fair value of purchase rights granted under the Purchase Plan during 1999 was
$6.24 per share.

                                      F-13
<PAGE>

                        PHONE.COM, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                         June 30, 1997, 1998, and 1999


   A summary of the status of the Company's options under the Plans, is as
follows (in thousands, except per share data):

<TABLE>
<CAPTION>
                                             Year ended June 30,
                              -----------------------------------------------------
                                    1997              1998              1999
                              ----------------- ----------------- -----------------
                                      Weighted-         Weighted-         Weighted-
                                       average           average           average
                                      exercise          exercise          exercise
                              Shares    price   Shares    price   Shares    price
                              ------  --------- ------  --------- ------  ---------
<S>                           <C>     <C>       <C>     <C>       <C>     <C>
Outstanding at beginning of
 year.......................    646     $0.11   2,071     $0.28   2,877    $ 1.00
Granted.....................  1,630      0.34   1,422      1.73   2,338     11.89
Forfeited...................   (112)     0.26    (213)     0.30    (220)     1.72
Exercised...................    (93)     0.13    (403)     0.22    (244)     1.16
                              -----             -----             -----
Outstanding at end of year..  2,071      0.28   2,877      1.00   4,751      6.35
                              =====             =====             =====
Options exercisable at end
 of year....................    235      0.15     385      0.28   1,009      1.58
                              =====             =====             =====
Weighted-average fair value
 of options granted during
 the year with exercise
 prices equal to fair value
 at date of grant...........             0.07              0.06              7.77
Weighted-average fair value
 of options granted during
 the year with exercise
 prices less than fair value
 at date of grant...........               --              1.82              0.32
</TABLE>

   As of June 30, 1999, the range of exercise prices and weighted-average
remaining contractual life of outstanding options were as follows (number of
options in thousands):

<TABLE>
<CAPTION>
                          Options outstanding         Options exercisable
                   --------------------------------- ---------------------
                                Weighted-
                                 average
                                remaining  Weighted-             Weighted-
       Range of                contractual  average   Number of   average
       exercise      Number       life     exercise    shares    exercise
        prices     outstanding   (years)     price   exercisable   price
      -----------  ----------- ----------- --------- ----------- ---------
      <S>          <C>         <C>         <C>       <C>         <C>
      $ 0.05-0.60     1,614       7.70      $ 0.34        783     $ 0.32
        1.20-2.10        64       8.81        1.76         14       1.57
        2.48-3.38     1,227       9.14        2.63         78       2.48
         7.25           242       9.68        7.25        101       7.25
         12.00          281       9.81       12.00         33      12.00
         16.00        1,323       9.95       16.00         --         --
                      -----                             -----
                      4,751       8.94        6.35      1,009       1.58
                      =====                             =====
</TABLE>

5. Leases

   In fiscal 1998, the Company entered into a noncancelable operating lease for
its facilities expiring in June 2005. As of June 30, 1999, the Company has a
letter of credit collateralized by a certificate of deposit in the amount of
$686,000, included in deposits and other assets in the accompanying
consolidated balance sheet as of June 30, 1999, related to the new facility
lease. The Company has an additional noncancelable operating lease for its
previous facility, which expires in April 2001. However, the Company has
entered into a sublease for this facility, which also expires in April 2001.

                                      F-14
<PAGE>

                        PHONE.COM, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                         June 30, 1997, 1998, and 1999


   In June 1999, the Company entered into an amendment to its noncancelable
operating lease for its facilities to add additional facilities and extend the
expiration date to May 2006.

   Future minimum lease payments under noncancelable operating leases, net of
sublease payments, as of June 30, 1999, are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                           Net
                                                      Minimum  Minimum   minimum
   Year ending                                         lease   sublease   lease
   June 30,                                           payments payments  payments
   -----------                                        -------- --------  --------
   <S>                                                <C>      <C>       <C>
   2000.............................................. $  2,736 $  (722)  $ 2,014
   2001..............................................    2,926    (401)    2,525
   2002..............................................    2,613      --     2,613
   2003..............................................    2,686      --     2,686
   2004..............................................    2,758      --     2,758
   Thereafter........................................    3,599      --     3,599
                                                      -------- -------   -------
                                                      $ 17,318 $(1,123)  $16,195
                                                      ======== =======   =======
</TABLE>

   Rent expense for the years ended June 30, 1997, 1998, and 1999, was
approximately $451,000, $307,000, and $1,212,000, respectively.

6. Income Taxes

   The differences between the income tax expense computed at the federal
statutory rate and the Company's tax provision for all periods presented
primarily relate to net operating losses not benefited. Income tax expense for
the year ended June 30, 1999, relates to foreign withholding taxes.

   The individual components of the Company's deferred tax assets are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                            Years ended June
                                                                  30,
                                                            -----------------
                                                             1998      1999
                                                            -------  --------
   <S>                                                      <C>      <C>
   Accruals and reserves not deductible for tax purposes... $   146  $    497
   Property and equipment..................................      15       103
   Capitalized start-up expenditures for tax purposes......     406       274
   Net operating loss carryovers...........................   7,600    15,598
   Research and development credit carryforwards...........     666       702
   Foreign tax credit carryforward.........................      --     2,011
                                                            -------  --------
     Total deferred tax assets.............................   8,833    19,185
   Valuation allowance.....................................  (8,833)  (19,185)
                                                            -------  --------
     Net deferred tax assets............................... $    --  $     --
                                                            =======  ========
</TABLE>

   In light of the Company's recent history of operating losses, the Company
has provided a valuation allowance for all of its deferred tax assets as it is
presently unable to conclude that it is more likely than not that the deferred
tax assets will be realized.

   As of June 30, 1999, the Company has a net operating loss carryover for
federal and California income tax purposes of approximately $36,000,000. In
addition, the Company had federal and California research and

                                      F-15
<PAGE>

                        PHONE.COM, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                         June 30, 1997, 1998, and 1999

development credit carryforwards of approximately $400,000 and $303,000,
respectively. The Company's federal net operating loss and research and
development credit carryforwards will expire in the year 2011 through 2019 if
not utilized. The Company's California net operating loss carryforwards will
expire in the year 2004. The state research and development credit can be
carried forward indefinitely. The Company also has a foreign tax credit
carryforward of $2,011,000, which expires in the year 2004.

   Federal and California tax laws impose substantial restrictions on the
utilization of net operating loss and tax credit carryforwards in the event of
an "ownership change" as defined in Internal Revenue Code, Section 382. If the
Company has an ownership change, the Company's ability to utilize the above
mentioned carryforwards could be significantly reduced.

7. Geographic, Segment, and Significant Customer Information

   During 1999, the Company adopted the provision of SFAS No. 131, Disclosures
about Segments of an Enterprise and Related Information. SFAS No. 131
establishes standards for the reporting by public business enterprises of
information about operating segments, products and services, geographic areas,
and major customers. The method for determining what information to report is
based on the way that management organizes the operating segments within the
Company for making operational decisions and assessments of financial
performance.

   The Company's chief operating decision maker is considered to be the
Company's Chief Executive Officer (CEO). The CEO reviews financial information
presented on a consolidated basis accompanied by disaggregated information
about revenues by geographic region and by product for purposes of making
operating decisions and assessing financial performance. Therefore, the Company
operates in a single operating segment: software that enables the delivery of
Internet-based services to mass-market wireless telephones and related
services. The disaggregated information reviewed on a product basis by the CEO
is as follows (in thousands):

<TABLE>
<CAPTION>
                                                              Years ended June
                                                                     30,
                                                             -------------------
                                                             1997  1998   1999
                                                             ---- ------ -------
   <S>                                                       <C>  <C>    <C>
   Revenue:
     UP.Link Server Suite................................... $187 $1,335 $ 6,636
     UP.Browser.............................................  105    870   4,514
     Consulting services....................................   --     --   2,292
                                                             ---- ------ -------
                                                             $292 $2,205 $13,442
                                                             ==== ====== =======
</TABLE>

   The Company markets its products primarily from its operations in the United
States. International sales are primarily to customers in Asia Pacific and
Europe. Information regarding the Company's revenues in different geographic
regions is as follows (in thousands):
<TABLE>
<CAPTION>
                                                              Years ended June
                                                                     30,
                                                             -------------------
                                                             1997  1998   1999
                                                             ---- ------ -------
   <S>                                                       <C>  <C>    <C>
   North America............................................ $272 $1,220 $ 4,515
   Europe...................................................   20    513   4,317
   Asia Pacific.............................................   --    472   4,610
                                                             ---- ------ -------
                                                             $292 $2,205 $13,442
                                                             ==== ====== =======
</TABLE>


                                      F-16
<PAGE>

                        PHONE.COM, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                         June 30, 1997, 1998, and 1999

   Significant customer information is as follows:
<TABLE>
<CAPTION>
                                   Percent of total revenue         Percent of
                                   ------------------------            total
                                    Years ended June 30,             accounts
                                  ==============================   receivable at
                                    1997       1998       1999     June 30, 1999
                                    ----       ----       ----     -------------
   <S>                            <C>        <C>        <C>        <C>
   Customer A....................       20%        22%        17%        --
   Customer B....................       --         18%         6%        --
   Customer C....................       30%        --         --         --
   Customer D....................       19%         1%        --         --
   Customer E....................       10%         2%        --         --
   Customer F....................       --          2%        10%         2%
</TABLE>

   Revenues aggregating 41%, 37%, and 43% of total revenues for the years ended
June 30, 1997, 1998, and 1999, respectively, were generated from customers who
are also stockholders of the Company, and whose ownership percentages ranged
from 0.6% to 3.3% as of June 30, 1999.

                                      F-17
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors and Stockholders of
Phone.com, Inc.

   In our opinion, the accompanying statement of assets acquired and
liabilities assumed and the related statement of operations and of cash flows
present fairly, in all material respects, the financial position of the WAP
business of APiON at March 31, 1999 and the results of its operations and cash
flows for the period from May 1, 1998 (inception) through March 31, 1999 in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of APiON's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
auditing standards generally accepted in the United Kingdom, which are
substantially consistent with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.

PricewaterhouseCoopers
Belfast, United Kingdom
26 October 1999

                                      F-18
<PAGE>

                             WAP BUSINESS OF APiON

                            STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                                                                     May 1, 1998
                                                                     (inception)
                                                                         to
                                                                      March 31,
                                                                        1999
                                                                     -----------
                                                                       $000's
<S>                                                                  <C>
Operating expenses:
  Salaries..........................................................      370
  Depreciation......................................................      143
  Government grants.................................................     (124)
  Other identifiable overhead costs.................................      260
  Allocated overhead costs..........................................      435
                                                                       ------
    Total operating expenses........................................    1,084
Tax expenses........................................................      147
                                                                       ------
Net operating expenses..............................................    1,231
                                                                       ======
</TABLE>


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

                                      F-19
<PAGE>

                             WAP BUSINESS OF APiON

              STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED

<TABLE>
<CAPTION>
                                                                         As at
                                                                       March 31,
                                                                         1999
                                                                       ---------
                                                                        $000's
<S>                                                                    <C>
                                ASSETS
Cash..................................................................   1,414
Accounts receivable...................................................   3,062
Capitalised software development costs................................     180
Plant and equipment, net..............................................     321
                                                                         -----
                                                                         4,977
                                                                         =====
                             LIABILITIES
Current liabilities:
  Accounts payable....................................................   1,431
  Amounts due under capital leases....................................      31
  Bank loans..........................................................      53
                                                                         -----
    Total current liabilities.........................................   1,515
                                                                         -----
Non current liabilities:
  Amounts due under capital leases....................................       3
  Bank loans..........................................................      78
  Deferred government grants..........................................      96
  Deferred taxation...................................................     147
                                                                         -----
    Total non current liabilities.....................................     324
                                                                         -----
    Total liabilities.................................................   1,839
                                                                         -----
    Net assets acquired...............................................   3,138
                                                                         =====
</TABLE>


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

                                      F-20
<PAGE>

                             WAP BUSINESS OF APiON

                              CASH FLOW STATEMENT

<TABLE>
<CAPTION>
                                                                  May 1, 1998
                                                                (inception)  to
                                                                   March 31,
                                                                      1999
                                                                ---------------
                                                                    $000's
<S>                                                             <C>
Operating activities:
  Net operating expenses.......................................     (1,231)
  Depreciation.................................................        143
  Amortization of government grants............................        (35)
  Changes in WAP operating assets and liabilities:
    Increase in accounts payable...............................        197
    Increase in deferred tax liabilities.......................        147
                                                                    ------
      Net cash outflow from operating activities...............       (779)
                                                                    ------
Investing activities:
  Capitalised software development costs.......................       (180)
  Purchase of plant and equipment..............................       (401)
  Government grants received...................................        131
                                                                    ------
      Net cash outflow from investing activities...............       (450)
                                                                    ------
Financing activities:
  Cash proceeds from bank loans................................        220
  Cash repaid against bank loans...............................        (89)
  Cash repaid against capital leases...........................        (29)
  Contribution of cash from the Services business..............      2,541
                                                                    ------
      Net cash provided by financing activities................      2,643
                                                                    ------
Net increase in cash...........................................      1,414
Balance at May 1, 1998.........................................         --
                                                                    ------
Balance at March 31, 1999......................................      1,414
                                                                    ======

Supplemental cash flow disclosures:
  Contribution of accounts receivable by the Services business
   to WAP......................................................      3,062
  Accounts payable transferred to WAP..........................     (1,234)
  Fixed assets acquired under capital leases...................        (63)
  Interest paid................................................          8
</TABLE>



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

                                      F-21
<PAGE>

                             WAP BUSINESS OF APiON

                       NOTES TO THE FINANCIAL STATEMENTS


1. Description of business

   APiON was incorporated in the United Kingdom in May 1995 to provide computer
software consulting services. Its WAP business was established in May 1998 to
develop wireless Internet products for sale to world wide telecommunications
service providers.

2. Accounting policies

   Basis of Presentation

   The activities referred to above were carried out jointly by APiON Limited
and by its related company, incorporated in the Republic of Ireland, APiON
Telecoms Limited (jointly referred to as "APiON").

   The operations of APiON consisted of the WAP business ("WAP"), and other
trading activities (the "Services business"). In conjunction with the
acquisition of WAP the trading activities associated with the Services business
have been spun off to the common shareholders of APiON. Please refer to the
Subsequent Events note for a discussion of the impact of this on WAP.

   Although APiON began research and development on WAP in 1998 it did not
commence commercial marketing of it until after March 31, 1999. As a result
there were no WAP revenues in the period to that date.

   The Statement of Operations reflects the direct operating expenses for WAP,
for which APiON maintained separate accounting information. Of APiON's total
operating costs of $8,852,000, $6,688,000 can be specifically identified with
the respective businesses. Of the residual total overhead costs, mainly
consisting of management and administration salaries, and property and
recruitment costs, $435,000 has been allocated to the WAP business on the basis
of the respective head counts of each business. Management believes that the
allocations described above provide a reasonable basis of allocating corporate
overhead costs.

   The Statement of Assets Acquired and Liabilities Assumed of WAP as at March
31, 1999 reflects the assets acquired and liabilities acquired assumed by
Phone.com in the transaction discussed in note 8. Since WAP had no revenue-
generating activities prior to March 31, 1999, the accounts receivable and
certain trade payables shown in the Statement of Assets Acquired and
Liabilities Assumed relate to the Services business, but have been included
since they were acquired by Phone.com in conjunction with its acquisition of
WAP.

   Development Stage Enterprise

   Since WAP has not commenced commercial operations, WAP is considered a
development stage enterprise as defined by Financial Accounting Standards Board
Opinion No. 7, Accounting and Reporting by Development Stage Enterprises. The
deficit accumulated in the development stage from May 1998 to March 31, 1999 is
$1,231,000.

   Financial Instruments and Concentration of Credit Risk

   The carrying value of WAP's financial instruments, including cash, accounts
receivable, bank loans and amounts due under capital leases, approximates fair
value. Financial instruments that subject WAP to concentrations of credit risk
consist primarily of trade accounts receivable.

   The receivables relate to the sale of services by the Services business,
principally to leading mobile telephone operators and manufacturers. Credit
risk is concentrated in the United Kingdom. As part of the ordinary course of
its business, the management of APiON performed credit evaluations of its
customers' financial condition and did not require collateral from its
customers. APiON has had no write-offs of accounts receivable and, based on its
evaluation of its accounts receivable collectibility and customer
creditworthiness, has recorded no allowance for doubtful accounts receivable.


                                      F-22
<PAGE>

                             WAP BUSINESS OF APiON

                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)


   Research and Development

   Research and development costs are expensed as incurred until technological
feasibility has been established. Until January 1999, WAP's software was under
development and had not yet achieved technological feasibility and,
accordingly, only development costs incurred subsequent to that date have been
capitalised.

   Income taxes

   Income taxes are accounted for under the asset and liability method as if
WAP was filing a separate return. Deferred tax assets and liabilities are
recognised for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognised in income in the
period that includes the enactment date. Valuation allowances are established
when necessary to reduce deferred tax assets to the amounts expected to be
recovered.

   Tangible fixed assets

   The cost of tangible fixed assets is their purchase cost, together with any
incidental costs of acquisition. Depreciation is calculated so as to write off
the cost of tangible fixed assets, less their estimated residual values, on a
straight-line basis over the expected useful economic lives of the assets
concerned. The annual rate used for this purpose is 33% per annum.

   Capital leases

   Leasing agreements, which transfer to WAP substantially all the benefits and
risks of ownership of an asset are treated as if the asset had been purchased
outright. The assets are included in fixed assets and the capital element of
the leasing commitments is shown as obligations under capital leases. Assets
held under capital leases are depreciated over the shorter of the lease terms
and the useful lives of equivalent owned assets.

   Government grants

   Revenue grants against revenue expenditure are credited to profit and loss
in the same period as the related expenditure is incurred.

   Grants against capital expenditure are taken to deferred income and credited
to profit and loss on the same basis as depreciation is charged on the related
assets. These grants are repayable to the government agency concerned in the
event that the relevant assets are disposed of, or cease to be used for the
purpose of the trade, within four years of the receipt of the grant. In light
of the carve-out of certain fixed assets as described in the Subsequent Event
note, management of APiON and Phone.com have met with the government agency
concerned. Agreement has been reached that the related grants will not be
repayable, and that the shareholders of APiON rather than WAP will assume the
liability to repay the grants relating to the carve-out fixed assets in the
circumstances of any subsequent disposal or failure to use them for the purpose
intended.

   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.


                                      F-23
<PAGE>

                             WAP BUSINESS OF APiON

                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)

   Comprehensive income

   WAP has no material components of other comprehensive income (loss) for all
periods presented.

3. Related party transactions

   During the period presented WAP purchased services from companies with
common shareholders and directors. WAP paid $38,455 during the period for
services rendered, at what the directors considered to be commercial market
prices.

4. Capitalised Software Development Costs

<TABLE>
<CAPTION>
                                                                          $000's
                                                                          ------
   <S>                                                                    <C>
   Cost:
     At May 1, 1998......................................................   --
     Additions...........................................................  180
                                                                           ---
     At March 31, 1999...................................................  180
                                                                           ===
</TABLE>

   There was no amortisation of the capitalised software development costs in
the period from May 1, 1998 to March 31, 1999 as no sales of WAP were made
before March 31, 1999.

5. Plant and Equipment

<TABLE>
<CAPTION>
                                                               Fixtures &
                                                     Computers  Fittings  Total
                                                     --------- ---------- ------
                                                      $000's     $000's   $000's
   <S>                                               <C>       <C>        <C>
   Cost:
     At May 1, 1998.................................     --        --       --
     Additions......................................    392        72      464
     Disposals......................................     --       (13)     (13)
                                                        ---       ---      ---
     At March 31, 1999..............................    392        59      451
                                                        ===       ===      ===

   Depreciation:
     At May 1, 1998.................................     --        --       --
     Disposals......................................     --       (13)     (13)
     Charge for the period..........................    112        31      143
                                                        ---       ---      ---
     At March 31, 1999..............................    112        18      130
                                                        ---       ---      ---
   Net book value at March 31, 1999.................    280        41      321
                                                        ===       ===      ===
</TABLE>

                                      F-24
<PAGE>

                             WAP BUSINESS OF APiON

                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)


6. Bank Loans and Capital Leases

   WAP has a series of bank loan facilities to finance the purchase of fixed
assets, each repayable in monthly installments over a three-year period at a
rate of interest of UK bank base rate plus 1.5% (currently 6.75% per annum). In
addition it has capital lease facilities, the final repayment on which falls
due in the year to March 2001. The repayment schedule for the total bank loan
and capital lease balances due at March 31,1999, was:

<TABLE>
<CAPTION>
                                                                   Bank  Capital
                                                                  Loans  leases
                                                                  ------ -------
                                                                  $000's $000's
   <S>                                                            <C>    <C>
   Repayable in the year to March, 31:
     2000                                                           53      34
     2001                                                           49       3
     2003                                                           29      --
                                                                   ---     ---
   Total minimum payments........................................  131      37
   Less amounts representing interest............................   --       3
                                                                   ---     ---
                                                                   131      34
                                                                   ===     ===
</TABLE>

7. Deferred taxation

<TABLE>
<CAPTION>
                                                                         As at
                                                                       March 31,
                                                                         1999
                                                                       ---------
                                                                        $000's
   <S>                                                                 <C>
   Fixed asset temporary differences..................................    147
   Net operating loss carry forwards..................................    373
   Less: Valuation allowance..........................................   (373)
                                                                         ----
   Total deferred tax liabilities, net................................    147
                                                                         ====
</TABLE>

   Management has evaluated the positive and negative evidence impacting the
realizability of the deferred tax assets that consist principally of net
operating losses carried forward in the UK. Management has considered the short
operating history of WAP as well as the uncertainty associated with the
Company's future profitability and has concluded that as of March 31, 1999,
such deferred tax assets are less likely than not to be realized in the
foreseeable future. Therefore management has recorded a full valuation
allowance against deferred tax assets. Management evaluates the positive and
negative evidence on a quarterly basis.

8. Subsequent events

   Subsequent to March 31, 1999, ownership of APiON Limited and APiON Telecoms
Limited was consolidated under a new United Kingdom company, also called APiON
Telecoms Limited, which was the statutory entity to be acquired by Phone.com.

   On October 26, 1999, all of the outstanding capital stock of APiON Telecoms
Limited was acquired by Phone.com, Inc. in exchange for 1,196,513 shares of
Phone.com common stock.

   Immediately prior to the acquisition, APiON spun off its Services business
to the vendor shareholders. The transfer involved certain employees, and fixed
assets employed in the Services business that had a net book value of $937,000
at March, 31 1999, and related asset finance liabilities of $573,000. The
Services business was transferred to the vendor shareholders for a cash payment
of $3,254,000, made in addition to the payment made for its book value of net
assets acquired.

                                      F-25
<PAGE>

                                PHONE.COM, INC.

          UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

   The following unaudited pro forma combined condensed financial statements
are presented for illustrative purposes only and are not necessarily indicative
of the combined financial position or results of operations for future periods
or the results of operations or financial position that actually would have
been realized had Phone.com and the WAP Business of APiON been a combined
company during the specified periods. The unaudited pro forma combined
condensed financial statements, including the related notes, are qualified in
their entirety by reference to, and should be read in conjunction with, the
historical financial statements and related notes thereto of Phone.com and the
WAP Business of APiON, included elsewhere in this filing. The following
unaudited pro forma combined condensed financial statements give effect to the
acquisition of APiON by Phone.com using the purchase method of accounting. The
pro forma combined condensed financial statements are based on the respective
historical audited financial statements and related notes of Phone.com and the
WAP Business of APiON.

   The pro forma adjustments are preliminary and based on management's
estimates of the value of the tangible and intangible assets acquired. The
actual adjustments may differ materially from those presented in these pro
forma financial statements. A change in the pro forma adjustments would result
in a reallocation of the purchase price affecting the value assigned to the
long-term tangible and intangible assets or, in some circumstances, resulting a
charge to the statement of operations. The effect of these changes on the
statement of operations will depend on the nature and amounts of the assets and
liabilities adjusted. See note 1(b) to the pro forma combined condensed
financial statements.

   The unaudited pro forma combined condensed balance sheet assumes that the
acquisition took place on June 30, 1999, and combines Phone.com's audited June
30, 1999 consolidated balance sheet with the WAP Business of APiON's audited
March 31, 1999 statement of assets acquired and liabilities assumed. The pro
forma combined condensed statement of operations assumes the acquisition took
place on July 1, 1998, and combines Phone.com's audited consolidated statement
of operations for the year ended June 30, 1999, with the WAP Business of
APiON's audited statement of operations for the year ended March 31, 1999.

                                      F-26
<PAGE>

                                PHONE.COM, INC.

              UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
                                 (In thousands)

<TABLE>
<CAPTION>
                                                June 30, 1999
                                    -----------------------------------------
                                       Historical          Pro forma
                                    ----------------- -----------------------
                                    Phone.com  APiON  Adjustments    Combined
                                    ---------  ------ -----------    --------
<S>                                 <C>        <C>    <C>            <C>
              ASSETS
Current assets:
  Cash and cash equivalents........ $ 79,803   $1,414  $(11,711)(b)  $ 69,506
  Short-term investments...........   33,283       --                  33,283
  Accounts receivable..............   20,474    3,062                  23,536
  Prepaid expenses and other
   current assets..................      865      180                   1,045
                                    --------   ------  --------      --------
    Total current assets...........  134,425    4,656   (11,711)      127,370
Property and equipment, net........    3,014      321                   3,335
Deposits and other assets..........    1,494       --                   1,494
Goodwill and other intangible
 assets, net.......................       --       --   244,537 (b)   244,537
                                    --------   ------  --------      --------
                                    $138,933   $4,977  $232,826      $376,736
                                    ========   ======  ========      ========
   LIABILITIES AND STOCKHOLDERS'
               EQUITY
Current liabilities:
  Current portion of equipment loan
   and capital lease obligations... $    424   $   84  $               $  508
  Accounts payable.................    1,749    1,431                   3,180
  Accrued expenses.................    7,173      243                   7,416
  Deferred revenue.................   36,797       --                  36,797
                                    --------   ------  --------      --------
    Total current liabilities......   46,143    1,758        --        47,901
Equipment loans and capital lease
 obligations, less current
 portion...........................      498       81                     579
                                    --------   ------  --------      --------
    Total liabilities..............   46,641    1,839        --        48,480
                                    --------   ------  --------      --------
Stockholders' equity:
  Common stock.....................       31                  1 (b)        32
  Additional paid-in capital.......  136,209       --     5,095 (a)
                                                        235,963 (b)   377,267
  Deferred stock compensation......   (1,318)      --    (5,095)(a)    (6,413)
  Treasury stock...................     (196)      --                    (196)
  Notes receivable from
   stockholders....................     (484)      --                    (484)
  Accumulated (deficit)/net assets
   acquired........................  (41,950)   3,138    (3,138)(b)   (41,950)
                                    --------   ------  --------      --------
    Total stockholders' equity
     (deficit).....................   92,292    3,138   232,826       328,256
                                    --------   ------  --------      --------
                                    $138,933   $4,977  $232,826      $376,736
                                    ========   ======  ========      ========
</TABLE>

   See accompanying notes to unaudited pro forma combined condensed financial
                                   statements

                                      F-27
<PAGE>

                                PHONE.COM, INC.

         UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
                     (In thousands, except per share data)

<TABLE>
<CAPTION>
                                         Year ended June 30, 1999
                                  --------------------------------------------
                                     Historical             Pro forma
                                  ------------------  ------------------------
                                  Phone.com   APiON   Adjustments    Combined
                                  ---------  -------  -----------    ---------
<S>                               <C>        <C>      <C>            <C>
Revenues:
  License.......................  $  5,229   $    --   $             $   5,229
  Maintenance and support
   services.....................     5,921        --                     5,921
  Consulting services...........     2,292        --                     2,292
                                  --------   -------   --------      ---------
    Total revenues..............    13,442        --         --         13,442
                                  --------   -------   --------      ---------
Cost of revenues:
  License.......................       371        --                       371
  Maintenance and support
   services.....................     3,022        --                     3,022
  Consulting services...........     1,146        --                     1,146
                                  --------   -------   --------      ---------
    Total cost of revenues......     4,539        --         --          4,539
                                  --------   -------   --------      ---------
    Gross profit................     8,903        --         --          8,903
                                  --------   -------   --------      ---------
Operating expenses:
  Research and development......    13,082       432                    13,514
  Sales and marketing...........    10,840       227                    11,067
  General and administrative....     4,432       425                     4,857
  Stock-based compensation......     1,011        --      3,821 (c)      4,832
  Amortization of goodwill and
   other intangible assets......        --        --     81,512 (d)     81,512
                                  --------   -------   --------      ---------
    Total costs and expenses....    29,365     1,084     85,333        115,782
                                  --------   -------   --------      ---------
    Operating loss..............   (20,462)   (1,084)   (85,333)      (106,879)
Interest income, net............     1,803        --                     1,803
                                  --------   -------   --------      ---------
    Loss before taxes...........   (18,659)   (1,084)   (85,333)      (105,076)
Income taxes....................     2,104       147                     2,251
                                  --------   -------   --------      ---------
    Net loss....................  $(20,763)  $(1,231)  $(85,333)     $(107,327)
                                  ========   =======   ========      =========
Basic and diluted net loss per
 share..........................  $  (2.98)                          $  (13.15)
                                  ========                           =========
Shares used to compute basic and
 diluted net loss per share.....     6,966                1,196 (e)      8,162
                                  ========                           =========
</TABLE>

   See accompanying notes to unaudited pro forma combined condensed financial
                                   statements

                                      F-28
<PAGE>

                                PHONE.COM, INC.

      NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

(1) Unaudited Pro Forma Combined Condensed Balance Sheet

   On October 26, 1999, Phone.com acquired all of the outstanding capital stock
of APiON in exchange for 1,196,513 shares of common stock of Phone.com. In
addition, the Company agreed to issue cash and common stock to current and
former employees of APiON. Former employees of APiON will receive consideration
totaling up to approximately $6.5 million of which one third is payable in cash
(approximately $2.2 million) upon the closing of this offering and two thirds
is payable in common stock of the Company on the one year anniversary of the
closing of the acquisition of APiON and is subject to forfeiture upon the
occurrence of certain events. Current employees of APiON will receive
consideration totaling up to approximately $7.6 million of which one third is
payable in cash upon the closing of this offering and one third is payable in
common stock of the Company on each of the first two anniversaries of the
closing of the acquisition of APiON contingent upon continued employment. The
actual number of Phone.com shares to be issued to current and former employees
of APiON will depend upon the fair value of Phone.com common stock on the
distribution date.

  Common stock issued to former shareholders and cash paid to current and
former employees of APiON at the closing of the acquisition is included in the
purchase price. Contingent common stock issuable in the future to former
employees of APiON will be treated as contingent consideration. The then fair
value of the common stock that is issued to the former employees of APiON upon
the satisfaction of certain future events will be added to goodwill and
amortized over the remaining useful life. Common stock issuable in the future
to current employees of APiON is recorded as deferred stock-based compensation.

   The pro forma combined condensed balance sheet as of June 30, 1999 gives
effect to the merger as if it had occurred on June 30, 1999.

   The following adjustment has been reflected in the unaudited pro forma
combined condensed balance sheet:

     (a) To record deferred stock compensation related to common stock of the
  Company to be issued to current employees of APiON as follows (in
  thousands):

<TABLE>
   <S>                                                                  <C>
   Total consideration................................................. $ 7,642
   Less: cash payable at closing.......................................  (2,547)
                                                                        -------
     Deferred stock-based compensation................................. $ 5,095
                                                                        =======
</TABLE>

     The common stock payable to current employees of APiON is payable in
  equal installments on each of the first two anniversaries of the closing,
  contingent upon continued employment.

     (b) To record common stock issued to stockholders of APiON and record
  applicable purchase accounting entries.

     Under purchase accounting, the total purchase price will be allocated to
  APiON's assets and liabilities based on their relative fair values.
  Allocations are subject to valuations as of the date of the consummation of
  the acquisition. The amounts and components of the estimated purchase price
  along with the preliminary allocation of the estimated purchase price to
  assets purchased are as follows (in thousands):

<TABLE>
   <S>                                                                <C>
   Cash (including $2,547 payable to current employees of APiON)..... $  4,711
   Common stock......................................................  235,964
   Estimated transaction costs.......................................    7,000
                                                                      --------
     Total purchase price............................................ $247,675
                                                                      ========

   Cash and cash equivalents......................................... $  1,414
   Other current assets..............................................    3,242
   Property and equipment............................................      321
   Liabilities assumed...............................................   (1,839)
                                                                      --------
     Book value of net tangible assets of APiON......................    3,138
   Goodwill and other intangible assets..............................  244,537
                                                                      --------
     Net assets acquired............................................. $247,675
                                                                      ========
</TABLE>


                                      F-29
<PAGE>

                                PHONE.COM, INC.

                NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
                       FINANCIAL STATEMENTS--(Continued)

     The actual allocation of the purchase price will depend upon the
  composition of APiON's net assets on the closing date and Phone.com's
  evaluation of the fair value of the net assets as of the date indicated.
  Consequently, the actual allocation of the purchase price could differ from
  that presented above.

(2) Unaudited Pro Forma Combined Condensed Statements of Operations

   The pro forma combined condensed statements of operations give effect to the
acquisition as if it had occurred at the beginning of the period presented.

   The following adjustments have been reflected in the unaudited pro forma
combined condensed statement of operations:

     (c) To reflect the accelerated amortization of deferred stock-based
  compensation associated with common stock of the Company to be issued to
  current employees of APiON in a manner consistent with Financial Accounting
  Standards Board Interpretation No. 28. The accelerated amortization results
  in 75% of the deferred stock-based compensation being amortized in the
  first year after the closing of the acquisition of APiON.

     (d) Adjustment to record the amortization of goodwill and intangible
  assets resulting from the preliminary allocation of the APiON purchase
  price. The pro forma adjustment assumes goodwill and other intangible
  assets will be amortized on a straight-line basis over an estimated life of
  three years resulting in one-third of the total goodwill and intangible
  assets of $244.5 million being amortized in the first year after the
  closing of the acquisition of APiON. The ultimate lives assigned will be
  determined at the date of acquisition based on the facts and circumstances
  existing at that date.

     (e) To reflect the shares to be issued as consideration for the
  acquisition.

                                      F-30
<PAGE>

                                     [Logo]
<PAGE>

                                    PART II

                    INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

   The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of common stock being registered. All amounts are estimates
except the SEC registration fee and the NASD filing fee and the Nasdaq
National Market listing fee.

<TABLE>
<CAPTION>
                                                                        Amount
                                                                      to be Paid
                                                                      ----------
<S>                                                                   <C>
SEC registration fee.................................................  $219,675
NASD filing fee......................................................    30,500
Nasdaq National Market listing fee...................................    17,500
Printing and engraving expenses......................................     *
Legal fees and expenses..............................................     *
Accounting fees and expenses.........................................     *
Blue Sky qualification fees and expenses.............................     5,000
Transfer Agent and Registrar fees....................................    10,000
Miscellaneous fees and expenses......................................     *
                                                                       --------
  Total..............................................................     *
                                                                       ========
</TABLE>
--------
*  To be filed by amendment.

Item 14. Indemnification of Directors and Officers

   Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities, including reimbursement for expenses
incurred, arising under the Securities Act of 1933, as amended. Our amended
and restated certificate of incorporation provides for indemnification of our
directors and officers to the maximum extent permitted by the Delaware General
Corporation Law, and our bylaws provide for indemnification of our directors,
officers, employees and other agents to the maximum extent permitted by the
Delaware General Corporation Law. In addition, we have entered into
indemnification agreements with our directors and officers containing
provisions which are in some respects broader than the specific
indemnification provisions contained in the Delaware General Corporation Law.
The indemnification agreements may require us, among other things, to
indemnify our directors against certain liabilities that may arise by reason
of their status or service as directors, other than liabilities arising from
willful misconduct of culpable nature, to advance their expenses incurred as a
result of any proceeding against them as to which they could be indemnified,
and to obtain directors' insurance if available on reasonable terms. Reference
is also made to Section 7 of the underwriting agreement contained in Exhibit
1.1 hereto, indemnifying our officers and directors against certain
liabilities.

Item 15. Recent Sales of Unregistered Securities

   (a) Since June 30, 1996, we have issued and sold, without payment of any
selling commission to any person, except as noted below, the following
unregistered securities:

    (1) Prior to completion of our initial public offering, we effected a
        two-for-three reverse stock split of our outstanding convertible
        preferred and common stock in which each three outstanding shares
        of convertible preferred stock was split into two shares of
        convertible preferred stock and each three outstanding shares of
        common stock was split into two shares of common stock.

    (2) In October 1996, we issued and sold shares of Series C preferred
        stock convertible into an aggregate of 2,538,766 shares of common
        stock to six venture capital funds and three strategic partners for
        an aggregate purchase price of $9,674,983.

                                     II-1
<PAGE>

    (3) In January and February 1998, we issued and sold shares of Series D
        preferred stock convertible into an aggregate of 6,444,877 shares
        of common stock to 19 venture capital funds, five strategic
        partners and two individuals for an aggregate purchase price of
        $32,748,354. Deutsche Morgan Grenfell acted as placement agent in
        connection with this sale, for which it received usual and
        customary placement agent fees.

    (4) In March 1999, we issued and sold shares of Series E preferred
        stock convertible into an aggregate of 2,458,543 shares of common
        stock to a total of one venture capital fund, five strategic
        partners and one individual investor for an aggregate purchase
        price of $17,799,114. Credit Suisse First Boston Corporation acted
        as placement agent in connection with this sale, for which it
        received usual and customary placement agent fees.

    (5) As of June 30, 1999, 1,725,872 shares of common stock had been
        issued to our employees and consultants upon exercise of options or
        pursuant to restricted stock purchase agreements and 4,751,189
        shares of common stock were issuable upon exercise of outstanding
        options under our 1995 and 1996 stock plans.

    (6)  In October 1999 we issued an aggregate of 1,196,513 shares of
         common stock to 13 former shareholders of APiON Telecoms Ltd. in
         connection with our acquisition of the outstanding share capital
         of APiON.

   (b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).

   The issuance described in Item 15(a)(1) was exempt from registration under
Section 2(3) of the Securities Act on the basis that such transaction did not
involve a "sale" of securities. The issuances described in Items 15(a)(2)
through 15(a)(4) and 15(a)(6) to be exempt from registration under the
Securities Act in reliance upon Section 4(2) thereof as transactions by an
issuer not involving any public offering. The issuances described in Items
15(a)(5) were deemed to be exempt from registration under the Securities Act in
reliance upon Rule 701 promulgated thereunder in that they were offered and
sold either pursuant to written compensatory benefit plans or pursuant to a
written contract relating to compensation, as provided by Rule 701. In
addition, such issuances were deemed to be exempt from registration under
Section 4(2) of the Securities Act as transactions by an issuer not involving
any public offering. The recipients of securities in each such transaction
represented their intentions to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends where affixed to the securities issued in such
transactions. All recipients had adequate access, through their relationships
with us, to information about Phone.com.

Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits

<TABLE>
 <C>     <S>
  1.1+++  Form of Underwriting Agreement.
  3.3*    Amended and Restated Bylaws of the Registrant.
  3.5*    Amended and Restated Certificate of Incorporation of Registrant.
  4.1*    Form of the Registrant's Common Stock Certificate.
  5.1+++  Opinion of Venture Law Group, a Professional Corporation.
 10.1*    Form of Indemnification Agreement.
 10.2*    1995 Stock Plan, as amended, and form of stock option agreement and
          restricted stock purchase agreement.
 10.3*    1996 Stock Plan and form of stock option agreement and restricted
          stock purchase agreement.
 10.4*    1999 Employee Stock Purchase Plan and form of subscription agree-
          ment.
 10.5*    1999 Directors' Stock Option Plan and form of stock option agree-
          ment.
 10.6*    Fourth Amended and Restated Investor Rights Agreement dated March
          12, 1999.
 10.7*    Voting Agreement dated January 23, 1998 and amendment thereto.
 10.8*    Lease Agreement dated March 10, 1998 for offices at 800 Chesapeake
          by and between Registrant and Seaport Centre Associates, LLC.
</TABLE>

                                      II-2
<PAGE>

<TABLE>
 <C>      <S>
 10.9*     Form of Change of Control Severance Agreement between the Regis-
           trant and the Registrant's Named Executive Officers.
 10.10*   Relocation Agreement dated December 23, 1996 between the Registrant
          and Charles Parrish.
 10.11*    Warrant Agreements to Purchase Series C Preferred Stock dated May
           29, 1997 and July 17, 1997 by and between the Registrant and
           Comdisco, Inc.
 10.12*    Letter Agreement dated August 18, 1997 with Malcolm Bird.
 10.13*    Incentive Compensation Plan for Malcolm Bird dated January 27,
           1999.
 10.14*+   OEM Master License Agreement with RSA Data Security dated December
           2, 1996.
 10.15*    Incentive Compensation Plan for Maurice Jeffery dated March 19,
           1999.
 10.16*+   Software License and Support Agreement dated as of May 1, 1996,
           with AT&T Wireless Services, Inc., as amended.
 10.17*+   Client License Agreement dated as of January 1, 1999, with
           Matsushita Communication Industrial Co., Ltd.
 10.18++   First Amendment to Lease Agreement dated June 17, 1999, by and be-
           tween Registrant and Seaport Centre Associates, LLC.
 10.19+++  Agreement by and between Registrant and the former shareholders of
           APiON Telecoms Ltd. dated as of October 11, 1999.
 10.20+++  Registration Rights Agreement by and between Registrant and the
           former shareholders of APiON Telecoms Ltd. dated as of October 26,
           1999.
 21        Subsidiaries of the Registrant.
 23.1      Consent of KPMG LLP, Independent Accountants.
 23.2      Consent of PricewaterhouseCoopers.
 23.3+++   Consent of Counsel (included in Exhibit 5.1).
 24.1      Power of Attorney (see page II-5).
 27.1++    Financial Data Schedule.
</TABLE>
--------
*  Incorporated herein by reference to the exhibit filed with the Company's
   Registration Statement on Form S-1 (Commission File No. 333-75219).
+  Confidential treatment has been granted by the Securities and Exchange
   Commission with respect to certain information in these exhibits.
++  Incorporated herein by reference to the exhibit filed with the Company's
    Annual Report on Form 10-K for the fiscal year ended June 30, 1999.
+++  To be filed by amendment.

(b) Financial Statement Schedules

   Financial statement schedules are omitted because the information called
for is not required or is shown either in the consolidated financial
statements or the notes thereto.

Item 17. Undertakings

   The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

   Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.

                                     II-3
<PAGE>

   The undersigned Registrant hereby undertakes that:

   (1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1), or (4), or
497(h) under the Act shall be deemed to be a part of this Registration
Statement as of the time it was declared effective.

   (2) For the purpose of determining any liability under the Act, each post-
effective amendment that contains a form of prospectus shall be deemed to be a
new registration statement relating to the securities offered therein, and
this offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

                                     II-4
<PAGE>

                                  SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Registration Statement on Form S-1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Redwood City, State of California, on October 28, 1999.

                                          Phone.Com, Inc.

                                                      /s/ Alan Black
                                          By: _________________________________
                                                         Alan Black
                                                Vice President, Finance and
                                                       Administration,
                                                Chief Financial Officer and
                                                          Treasurer

                               POWER OF ATTORNEY

   KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Alain Rossmann and Alan Black, and each
one of them, his attorneys-in-fact, each with the power of substitution, for
him in any and all capacities, to sign any and all amendments to this
Registration Statement (including post-effective amendments) and any
registration statement for the same offering pursuant to Rule 462(b) under the
Securities Act, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said attorneys-
in-fact, or his substitute or substitutes, may do or cause to be done by
virtue hereof. This Power of Attorney may be signed in several counterparts.

   Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-1 has been signed by the following persons in
the capacities and on the dates indicated:

<TABLE>
<CAPTION>
             Signature                           Title                    Date
             ---------                           -----                    ----
<S>                                  <C>                           <C>
    /s/ Alain Rossmann               Chairman and Chief Executive   October 28, 1999
____________________________________  Officer (Principal
   Alain Rossmann                     Executive Officer)
      /s/ Alan Black                 Vice President, Finance and    October 28, 1999
____________________________________  Administration, Chief
   Alan Black                         Financial Officer and
                                      Treasurer (Principal
                                      Financial and Accounting
                                      Officer)
    /s/ Roger Evans                  Director                       October 28, 1999
____________________________________
   Roger Evans
    /s/ Charles Parrish              Executive Vice President and   October 28, 1999
____________________________________  Director
   Charles Parrish
      /s/ Reed Hundt                 Director                       October 28, 1999
____________________________________
   Reed Hundt
     /s/ David Kronfeld              Director                       October 28, 1999
____________________________________
   David Kronfeld
    /s/ Andrew Verhalen              Director                       October 28, 1999
____________________________________
   Andrew Verhalen
</TABLE>

                                     II-5
<PAGE>

                                 Exhibit Index

<TABLE>
<CAPTION>
 Exhibit
  Number                               Description
 -------  --------------------------------------------------------------------
 <C>      <S>
  1.1+++   Form of Underwriting Agreement.
<CAPTION>
 <C>      <S>
  3.3*     Amended and Restated Bylaws of the Registrant.
  3.5*     Amended and Restated Certificate of Incorporation of Registrant.
  4.1*     Form of the Registrant's Common Stock Certificate.
  5.1+++   Opinion of Venture Law Group, a Professional Corporation.
 10.1*     Form of Indemnification Agreement.
 10.2*     1995 Stock Plan, as amended, and form of stock option agreement and
           restricted stock purchase agreement.
 10.3*     1996 Stock Plan and form of stock option agreement and restricted
           stock purchase agreement.
 10.4*     1999 Employee Stock Purchase Plan and form of subscription agree-
           ment.
 10.5*     1999 Directors' Stock Option Plan and form of stock option agree-
           ment.
 10.6*     Fourth Amended and Restated Investor Rights Agreement dated March
           12, 1999.
 10.7*     Voting Agreement dated January 23, 1998 and amendment thereto.
 10.8*     Lease Agreement dated March 10, 1998 for offices at 800 Chesapeake
           by and between Registrant and Seaport Centre Associates, LLC.
 10.9*     Form of Change of Control Severance Agreement between the Regis-
           trant and the Registrant's Named Executive Officers.
 10.10*   Relocation Agreement dated December 23, 1996 between the Registrant
          and Charles Parrish.
 10.11*    Warrant Agreements to Purchase Series C Preferred Stock dated May
           29, 1997 and July 17, 1997 by and between the Registrant and
           Comdisco, Inc.
 10.12*    Letter Agreement dated August 18, 1997 with Malcolm Bird.
 10.13*    Incentive Compensation Plan for Malcolm Bird dated January 27,
           1999.
 10.14*+   OEM Master License Agreement with RSA Data Security dated December
           2, 1996.
 10.15*    Incentive Compensation Plan for Maurice Jeffery dated March 19,
           1999.
 10.16*+   Software License and Support Agreement dated as of May 1, 1996,
           with AT&T Wireless Services, Inc., as amended.
 10.17*+   Client License Agreement dated as of January 1, 1999,
           with Matsushita Communication Industrial Co., Ltd.
 10.18++   First Amendment to Lease Agreement dated June 17, 1999, by and be-
           tween Registrant and Seaport Centre Associates, LLC.
 10.19+++  Agreement by and between Registrant and the former shareholders of
           APiON Telecoms Ltd. dated as of October 11, 1999.
 10.20+++  Registration Rights Agreement by and between Registrant and the
           former shareholders of APiON Telecoms Ltd. dated as of October 26,
           1999.
 21        Subsidiaries of the Registrant.
 23.1      Consent of KPMG LLP, Independent Accountants.
 23.2      Consent of PricewaterhouseCoopers.
 23.3+++   Consent of Counsel (included in Exhibit 5.1).
 24.1      Power of Attorney (see page II-5).
 27.1++    Financial Data Schedule.
</TABLE>
--------
*  Incorporated herein by reference to the exhibit filed with the Company's
   Registration Statement on Form S-1 (Commission File No. 333-75219).
+  Confidential treatment has been granted by the Securities and Exchange
   Commission with respect to certain information in these exhibits.
++  Incorporated herein by reference to the exhibit filed with the Company's
    Annual Report on Form 10-K for the fiscal year ended June 30, 1999.
+++  To be filed by amendment.
[{"type": "S-1", "sequence": "1", "description": "FORM S-1", "secsgml_size_bytes": 414590}]
{"company-data": {"conformed-name": "PHONE COM INC", "cik": "0001082506", "assigned-sic": "7372", "irs-number": "943219054"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-89879", "film-number": "99736503"}, "business-address": {"street1": "800 CHESAPEAKE DRIVE", "city": "REDWOOD CITY", "state": "CA", "zip": "94063", "phone": "6505620200"}, "mail-address": {"street1": "800 CHESAPEAKE DRIVE", "city": "REDWOOD CITY", "state": "CA", "zip": "94063"}, "former-company": {"former-conformed-name": "UNWIRED PLANET INC", "date-changed": "19990324"}}
As filed with the Securities and Exchange Commission on October 28, 1999
                                                    Registration No. 333-
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC 20549
                               ----------------
                                   FORM S-1
                            REGISTRATION STATEMENT
                                     Under
                          The Securities Act of 1933
                               ----------------

                                PHONE.COM, INC.

            (Exact Name of Registrant as Specified in Its Charter)
                               ----------------
Delaware                  3661                       94-3219054
 (State or Other
 Jurisdiction of   (Primary Standard Industrial        (I.R.S. Employer
 Incorporation or
  Organization)     Classification Code Number)      Identification Number)
----------------
                             800 Chesapeake Drive
                        Redwood City, California 94063
                                (650) 562-0200
  (Address, Including Zip Code, and Telephone Number, Including Area Code, of
                   Registrant's Principal Executive Offices)
                               ----------------
                                Alain Rossmann
                     Chairman and Chief Executive Officer
                                Phone.com, Inc.
                             800 Chesapeake Drive
                        Redwood City, California, 94063
                                (650) 562-0200
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
                             of Agent for Service)

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

                                  Copies to:
           Mark A. Medearis                       Mark A. Bertelsen
             Edward Y. Kim                         Jose F. Macias
            Anita Vasudevan                           Jon Avina
           Venture Law Group                        Elise Brinck
      A Professional Corporation          Wilson Sonsini Goodrich & Rosati
          2775 Sand Hill Road                 Professional Corporation
         Menlo Park, CA 94025                    650 Page Mill Road
                               ----------------  Palo Alto, CA 94304

   Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
                               ----------------

   If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
   If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
   If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
   If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
   If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

                        CALCULATION OF REGISTRATION FEE

---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Proposed
                                                     Proposed       Maximum
                                       Amount        Maximum       Aggregate      Amount Of
     Title Of Each Class Of            To Be      Offering Price    Offering     Registration
   Securities To Be Registered     Registered(1)   Per Unit(2)      Price(2)         Fee
---------------------------------------------------------------------------------------------
Common stock, par value $.001...      3,795,000      $208.22      $790,194,900     $219,675
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
(1) Includes 495,000 shares of common stock issuable upon exercise of the
    Underwriters' over-allotment option.
(2) Estimated solely for the purpose of computing the amount of the
    registration fee, based on the average of the high and low prices for the
    Company's Common Stock as reported on The Nasdaq National Market on
    October 27, 1999 in accordance with Rule 457 under the Securities Act.

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

   The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained herein is subject to completion or amendment. A         +
+registration statement relating to these securities has been filed with the   +
+Securities and Exchange Commission. These securities may not be sold nor may  +
+offers to buy be accepted prior to the time the registration statement        +
+becomes effective. This prospectus shall not constitute an offer to sell or   +
+the solicitation of an offer to buy nor shall there be any sale of these      +
+securities in any State in which such offer, solicitation or sale would be    +
+unlawful prior to the registration or qualification under the securities laws +
+of any such State.                                                            +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
                  SUBJECT TO COMPLETION DATED OCTOBER 28, 1999

                                3,300,000 Shares

                                     [LOGO]

                                Phone.com, Inc.

                                  Common Stock

                                   --------

  We are selling 1.0 million shares of common stock and the selling
stockholders are selling 2.3 million shares of common stock. We will not
receive any of the proceeds from shares sold by the selling stockholders.

  The underwriters have an option to purchase a maximum of 495,000 additional
shares to cover over-allotments of shares.

  Our shares are listed for trading on the Nasdaq National Market under the
symbol "PHCM." On October 27, 1999, the last reported sales price for our
common stock on the Nasdaq National Market was $205.75 per share.

  Investing in the common stock involves risks. See "Risk Factors" starting on
page 8.
Underwriting              Proceeds to
                                 Price to Discounts and Proceeds to   Selling
                                  Public   Commissions   Phone.com  Stockholders
                                 -------- ------------- ----------- ------------
Per Share.......................
Total...........................
The shares of common stock will be delivered on or about      , 1999.

  Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

Credit Suisse First Boston                                 Goldman, Sachs & Co.

Hambrecht & Quist

                               Robertson Stephens

                                                      U.S. Bancorp Piper Jaffray

                   The date of this prospectus is     , 1999
TABLE OF CONTENTS
Page
                                      ----
Prospectus Summary..................    4
Risk Factors........................    8
Special Note Regarding Forward-
 Looking Statements.................   17
Use of Proceeds.....................   18
Price Range of Common Stock.........   18
Dividend Policy.....................   18
Additional Information About
 Phone.com..........................   18
Capitalization......................   19
Dilution............................   20
Selected Consolidated Financial
 Data...............................   21
Management's Discussion and Analysis
 of Financial Condition and Results
 of Operations......................   22
Page
                                      ----
Business............................   35
Management..........................   51
Certain Transactions................   61
Principal and Selling Stockholders..   63
Description of Capital Stock........   65
Shares Eligible for Future Sale.....   67
Underwriting........................   69
Notice to Canadian Residents........   71
Legal Matters.......................   72
Experts.............................   72
Where You Can Find More
 Information........................   72
Index to Consolidated Financial
 Statements.........................  F-1
3
PROSPECTUS SUMMARY

   This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all the information you
should consider before buying shares in this offering. You should read the
entire prospectus carefully.

                                Phone.com, Inc.

   We are a leading provider of software that enables the delivery of Internet-
based services to mass-market wireless telephones. Using our software, network
operators can provide Internet-based services to their wireless subscribers,
and wireless telephone manufacturers can turn their mass-market wireless
telephones into mobile Internet appliances. Wireless subscribers thus have
access to Internet- and corporate intranet-based services, including email,
news, stocks, weather, travel and sports. In addition, subscribers have access
via their wireless telephones to network operators' intranet-based telephony
services, which may include over-the-air activation, call management, billing
history information, pricing plan subscription and voice message management.
Our software platform consists of the UP.Link Server Suite, which is installed
on network operators' systems, and UP.Browser, which is embedded in wireless
telephones.

   In September 1999, we announced MyPhone, our mobile Internet portal platform
that enables network operators to rapidly deploy branded portal sites for their
wireless subscribers. With MyPhone, network operators can provide their
subscribers with a customized set of information services and applications that
are optimized for the mobile user, thereby enhancing subscriber loyalty and
capturing new revenue opportunities.

   We were a pioneer in the convergence of the Internet and mobile telephony.
To provide a worldwide standard for the delivery of Internet-based services
over mass-market wireless telephones, we formed the Wireless Application
Protocol Forum in close cooperation with co-founders Ericsson, Motorola and
Nokia. In April 1998, the WAP Forum published technical specifications for
application development and product interoperability, substantial portions of
which are based on our technology and on Internet standards. Over 150 leading
network operators, telecommunications device and equipment manufacturers, and
software and services companies worldwide have joined the WAP Forum as of
September 1999.

   We focus on selling our UP.Link Server Suite and related technical support
to network operators to enable them to offer a variety of wireless Internet-
based services to their subscribers. The UP.Link Server Suite includes (1) a
means of exchanging data between the Internet and mass-market wireless
telephones, commonly referred to as a gateway; (2) a service platform that
performs subscriber management and service provisioning functions and
communicates with the network operator's customer care and billing systems; and
(3) Internet-based wireless applications such as email and personal information
management software. As of August 1999, 31 network operators have licensed our
software and have commenced or announced commercial service or are in market or
laboratory trials. Our current network operator customers include:

   . AT&T Wireless Services             .  Mannesmann Mobilfunk (D2)
   . Bell Atlantic Mobile               .  Nextel Communications
   . GTE Wireless                       .  Southern LINC
   . SFR/CEGETEL                        .  Shinsegi Telecom
   . DDI Corporation                    .  US West
   . IDO Corporation                    .  Telstra Corporation
   . Bell Mobility                      .  Deutsche Telekom Mobilnet GmbH (T-
   . LG Telecom                            Mobile)
   . Omnitel                            .  France Telecom Mobile
   . Sprint PCS                         .  Telecom Italia Mobile

                                       4
The UP.Browser is a browser and messaging software product that is
specifically designed for mass-market wireless telephones. We license our
UP.Browser software to wireless telephone manufacturers, who embed UP.Browser
into their products. In order to encourage these manufacturers to include
UP.Browser in their wireless telephone models, no per-unit royalty is charged.
As of September 1999, 25 wireless telephone manufacturers have licensed
UP.Browser, including:

   . Alcatel                            .  Neopoint
   . Bosch                              .  Nokia
   . Casio                              .  Panasonic (Matsushita)
   . Hitachi                            .  Philips
   . Hyundai Electronics                .  Qualcomm
   . IGS                                .  Sagem
   . Kyocera                            .  Samsung Electronics
   . LG Information & Communications    .  Sharp
   . Mitsubishi                         .  Siemens
   . Motorola                           .  Sony
   . NEC                                .  Toshiba
                                        .  3Com (Palm Computing division)

In addition, Ericsson has announced that it will introduce wireless telephones
that will be interoperable with the UP.Link Server Suite.

   Our principal executive offices are located at 800 Chesapeake Drive, Redwood
City, California 94063, and our telephone number is (650) 562-0200.

Recent Developments

   In October 1999, we completed the acquisition of the outstanding share
capital of APiON Telecoms Ltd., a company based in Belfast, Northern Ireland.
APiON is a provider of WAP software products to GSM network operators in Europe
and has expertise in GSM Intelligent Networks, wireless data and WAP
technology. APiON has commercial relationships with a number of GSM network
operators in Europe including Swisscom and Sonora Ltd. In connection with this
transaction, we acquired all of the outstanding shares of capital stock of
APiON in exchange for an aggregate of approximately 1,196,513 shares of our
common stock. A portion of these shares are held in escrow for a period of one
year to indemnify us against potential liabilities of APiON and its former
shareholders. In addition, we also agreed to issue cash and common stock with
an aggregate value of up to $14.1 million to current and former employees of
APiON. A more detailed description of the transaction is provided in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

   On October 21, 1999, we announced our operating results for the quarter
ended September 30, 1999. Total revenues were $8.5 million for the quarter,
while net loss was $4.9 million, or $0.16 per share. Deferred revenue was $38.4
million as of September 30, 1999. As of September 30, 1999, we had cash and
short-term investments of $117.8 million, total assets of $136.8 million and
total stockholders' equity of $87.6 million.

                                       5
The Offering
Common stock offered............... 3,300,000 shares (comprised of 1,000,000
                                    shares offered by Phone.com and 2,300,000
                                    shares offered by selling stockholders, of
                                    which 500,000 shares are being offered by
                                    former APiON shareholders)
Common stock to be outstanding
 after this offering............... 32,213,094 shares
                                    Working capital and general corporate
Use of proceeds.................... purposes
Nasdaq National Market symbol...... PHCM
This table is based on shares outstanding as of June 30, 1999. This table
excludes:

  .  4,751,189 shares subject to outstanding options at a weighted average
     exercise price of $6.35 per share as of June 30, 1999,
  .  31,486 shares issuable upon exercise of outstanding warrants at a
     weighted average exercise price of $3.81 per share as of June 30, 1999,
  .  an aggregate of 4,136,826 shares available for future issuance under our
     1995 Stock Plan, 1996 Stock Plan, 1999 Directors' Stock Option Plan and
     1999 Employee Stock Purchase Plan as of June 30, 1999,
  .  1,196,513 shares issued in October 1999 to former APiON shareholders in
     connection with the APiON acquisition.

                                       6
Summary Consolidated Financial Data
Year Ended June 30,
                                           -----------------------------------------------
                            December 16,                                      1999
                          1994 (Inception)                             -------------------
                          to June 30, 1995  1996     1997      1998     Actual   Pro Forma
                          ---------------- -------  -------  --------  --------  ---------
                                (In thousands, except per share data)
Consolidated Statements
 of Operations Data:
Revenues:
  License...............      $    --      $    --  $    80  $    522  $  5,229  $   5,229
  Maintenance and
   support services.....           --           --      212     1,683     5,921      5,921
  Consulting services...           --           --       --        --     2,292      2,292
                              -------      -------  -------  --------  --------  ---------
    Total revenues......           --           --      292     2,205    13,442     13,442
                              -------      -------  -------  --------  --------  ---------
Gross profit (loss).....           --           --      (61)    1,047     8,903      8,903
Stock-based
 compensation...........           --           --       --       108     1,011      4,832
Amortization of goodwill
 and other intangible
 assets.................           --           --       --        --        --     81,512
Other operating
 expenses...............          103        2,666    8,394    12,544    28,354     29,438
                              -------      -------  -------  --------  --------  ---------
Operating loss..........         (103)      (2,666)  (8,455)  (11,605)  (20,462)  (106,879)
                              -------      -------  -------  --------  --------  ---------
Net loss................      $  (103)     $(2,470) $(7,991) $(10,623) $(20,763) $(107,327)
                              =======      =======  =======  ========  ========  =========
Basic and diluted net
 loss per share.........      $ (0.02)     $ (0.53) $ (1.67) $  (2.03) $  (2.98) $  (13.15)
                              =======      =======  =======  ========  ========  =========
Shares used in computing
 basic and diluted net
 loss per share.........        4,671        4,704    4,776     5,221     6,966      8,162
                              =======      =======  =======  ========  ========  =========
June 30, 1999
                                                ------------------------------
                                                 Actual  Pro Forma As Adjusted
                                                -------- --------- -----------
Consolidated Balance Sheet Data:
Cash, cash equivalents and short-term
 investments................................... $113,086 $102,789     $
Total assets...................................  138,933  376,736
Equipment loan and capital lease obligations,
 less current portion..........................      498      579       579
Total stockholders' equity.....................   92,292  328,256
--------
See Note 1 of Notes to Consolidated Financial Statements for an explanation of
the method used to determine the number of shares used to compute the net loss
per share amounts.

   The pro forma consolidated statements of operations data for the year ended
June 30, 1999 and the pro forma consolidated balance sheet data as of June 30,
1999 summarized above have been derived from the unaudited Pro Forma Combined
Condensed Financial Statements contained elsewhere in this prospectus. The pro
forma combined condensed balance sheet data assumes that the APiON acquisition
took place on June 30, 1999 and combines Phone.com's consolidated balance sheet
data as of June 30, 1999 with the WAP Business of APiON's statement of assets
acquired and liabilities assumed data as of March 31, 1999. The pro forma
combined condensed statement of operations data assumes the acquisition took
place on July 1, 1998 and combines Phone.com's consolidated statement of
operations data for the year ended June 30, 1999 with the WAP Business of
APiON's statement of operations data for the year ended March 31, 1999.

   The as adjusted numbers in the table above are adjusted to give effect to
receipt of the net proceeds from the sale of shares of common stock offered by
us at the assumed public offering price of $    per share after deducting the
underwriting discounts and commissions and estimated offering expenses payable
by us. See also "Use of Proceeds," "Capitalization" and "Underwriting."

   Except as otherwise noted herein, all information in this prospectus assumes
no exercise of the underwriters' over-allotment option. In addition, the
information in this prospectus does not give effect to our proposed two-for-one
stock split, which will be effected through a stock dividend to all
stockholders of record as of October 29, 1999.

                                       7
RISK FACTORS

   You should carefully consider the following risks before making an
investment decision. The risks described below are intended to highlight risks
that are specific to us and are not the only ones that we face. Additional
risks and uncertainties, such as those that generally apply to our industry or
to companies that have recently undertaken initial public offerings, also may
impair our business operations. You should also refer to the other information
set forth in this prospectus, including the discussions set forth in "Special
Note Regarding Forward-Looking Statements," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business," as
well as our consolidated financial statements and the related notes. You should
rely only on the information contained in this document. We have not authorized
anyone to provide you with information that is different. The information in
this document may only be accurate on the date of this document.

   This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in the forward-looking statements as a result of factors that are
described below and elsewhere in this prospectus. See "Special Note Regarding
Forward-Looking Statements."

Our future profitability is uncertain because we have a limited operating
history.

   Because we commenced operations in December 1994 and commercially released
our first products in June 1996, we only have a limited operating history on
which you can base your evaluation of our business. We may not continue to grow
or achieve profitability. We face a number of risks encountered by early stage
companies in the wireless telecommunications and Internet software industries,
including:

  . our need for network operators to launch and maintain commercial services
    utilizing our products;
  . the uncertainty of market acceptance of commercial services utilizing our
    products;
  . our substantial dependence on products with only limited market
    acceptance to date;
  . our need to introduce reliable and robust products that meet the
    demanding needs of network operators and wireless telephone
    manufacturers;
  . our need to expand our marketing, sales, consulting and support
    organizations, as well as our distribution channels;
  . our ability to anticipate and respond to market competition;
  . our need to manage expanding operations; and
  . our dependence upon key personnel.

   Our business strategy may not be successful, and we may not successfully
address these risks. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview."

We may not achieve or sustain our revenue or profit goals.

   Because we expect to continue to incur significant product development,
sales and marketing, and administrative expenses, we will need to generate
significant revenues to become profitable and sustain profitability on a
quarterly or annual basis. We may not achieve or sustain our revenue or profit
goals, and our ability to do so depends on a number of factors outside of our
control, including the extent to which:

  . there is market acceptance of commercial services utilizing our products;
  . our competitors announce and develop, or lower the prices of, competing
    products; and
  . our strategic partners dedicate resources to selling our products and
    services.

   As a result, we may not be able to increase revenue or achieve profitability
on a quarterly or annual basis. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview."

                                       8
Our quarterly operating results are subject to significant fluctuations, and
our stock price may decline if we do not meet expectations of investors and
analysts.

   Our quarterly revenues and operating results are difficult to predict and
may fluctuate significantly from quarter to quarter due to a number of factors,
some of which are outside of our control. These factors include, but are not
limited to:

  . delays in market acceptance or implementation by our customers of our
    products and services;

  . changes in demand by our customers for additional products and services;

  . our lengthy sales cycle, our concentrated target market and the
    potentially substantial effect on total revenues that may result from the
    gain or loss of business from each incremental network operator customer;

  . introduction of new products or services by us or our competitors;

  . delays in developing and introducing new products and services;

  . changes in our pricing policies or those of our competitors or customers;

  . changes in our mix of domestic and international sales;

  . risks inherent in international operations;

  . changes in our mix of license, consulting and maintenance and support
    services revenues;

  . changes in accounting standards, including standards relating to revenue
    recognition, business combinations and stock-based compensation; and

  . the impact of year 2000 concerns on the timing of capital expenditures by
    network operators and their launches of commercial services utilizing our
    products and services.

   Our sales cycle, which is lengthy--typically between nine and twelve
months--contributes to fluctuations in our quarterly operating results. Many
factors outside our control add to the lengthy education and customer approval
process for our products. For example, many of our prospective customers have
neither budgeted expenses for the provision of Internet-based services to
wireless subscribers nor specifically dedicated personnel for the procurement
and implementation of our products and services. Further, the emerging and
evolving nature of the market for Internet-based services via wireless
telephones may lead prospective customers to postpone their purchasing
decisions. In addition, general concerns regarding year 2000 compliance may
further delay purchase decisions by prospective customers.

   Most of our expenses, such as employee compensation and lease payments for
facilities and equipment, are relatively fixed. In addition, our expense levels
are based, in part, on our expectations regarding future revenues. As a result,
any shortfall in revenues relative to our expectations could cause significant
changes in our operating results from quarter to quarter. Due to the foregoing
factors, we believe period to period comparisons of our revenue levels and
operating results are not meaningful. You should not rely on our quarterly
revenues and operating results to predict our future performance.

We may be unable to successfully integrate APiON into our business or achieve
the expected benefits of the APiON acquisition.

   Our acquisition of APiON, which was completed in October 1999, will require
integrating the business and operations of APiON with our company. We may not
be able to successfully assimilate the personnel, operations and customers of
APiON into our business. Additionally, we may fail to achieve the anticipated
synergies from the acquisition of APiON, including marketing, product
development, distribution and other operational synergies.

                                       9
The integration process may further strain our existing financial and
managerial controls and reporting systems and procedures. This may result in
the diversion of management and financial resources from our core business
objectives. In addition, we are not experienced in managing significant
facilities or operations in geographically distant areas. Finally, we cannot be
certain that we will be able to retain APiON's key employees.

Our sales cycle is long, and our stock price could decline if sales are delayed
or cancelled.

   Quarterly fluctuations in our operating performance are exacerbated by our
sales cycle, which is lengthy, typically between nine and twelve months, and
unpredictable. Because our products represent a significant capital investment
for our customers, we spend a substantial amount of time educating customers
regarding the use and benefits of our products and they in turn spend a
substantial amount of time performing internal reviews and obtaining capital
expenditure approvals before purchasing our products. Any delay in sales of our
products could cause our quarterly operating results to vary significantly from
projected results, which could cause our stock price to decline. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Results of Operations."

Our success depends on acceptance of our products and services by network
operators and their subscribers.

   From inception through June 30, 1999, 34% of our total cumulative revenues
have come from fees paid to us by wireless telephone manufacturers that embed
our browser in their wireless telephones. However, our future success depends
on our ability to increase revenues from sales of our UP.Link Server Suite
software and related services to new and existing network operator customers
and on market acceptance of new products and services, and we may not be able
to achieve widespread adoption by these customers. This dependence is
exacerbated by the relatively small number of network operators worldwide. To
date, we currently have only a limited number of network operator customers,
including AT&T Wireless Services, Bell Atlantic Mobile, DDI, GTE Wireless, IDO,
SFR/Cegetel and Sprint, that have implemented and deployed services based on
our products. We cannot assure you that network operators will widely deploy or
successfully market services based on our products, or that large numbers of
subscribers will use these services. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Overview."

The market for the delivery of Internet-based services through wireless
telephones is rapidly evolving, and we may not be able to adequately address
this market.

   The market for the delivery of Internet-based services through wireless
telephones is rapidly evolving and is characterized by an increasing number of
market entrants that have introduced or developed, or are in the process of
introducing or developing, products that facilitate the delivery of Internet-
based services through wireless telephones. As a result, the life cycle of our
products is difficult to estimate. We may not be able to develop and introduce
new products, services and enhancements that respond to technological changes
or evolving industry standards on a timely basis, in which case our business
would suffer. In addition, we cannot predict the rate of adoption by wireless
subscribers of these services or the price they will be willing to pay for
these services. As a result, it is extremely difficult to predict the pricing
of these services and the future size and growth rate of this market.

   Our network operator customers face implementation and support challenges in
introducing Internet-based services via wireless telephones, which may slow
their rate of adoption or implementation of the services our products enable.
Historically, network operators have been relatively slow to implement new
complex services such as Internet-based services. In addition, network
operators may encounter greater customer service demands to support Internet-
based services via wireless telephones than they do for their traditional voice
services. We have limited or no control over the pace at which network
operators implement these new services. The failure of network operators to
introduce and support services utilizing our products in a timely and effective
manner could harm our business. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview."

                                       10
To date, we have relied on sales to a small number of customers, some of whom
are our stockholders, and the failure to retain these customers or add new
customers may harm our business.

   To date, a significant portion of our revenues in any particular period has
been attributable to a limited number of customers, comprised primarily of
network operators and wireless telephone manufacturers, some of whom are our
stockholders. We believe that we will continue to depend upon a limited number
of customers for a significant portion of our revenues for each quarter for the
foreseeable future. Any failure by us to capture a significant share of those
customers could materially harm our business. For example, during the fiscal
year ended June 30, 1998, AT&T Wireless Services, which owned approximately
2.5% of our common stock as of June 30, 1999, and Matsushita Communication
Industrial accounted for approximately 22% and 18%, respectively, of our total
revenues. For the fiscal year ended June 30, 1999, AT&T Wireless Services
accounted for approximately 17% of our total revenues, and DDI Corporation,
which owned approximately 0.6% of our common stock as of June 30, 1999,
accounted for approximately 14% of our total revenues. The foregoing
calculations are based on revenues derived from direct and indirect sales to
these customers.

If wireless telephones are not widely adopted for mobile delivery of Internet-
based services, our business could suffer.

   We have focused our efforts on mass-market wireless telephones as the
principal means of delivery of Internet-based services using our products. If
wireless telephones are not widely adopted for mobile delivery of Internet-
based services, our business would suffer materially. Mobile individuals
currently use many competing products, such as portable computers, to remotely
access the Internet and email. These products generally are designed for the
visual presentation of data, while wireless telephones historically have been
limited in this regard. If mobile individuals do not adopt wireless telephones
as a means of accessing Internet-based services, our business would suffer. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview."

If widespread integration of browser technology does not occur in wireless
telephones, our business could suffer.

   Because our current UP.Link Server Suite software offers enhanced features
and functionality that are not currently covered by the specifications
promulgated by the WAP Forum, subscribers currently must use UP.Browser-enabled
wireless telephones in order to fully utilize these features and functionality.
Additionally, we expect that future versions of our UP.Link Server Suite
software will offer features and functionality that are compatible with the
specifications promulgated by the WAP Forum. Our business could suffer
materially if widespread integration of UP.Browser or WAP-compliant third party
browser software in wireless telephones does not occur. Recently, a number of
manufacturers have delayed commercial release of WAP-compliant wireless
telephones, particularly affecting European and other markets based on the GSM
standard. All of our agreements with wireless telephone manufacturers are
nonexclusive, so they may choose to embed a browser other than ours in their
wireless telephones. We may not succeed in maintaining and developing
relationships with telephone manufacturers, and any arrangements may be
terminated early or not renewed at expiration. In addition, wireless telephone
manufacturers may not produce products using UP.Browser in a timely manner and
in sufficient quantities, if at all. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Overview."

Our strategy for the MyPhone service is subject to uncertainties, and we may
not be able to achieve market acceptance of the service.

   In September 1999, we announced our MyPhone service. The MyPhone service
will be used by network operator customers on a trial basis beginning in late
1999. We intend to offer MyPhone as an OEM service to enable network operators
to create branded mobile Internet portals for their subscribers, and we do not
currently intend to develop our own branded portal site. We have limited
experience in developing mobile Internet portals, and we may not be successful
in executing our business strategy for the MyPhone service. The

                                       11
success of MyPhone will depend on a number of factors, including the adoption
of MyPhone by network operators, our ability to establish strong relationships
with content and information service providers, our ability to provide
compelling applications and services through MyPhone and the acceptance by
wireless subscribers of the MyPhone service. Developing these capabilities and
commercializing this service will require us to incur significant additional
expenses, including costs relating to operating the portal, as well as sales
and marketing and research and development expenses. We expect to incur these
costs and expenses in advance of generating revenues from this service.
Furthermore, our business model for MyPhone is new and evolving. Even if we are
successful in executing this strategy, we cannot be certain that our business
model for the MyPhone service will result in significant revenues or
profitability.

The market for our products and services is highly competitive.

   The market for our products and services is becoming increasingly
competitive. The widespread adoption of open industry standards such as the WAP
specifications may make it easier for new market entrants and existing
competitors to introduce products that compete with our software products. In
addition, a number of our competitors, including Nokia, have announced or are
expected to announce enhanced features and functionality as proprietary
extensions to the WAP protocol. Furthermore, some of our competitors, such as
NTT, have introduced or may introduce services based on proprietary wireless
protocols that are not compliant with the WAP specifications.

   We expect that we will compete primarily on the basis of price, time to
market, functionality, quality and breadth of product and service offerings.
Our current and potential competitors include the following:

  . Wireless equipment manufacturers, such as Ericsson and Nokia;
  . Microsoft;
  . Wireless Knowledge, a joint venture of Microsoft and Qualcomm;
  . Systems integrators, such as CMG plc, and software companies, such as
    Oracle Corporation;
  . Wireless network operators, such as NTT DoCoMo; and
  . Providers of Internet software applications and content, electronic
    messaging applications and personal information management software
    solutions.

   In particular, Microsoft Corporation has announced its intention to
introduce products and services that may compete directly with our UP.Link,
UP.Browser and UP.Application products. In addition, Microsoft has announced
that it intends to enable its Windows CE operating system to run on wireless
handheld devices, including wireless telephones, and to develop and market its
own browser for these devices. Furthermore, Nokia is marketing a WAP server to
corporate customers and content providers. This WAP server is designed to
enable wireless telephone subscribers to directly access applications and
services provided by these customers, rather than through gateways provided by
network operators' WAP servers. If Nokia's WAP server is widely adopted by
corporate customers and content providers, it could undermine the need for
network operators to purchase WAP servers. Many of our existing competitors, as
well as potential competitors, have substantially greater financial, technical,
marketing and distribution resources than we do.

   As we enter new markets and introduce new services, such as the MyPhone
service, we will face additional competitors. These competitors may include
telecommunications companies such as Lucent Technologies, traditional Internet
portals such as AOL, InfoSpace, Microsoft and Yahoo!, Internet infrastructure
software companies and several private mobile Internet portal companies. See
"Business--Competition."

Our software products may contain defects or errors, and shipments of our
software may be delayed.

   The software we develop is complex and must meet the stringent technical
requirements of our customers. We must develop our products quickly to keep
pace with the rapidly changing Internet software and telecommunications
markets. Software products and services as complex as ours are likely to
contain undetected errors or defects, especially when first introduced or when
new versions are released. We have in

                                       12
the past experienced delays in releasing some versions of our products until
software problems were corrected. Our products may not be free from errors or
defects after commercial shipments have begun, which could result in the
rejection of our products and damage to our reputation, as well as lost
revenues, diverted development resources, and increased service and warranty
costs, any of which could harm our business. See "Business--Research and
Product Development."

We depend on recruiting and retaining key management and technical personnel
with telecommunications and Internet software experience.

   Because of the technical nature of our products and the dynamic market in
which we compete, our performance depends on attracting and retaining key
employees. In particular, our future success depends in part on the continued
services of each of our current executive officers. We currently maintain key
person life insurance policies for Alain Rossmann, our Chief Executive Officer,
and Charles Parrish, our Executive Vice President. We are seeking to hire a
Vice President of Worldwide Sales and a general manager of the MyPhone service.
Competition for qualified personnel in the telecommunications and Internet
software industries is intense, and finding qualified personnel with experience
in both industries is even more difficult. We believe that there are only a
limited number of persons with the requisite skills to serve in many key
positions, and it is becoming increasingly difficult to hire and retain these
persons. Competitors and others have in the past, and may in the future,
attempt to recruit our employees. See "Business--Employees."

We may fail to support our anticipated growth in operations.

   To succeed in the implementation of our business strategy, we must rapidly
execute our sales strategy and further develop products and expand service
capabilities, while managing anticipated growth by implementing effective
planning and operating processes. If we fail to manage our growth effectively,
our business could suffer materially. To manage anticipated growth, we must:

  . continue to implement and improve our operational, financial and
    management information systems; for example, we are currently in the
    process of implementing Oracle financial software;
  . hire, train and retain additional qualified personnel;
  . continue to expand and upgrade core technologies; and
  . effectively manage multiple relationships with various network operators,
    wireless telephone manufacturers, content providers, applications
    developers and other third parties.

   Our systems, procedures and controls may not be adequate to support our
operations, and our management may not be able to achieve the rapid execution
necessary to exploit the market for our products and services. See "Business--
Employees."

Our success, particularly in international markets, depends in part on our
ability to maintain and expand our distribution channels.

   Our success depends in part on our ability to increase sales of our products
and services through value-added resellers and systems integrators and to
expand our indirect distribution channels. If we are unable to maintain the
relationships that we have with our existing distribution partners, increase
revenues derived from sales through our indirect distribution channels, or
increase the number of distribution partners with whom we have relationships,
then we may not be able to increase our revenues or achieve profitability.

   To date, the majority of our revenues from international markets have
resulted from our direct sales efforts. We expect that network operators in
international markets generally will require that our products and support
services be supplied through value-added resellers and systems integrators.
Thus, we expect that a significant portion of international sales will be made
through value-added resellers and systems integrators, and the success of our
international operations will depend on our ability to maintain productive
relationships with value-added resellers and systems integrators.

   In addition, our agreements with our distribution partners do not restrict
the sale by them of products and services that are competitive with our
products and services, and each of our partners generally can cease

                                       13
marketing our products and services at their option and, in some circumstances,
with little notice and with little or no penalty. See "Business--Sales and
Marketing."

We depend on others to provide content and develop applications for wireless
telephones.

   In order to increase the value to customers of our product platform and
encourage subscriber demand for Internet-based services via wireless
telephones, we must successfully promote the development of Internet-based
applications and content for this market. If content providers and application
developers fail to create sufficient applications and content for Internet-
based services via wireless telephones, our business could suffer materially.
Our success in motivating content providers and application developers to
create and support content and applications that subscribers find useful and
compelling will depend, in part, on our ability to develop a customer base of
network operators and wireless telephone manufacturers large enough to justify
significant and continued investments in these endeavors. See "Business--
Research and Product Development" and "--Sales and Marketing."

If we are unable to integrate our products with third-party technology, such as
network operators' systems, our business may suffer.

   Our products are integrated with network operators' systems and wireless
telephones. If we are unable to integrate our platform products with these
third-party technologies, our business could suffer materially. For example,
if, as a result of technology enhancements or upgrades of these systems or
telephones, we are unable to integrate our products with these systems or
telephones, we could be required to redesign our software products. Moreover,
many network operators use legacy, or custom-made, systems for their general
network management software. Legacy systems are typically very difficult to
integrate with new server software such as our UP.Link Server Suite. We may not
be able to redesign our products or develop redesigned products that achieve
market acceptance. See "Business--Research and Product Development."

An interruption in the supply of software that we license from third parties
could cause a decline in product sales.

   We license technology that is incorporated into our products from third
parties, such as RSA Data Security, Inc. and other companies. Any significant
interruption in the supply of any licensed software could cause a decline in
product sales, unless and until we are able to replace the functionality
provided by this licensed software. We also depend on these third parties to
deliver and support reliable products, enhance their current products, develop
new products on a timely and cost-effective basis, and respond to emerging
industry standards and other technological changes. The failure of these third
parties to meet these criteria could materially harm our business. See
"Business--Research and Product Development."

We may be unable to adequately protect our proprietary rights.

   Our success depends significantly on our ability to protect our proprietary
rights to the technologies used in our products. If we are not adequately
protected, our competitors could use the intellectual property that we have
developed to enhance their products and services, which could harm our
business. We rely on patent protection, as well as a combination of copyright
and trademark laws, trade secrets, confidentiality provisions and other
contractual provisions, to protect our proprietary rights, but these legal
means afford only limited protection. See "Business--Intellectual Property
Rights."

We may be sued by third parties for infringement of their proprietary rights.

   The telecommunications and Internet software industries are characterized by
the existence of a large number of patents and frequent litigation based on
allegations of patent infringement or other violations of intellectual property
rights. As the number of entrants into our market increases, the possibility of
an intellectual property claim against us grows. Any intellectual property
claims, with or without merit, could be time-consuming and expensive to
litigate or settle and could divert management attention from administering our
core business. See "Business--Intellectual Property Rights."

                                       14
International expansion is an important part of our strategy, and this
expansion carries specific risks.

   International sales of products and services accounted for 7%, 44% and 66%
of our total revenues in the years ended June 30, 1997, 1998 and 1999,
respectively. We expect international sales to continue to account for a
significant portion of our revenues, although the percentage of our total
revenues derived from international sales may vary. Risks inherent in our
international business activities include business risks, economic and
political risks, and legal risks. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview" and "Business--Sales
and Marketing."

Our year 2000 compliance efforts may involve significant time and expense, and
uncorrected problems could harm our business.

   Many currently installed computer systems are not capable of distinguishing
21st century dates from 20th century dates. As a result, beginning on January
1, 2000, computer systems and software used by many companies in a wide variety
of industries, including technology, transportation, utilities, finance and
telecommunications, will produce erroneous results or fail unless they have
been modified or upgraded to process date information correctly. Year 2000
compliance efforts may involve significant time and expense, and uncorrected
problems could materially and adversely affect our business. We may face claims
based on year 2000 issues arising from the integration of multiple products,
including ours, within an overall system. Network operators may also cease or
delay purchase and installation of new complex systems, such as our server
software products, as a result of, and during, their own internal year 2000
testing. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Year 2000 Readiness Disclosure."

We may acquire technologies or companies in the future, and these acquisitions
could result in the dilution of our stockholders and disruption of our
business.

   We may acquire technologies or companies in the future. Entering into an
acquisition entails many risks, any of which could materially harm our
business, including:

  . diversion of management's attention from other business concerns;
  . failure to assimilate the acquired company with our pre-existing
    business;
  . potential loss of key employees from either our pre-existing business or
    the acquired business;
  . dilution of our existing stockholders as a result of issuing equity
    securities; and
  . assumption of liabilities of the acquired company.

Our stock price, like that of many companies in the Internet and
telecommunications software industries, may be volatile.

   Since our initial public offering in June 1999, our stock price has
experienced significant volatility. We expect that the market price of our
common stock also will fluctuate in the future as a result of variations in our
quarterly operating results. These fluctuations may be exaggerated if the
trading volume of our common stock is low. In addition, due to the technology-
intensive and emerging nature of our business, the market price of our common
stock may rise and fall in response to:

  . announcements of technological or competitive developments;
  . acquisitions or strategic alliances by us or our competitors;
  . the gain or loss of a significant customer or order; and
  . changes in estimates of our financial performance or changes in
    recommendations by securities analysts.

Our executive officers and directors own a large percentage of our voting stock
and could exert significant influence over matters requiring stockholder
approval.

   Our executive officers and directors and their respective affiliates,
currently own approximately 39% of our outstanding common stock, based on
shares outstanding as of June 30, 1999. Accordingly, these stockholders may, as
a practical matter, be able to exert significant influence over matters
requiring approval by our stockholders, including the election of directors and
the approval of mergers or other business combinations. This concentration
could have the effect of delaying or preventing a change in control.

                                       15
Our certificate of incorporation and bylaws and Delaware law contain provisions
that could discourage a takeover.

   Provisions of our certificate of incorporation and bylaws and Delaware law
may discourage, delay or prevent a merger or acquisition that a stockholder may
consider favorable. These provisions include the following:

  . establishing a classified board in which only a portion of the total
    board members will be elected at each annual meeting;
  . authorizing the board to issue preferred stock;
  . prohibiting cumulative voting in the election of directors;
  . limiting the persons who may call special meetings of stockholders;
  . prohibiting stockholder action by written consent; and
  . establishing advance notice requirements for nominations for election of
    the board of directors or for proposing matters that can be acted on by
    stockholders at stockholder meetings.

   See "Management--Board Composition" and "Description of Capital Stock--Anti-
Takeover Provisions of Delaware Law and Charter Provisions."

                                       16
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

   Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business," and elsewhere in this prospectus are forward-looking
statements made within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934. These statements
involve known and unknown risks, uncertainties, and other factors that may
cause our or our industry's actual results, levels of activity, performance, or
achievements to be materially different from any future results, levels of
activity, performance, or achievements expressed or implied by these forward-
looking statements. These factors are described in "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other sections of this prospectus.

   In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," or "continue" or the negative of these
terms or other comparable terminology.

   Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of forward-
looking statements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform them to actual results.

                                       17
USE OF PROCEEDS

   The net proceeds to us from the sale of the 1,000,000 shares of common stock
offered by us are estimated to be approximately $    million (approximately
$    million if the underwriters' over-allotment option is exercised in full)
based on an assumed public offering price of $    per share and after deducting
the underwriting discounts and commissions and the estimated offering expenses.
We will not receive any portion of the proceeds from the sale of shares of
common stock by the selling stockholders.

   We intend to use the net proceeds of this offering primarily for additional
working capital and other general corporate purposes, including increased sales
and marketing expenditures, increased research and development expenditures and
capital expenditures. We have not yet determined our expected use of these
proceeds. The amounts and timing of these expenditures will vary depending on a
number of factors, including the amount of cash generated by our operations,
competitive and technological developments and the rate of growth, if any, of
our business. We may also use a portion of the net proceeds to acquire
additional businesses, products and technologies, to lease additional
facilities, or to establish joint ventures that we believe will complement our
current or future business. However, we have no specific agreements or
commitments to do so and are not currently engaged in any negotiations for any
material acquisition or joint venture. The amounts that we actually expend for
working capital and other general corporate purposes will vary significantly
depending on a number of factors, including future revenue growth, if any, and
the amount of cash we generate from operations. As a result, we will retain
broad discretion in the allocation of the net proceeds of this offering.
Pending the uses described above, we will invest the net proceeds in short-
term, interest-bearing, investment-grade securities.

                          PRICE RANGE OF COMMON STOCK

   Our common stock has been listed for quotation on the Nasdaq National Market
under the symbol "PHCM" since our initial public offering on June 11, 1999. The
following table shows the high and low sales prices of our common stock as
reported by the Nasdaq National Market for the period indicated.
1999                                                          High     Low
   ----                                                         ------- -------
Quarter ended June 30, 1999 (from June 11, 1999)............ $ 65.56 $ 16.00
   Quarter ended September 30, 1999............................ $185.31 $ 39.63
   Period from October 1, 1999 through October 27, 1999........ $251.25 $149.63
The closing sale price of the common stock as reported on the Nasdaq
National Market on October 27, 1999 was $205.75 per share. As of that date
there were 185 holders of record of the common stock. This does not include the
number of persons whose stock is in nominee or "street name" accounts through
brokers.

                                DIVIDEND POLICY

   We have never paid cash dividends on our common stock. We currently intend
to retain any future earnings to fund the development and growth of our
business. Therefore, we do not currently anticipate paying any cash dividends
in the foreseeable future. In addition, the terms of our current equipment loan
prohibit us from paying dividends without our lender's consent.

                     ADDITIONAL INFORMATION ABOUT PHONE.COM

   We were incorporated in Delaware under the name "Libris, Inc." in December
1994 and changed our name to "Unwired Planet, Inc." in April 1996. In April
1999, we changed our name from "Unwired Planet, Inc." to "Phone.com, Inc." Our
principal executive offices are located at 800 Chesapeake Drive, Redwood City,
California 94063, and our telephone number is (650) 562-0200. The address of
our Web site is "www.phone.com." Information contained on our Web site shall
not be deemed to be a part of this prospectus.

                                       18
CAPITALIZATION

   The following table sets forth the following information:

  .  the actual capitalization of Phone.com as of June 30, 1999;
  .  the as adjusted capitalization to give effect to the sale of 1,000,000
     shares of common stock by Phone.com at the assumed public offering price
     of $    per share in this offering after deducting the underwriting
     discounts and commissions Phone.com expects to pay in connection with
     this offering and estimated offering expenses payable by Phone.com.

   This table should be read in conjunction with the Consolidated Financial
Statements and the Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus.
As of June 30, 1999
                                                          ---------------------
                                                                        As
                                                           Actual    Adjusted
                                                          ---------  ----------
                                                            (In thousands,
                                                          except share data)
Equipment loan and capital lease obligations, less
 current portion......................................... $     498  $     498
                                                          ---------  ---------
Stockholders' equity:
  Convertible preferred stock $0.001 par value, 5,000,000
   shares authorized, no shares issued and outstanding,
   actual and as adjusted ...............................        --         --
  Common stock $0.001 par value, 100,000,000 shares
   authorized, 31,213,094 shares issued and outstanding,
   actual; 100,000,000 shares authorized, 32,213,094
   shares issued and outstanding, as adjusted(1) ........        31
  Additional paid-in capital.............................   136,209
  Deferred stock-based compensation......................    (1,318)    (1,318)
  Treasury stock.........................................      (196)      (196)
  Notes receivable from stockholders.....................      (484)      (484)
  Accumulated deficit....................................   (41,950)   (41,950)
                                                          ---------  ---------
    Total stockholders' equity...........................    92,292
                                                          ---------  ---------
      Total capitalization............................... $  92,790  $
                                                          =========  =========
--------
(1) This table excludes the following shares:

  .  4,751,189 shares subject to outstanding options at a weighted average
     exercise price of $6.35 per share as of June 30, 1999,
  .  31,486 shares issuable upon exercise of outstanding warrants at a
     weighted average exercise price of $3.81 per share as of June 30, 1999,
  .  an aggregate of 4,136,826 shares available for future issuance under our
     1995 Stock Plan, 1996 Stock Plan, 1999 Directors' Stock Option Plan and
     1999 Employee Stock Purchase Plan as of June 30, 1999. See "Management--
     Stock Plans" and Notes 4 and 5 of the Notes to Consolidated Financial
     Statements,
  .  1,196,513 shares issued in October 1999 to former APiON shareholders in
     connection with the APiON acquisition.

                                       19
DILUTION

   The net tangible book value of our common stock on June 30, 1999 was $92.3
million, or approximately $2.96 per share. Pro forma net tangible book value
represents the amount of our total tangible assets less total liabilities,
divided by the number of shares of common stock outstanding. Dilution in net
tangible book value per share represents the difference between the amount per
share paid by purchasers of shares of our common stock in this offering and the
net tangible book value per share of our common stock immediately following
this offering. After giving effect to our sale of 1,000,000 shares of common
stock offered by this prospectus at the assumed public offering price of $
per share and after deducting the underwriting discounts and commissions and
estimated offering expenses payable by us, our net tangible book value would
have been $    million, or approximately $    per share. This represents an
immediate increase in net tangible book value of $    per share to existing
stockholders and an immediate dilution in net tangible book value of $    per
share to new investors.
Public offering price per share.....................................        $
  Net tangible book value per share as of June 30, 1999............. $ 2.96
  Increase per share attributable to new investors..................
                                                                     ------
Net tangible book value per share after this offering...............
                                                                            ----
Dilution per share to new investors.................................        $
                                                                            ====
The following table sets forth, as of June 30, 1999, the differences between
the number of shares of common stock purchased from us, the total price and
average price per share paid by existing investors and by the new investors,
before deducting the underwriting discounts and commissions and estimated
offering expenses payable by us at the assumed public offering price of $
per share.
Total
                                 Shares Purchased  Consideration
                                ------------------ --------------  Average Price
                                  Number   Percent Amount Percent    Per Share
                                ---------- ------- ------ -------  -------------
Existing stockholders.......... 31,213,094       %  $            %    $
New investors..................
                                ----------  -----   ---   -------
  Total........................             100.0%  $     $ 100.0%
                                ==========  =====   ===   =======
The sales by the selling stockholders in this offering will reduce the
number of shares of common stock held by existing stockholders to    , or
approximately   % of the total shares of common stock outstanding immediately
after this offering, and will increase the number of shares of common stock
held by new investors to    , or   % of the total number of shares of common
stock outstanding immediately after this offering. See "Principal and Selling
Stockholders."

                                       20
SELECTED CONSOLIDATED FINANCIAL DATA

   The tables that follow present portions of our consolidated financial
statements and are not complete. You should read the following selected
consolidated financial data in conjunction with our consolidated financial
statements and related notes thereto and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
in this prospectus. The consolidated statements of operations data for the
years ended June 30, 1997, 1998 and 1999, and the consolidated balance sheet
data as of June 30, 1998 and 1999 are derived from our consolidated financial
statements that have been audited by KPMG LLP, independent auditors, which are
included elsewhere in this prospectus. The pro forma combined condensed
statement of operations and balance sheet data have been derived from the
Unaudited Pro Forma Condensed Combined Financial Statements included elsewhere
in this prospectus. The pro forma combined condensed balance sheet data assumes
that the APiON acquisition took place on June 30, 1999 and combines Phone.com's
consolidated balance sheet data as of June 30,1999 with the WAP Business of
APiON's statement of assets acquired and liabilities assumed data as of March
31, 1999. The pro forma combined condensed statement of operations data assumes
the acquisition took place on July 1, 1998 and combines Phone.com's
consolidated statement of operations data for the year ended June 30, 1999 with
the WAP Business of APiON's statement of operations data for the year ended
March 31, 1999. The selected unaudited pro forma financial information below
does not represent what Phone.com's financial position or results of operations
would have been if the acquisition of APiON had occurred on the dates
indicated, or the financial position or results of operations of Phone.com and
APiON as a combined company for any future period. The consolidated statements
of operations data for the period from December 16, 1994 (inception) to June
30, 1995 and for the year ended June 30, 1996, and the consolidated balance
sheet data as of June 30, 1995, 1996 and 1997 are derived from audited
consolidated financial statements that are not included in this prospectus. The
historical results presented below are not necessarily indicative of the
results to be expected for any future fiscal year. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
Year Ended June 30,
                                           --------------------------------------------------
                            December 16,                                        1999
                          1994 (Inception)                               --------------------
                          to June 30, 1995  1996      1997      1998      Actual    Pro Forma
                          ---------------- -------  --------  ---------  ---------  ---------
                                  (In thousands, except per share data)
Consolidated Statements
 of Operations Data:
Revenues:
 License................      $    --      $    --  $     80  $     522  $   5,229  $   5,229
 Maintenance and support
  services..............           --           --       212      1,683      5,921      5,921
 Consulting services....           --           --        --         --      2,292      2,292
                              -------      -------  --------  ---------  ---------  ---------
 Total revenues.........           --           --       292      2,205     13,442     13,442
                              -------      -------  --------  ---------  ---------  ---------
Cost of revenues:
 License................           --           --        87         95        371        371
 Maintenance and support
  services..............           --           --       266      1,063      3,022      3,022
 Consulting services....           --           --        --         --      1,146      1,146
                              -------      -------  --------  ---------  ---------  ---------
 Total cost of
  revenues..............           --           --       353      1,158      4,539      4,539
                              -------      -------  --------  ---------  ---------  ---------
 Gross profit (loss)....           --           --       (61)     1,047      8,903      8,903
                              -------      -------  --------  ---------  ---------  ---------
Operating expenses:
 Research and
  development...........           92        1,387     3,959      5,732     13,082     13,514
 Sales and marketing....            6          757     3,198      5,011     10,840     11,067
 General and
  administrative........            5          522     1,237      1,801      4,432      4,857
 Stock-based
  compensation..........           --           --        --        108      1,011      4,832
 Amortization of
  goodwill and other
  intangible assets.....           --           --        --         --         --     81,512
                              -------      -------  --------  ---------  ---------  ---------
 Total operating
  expenses..............          103        2,666     8,394     12,652     29,365    115,782
                              -------      -------  --------  ---------  ---------  ---------
 Operating loss.........         (103)      (2,666)   (8,455)   (11,605)   (20,462)  (106,879)
Interest income, net....           --          196       464        982      1,803      1,803
                              -------      -------  --------  ---------  ---------  ---------
 Loss before income
  taxes.................         (103)      (2,470)   (7,991)   (10,623)   (18,659)  (105,076)
Income taxes............           --           --        --         --      2,104      2,251
                              -------      -------  --------  ---------  ---------  ---------
 Net loss...............      $  (103)     $(2,470) $ (7,991) $ (10,623) $ (20,763) $(107,327)
                              =======      =======  ========  =========  =========  =========
Basic and diluted net
 loss per share.........      $ (0.02)     $ (0.53) $  (1.67) $   (2.03) $   (2.98) $  (13.15)
                              =======      =======  ========  =========  =========  =========
Shares used in computing
 basic and diluted net
 loss per share.........        4,671        4,704     4,776      5,221      6,966      8,162
                              =======      =======  ========  =========  =========  =========
As of June 30,
                          ----------------------------------------------------
                                                                  1999
                                                           -------------------
                           1995    1996    1997     1998    Actual   Pro Forma
                          ------- ------- ------- -------- --------- ---------
                                        (In thousands)
Consolidated Balance
 Sheet Data:
Cash, cash equivalents
 and short-term
 investments............. $ 2,300 $ 5,848 $ 8,014 $ 33,464 $ 113,086 $102,789
Total assets.............   2,315   6,767   9,759   39,144   138,933  376,736
Equipment loan and
 capital lease
 obligations, less
 current portion.........      --      --      --      915       498      579
Total stockholders'
 equity..................   2,243   6,464   8,125   28,393    92,292  328,256
21
MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   This section of this prospectus includes a number of forward-looking
statements, made within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934, that reflect our
current views with respect to future events and financial performance. We use
words such as "anticipates," "believes," "expects," "future," and "intends,"
and similar expressions to identify forward-looking statements. You should not
place undue reliance on these forward-looking statements, which apply only as
of the date of this prospectus. These forward-looking statements are subject to
risks and uncertainties that could cause actual results to differ materially
from historical results or our predictions. These risks are described in "Risk
Factors" and elsewhere in this prospectus. See "Special Note Regarding Forward-
Looking Statements."

Overview

   We were incorporated in December 1994 and, from inception until June 1996,
our operations consisted primarily of various start-up activities, including
development of technologies central to our business, recruiting personnel and
raising capital. In 1995, we developed our initial technology, which enables
the delivery of Internet-based services to wireless telephones. In 1996, we
introduced and deployed our first products based on this technology. We first
recognized license revenues in August 1996, and generated license revenues of
approximately $80,000, $522,000 and $5.2 million for the fiscal years ended
June 30, 1997, 1998 and 1999, respectively. We incurred net losses of
approximately $8.0 million, $10.6 million and $20.8 million for the fiscal
years ended June 30, 1997, 1998 and 1999, respectively. As of June 30, 1999, we
had an accumulated deficit of approximately $42.0 million.

   To provide a worldwide standard for the delivery of Internet-based services
over mass-market wireless telephones, we formed the WAP Forum in close
cooperation with Ericsson, Motorola and Nokia, the world's three largest
manufacturers of wireless telephones. In February 1998, the WAP Forum published
technical specifications for application development and product
interoperability based substantially on Phone.com's technology and on Internet
standards. Leading network operators, telecommunications device and equipment
manufacturers and software companies worldwide have sanctioned the
specifications promulgated by the WAP Forum.

   We generate revenues from licenses, maintenance and support services and
consulting services. We receive license revenues from licensing our UP.Link
Server Suite software directly to network operators and indirectly through
value-added resellers. From our inception through June 30, 1999, cumulative
revenues from licensing our UP.Link Server Suite software represented 51% of
total cumulative revenues, inclusive of installation, training and support
services provided to network operators. Maintenance and support services
revenues also include engineering and support services provided to wireless
telephone manufacturers. Cumulative engineering and support services fees from
UP.Browser agreements with wireless telephone manufacturers represented 34% of
our total cumulative revenues from inception through June 30, 1999. Consulting
services revenues are derived from consulting services provided to network
operator customers either directly by us or indirectly through resellers.

   In September 1999, we introduced MyPhone, our mobile Internet portal
platform. We expect to incur significant additional expenses in developing and
commercializing the MyPhone service, including costs relating to operating the
portal, as well as sales and marketing and research and development expenses.
We expect to incur these costs and expenses in advance of generating revenues
from this service and cannot be certain that our business model for the MyPhone
service will result in significant revenues or profitability.

   On October 21, 1999, we announced our operating results for the quarter
ended September 30, 1999. Total revenues were $8.5 million for the quarter,
while net loss was $4.9 million, or $0.16 per share. Deferred revenue was $38.4
million as of September 30, 1999. As of September 30, 1999, we had cash and
short-term investments of $117.8 million, total assets of $136.8 million and
total stockholders' equity of $87.6 million.

                                       22
In October 1999, we completed the acquisition of the outstanding share
capital of APiON Telecoms Ltd., a company based in Belfast, Northern Ireland.
APiON is a provider of WAP software products to GSM network operators in Europe
and has expertise in GSM Intelligent Networks, wireless data and WAP
technology. In connection with this transaction, we acquired all of the
outstanding shares of capital stock of APiON in exchange for an aggregate of
approximately 1,196,513 shares of our common stock. A portion of these shares
are held in escrow for a period of one year to indemnify us against potential
liabilities of APiON and its former shareholders.

   In addition, we also agreed to issue cash and common stock to current and
former employees of APiON. Current employees of APiON will receive cash in the
aggregate amount of approximately $2.5 million, less applicable withholdings
for taxes and insurance, upon the closing of this offering, and will receive
shares of common stock equal in value to approximately $2.5 million, less
applicable withholdings for taxes and insurance, on each of the first two
anniversaries of the closing of the APiON acquisition, subject to their
continued employment. Former employees of APiON who were engaged in APiON's
services business, which we did not acquire in the transaction, will receive
cash in the aggregate amount of approximately $2.2 million, less applicable
withholdings for taxes and insurance, upon the closing of this offering, and
will receive shares of common stock equal in value to approximately $4.3
million, less applicable withholdings for taxes and insurance, on the
anniversary of the closing of the APiON acquisition, subject to forfeiture upon
the occurrence of certain events.

   In connection with the APiON acquisition, we will record a significant
amount of goodwill and deferred compensation that will significantly increase
our net loss for the foreseeable future. We expect to record goodwill of
approximately $244.6 million and additional deferred stock-based compensation
of approximately $5.1 million, to be amortized over a three-year period and a
two-year period, respectively. In addition, we expect that operating expenses
will increase as a result of the acquisition, due primarily to the additional
personnel and the costs of operating a European subsidiary. For example, as a
result of the addition of APiON's technical, sales and customer engineering
personnel, we expect that research and development expenses and sales and
marketing expenses may increase by as much as $5 million in the aggregate for
the fiscal year ended June 30, 2000.

   Our future success depends on our ability to increase revenues from sales of
products and services to new and existing network operator customers. If the
market for Internet-based services via wireless telephones fails to develop or
develops more slowly than expected, then our business would be materially and
adversely affected. In addition, because there is a relatively small number of
network operators worldwide, any failure to sell our products to network
operator customers successfully could result in a shortfall in revenues that
could not be readily offset by other revenue sources. We also anticipate that
network operators may defer commercial launches of services based on our
product and services as they divert their resources and efforts to ensure year
2000 compliance.

   Our business strategy also relies to a significant extent on the widespread
propagation of UP.Browser-enabled telephones through our relationships with
network operators and wireless telephone manufacturers. In order to encourage
adoption of UP.Browser-enabled wireless telephones, we license our UP.Browser
software to wireless telephone manufacturers free of per-unit royalties and
other license fees and provide maintenance and support services for an annual
flat fee. As of September 1999, we had licensed UP.Browser to 25 wireless
telephone manufacturers. As of September 1999, 10 wireless telephone
manufacturer customers had made commercial shipments of telephones with the
UP.Browser embedded. In addition, as of September 1999, we are currently
providing engineering support services in connection with 60 browser
integration projects.

   During the year ended June 30, 1998, AT&T Wireless Services, which owned
approximately 2.5% of our common stock as of June 30, 1999, and Matsushita
Communication Industrial accounted for approximately 22% and 18%, respectively,
of our total revenues. For the year ended June 30, 1999, AT&T Wireless Services
accounted for approximately 17% of our total revenues, and DDI Corporation,
which owned approximately 0.6% of our common stock as of June 30, 1999,
accounted for approximately 14% of our total revenues. The foregoing
calculations are based on revenues derived from direct and indirect sales to
these customers.

                                       23
For agreements entered into prior to July 1, 1998, we recognized revenues in
accordance with the provisions of the American Institute of Certified Public
Accountants' Statement of Position No. 91-1, Software Revenue Recognition.
Effective July 1, 1998, we adopted SOP 97-2, Software Revenue Recognition, as
amended. SOP 97-2 generally requires revenue earned on software arrangements
involving multiple elements to be allocated to each element based on the
relative fair value of the elements.

   We license our UP.Link Server Suite products to network operators through
our direct sales force and indirectly through our channel partners. Our license
agreements do not provide for a right of return. Allowances for future
estimated warranty costs are provided at the time revenue is recognized.
Licenses can be purchased on an as-deployed basis or on a prepaid basis. For
licenses purchased on an as-deployed basis, license revenue is recognized as
subscribers are activated to use the services that are based on our UP.Link
Server Suite products. We have no obligation to provide standards-compliant
products once a subscriber has been activated. For licenses purchased on a
prepaid basis, prepaid license fees are recognized under subscription
accounting due to our commitment to provide standards-compliant products for
each license covered by the prepaid arrangement. This subscription revenue is
recognized ratably over the contractual term of the prepaid arrangement (i.e.,
the date the prepaid licenses expire if not used), commencing at the beginning
of the month in which delivery and acceptance occur by the network operator.
The prepaid license period is generally twelve to thirty months. Licenses
expire if not activated prior to the end of the prepaid license term. We
recognize revenues from maintenance and support services provided to network
operators ratably over the term of the agreement, generally one year, and
recognize revenues from consulting services provided to network operators as
the services are performed.

   We recognize revenues from UP.Browser agreements with wireless telephone
manufacturers ratably over the period during which the services are performed,
generally one year. We provide our wireless telephone manufacturer customers
with support associated with their efforts to port our UP.Browser software to
their wireless telephones, software error corrections and new releases as they
become commercially available.

   Deferred revenue was $36.8 million as of June 30, 1999, comprised of $33.6
million in prepaid fees charged to wireless network operators and $3.2 million
in prepaid maintenance and other service fees charged to wireless telephone
manufacturers. We expect that deferred revenue will decline in the long term as
network operators deploy services based on our products. In particular, we
began recognizing license revenue in the third quarter of fiscal 1999 in
connection with the launch by CEGETEL/SFR of commercial services based on our
products and the acceptance of our products by DDI Corporation. Relating to our
sales to CEGETEL/SFR, we recognized previously deferred license revenues of
$541,000 for the year ended June 30, 1999 and will recognize approximately
$400,000 in each of the quarters ending September 30, 1999, December 31, 1999
and March 31, 2000. With regard to sales to DDI Corporation, we recognized
license revenues of $1.5 million for the year ended June 30, 1999, and will
recognize approximately $2.4 million in each of the quarters ending September
30, 1999 and December 31, 1999, and $1.6 million in each of the quarters ending
March 31, 2000 through March 31, 2001, and $1.1 million in the quarter ending
June 30, 2001. The revenues recognized and deferred for DDI Corporation include
direct sales and sales through an indirect channel partner, Itochu Techno
Science Corporation. We also began recognizing license revenue in the fourth
quarter of fiscal 1999 in connection with the launches by two other wireless
network operator customers. With respect to these customers, we recognized
license revenue of $441,000 in the fourth quarter of fiscal 1999, and will
recognize substantially all of the remaining deferred revenue by September 30,
2001.

   Under an agreement with AT&T Wireless Services, initially entered into in
May 1996, AT&T Wireless Services prepaid $4.7 million for the right to deploy
up to a fixed number of licenses through December 1999. Due to the early nature
of the commercial deployments of our products by network operators and because
we believed we would assume additional obligations to assist AT&T Wireless
Services in deploying the software licenses if difficulties were encountered
during the deployment, the license portion of the prepaid fee was recognized as
licenses were deployed. Between August 1997 and December 1998, $484,000 was
recognized relating to this prepayment. In connection with an amendment to the
agreement entered into in March 1999, AT&T Wireless Services agreed that we
would not be further obligated to assist them in the deployment of the prepaid
licenses discussed above. Therefore, the remaining deferred revenue of
approximately $4.2 million as

                                       24
of the date of the contract amendment in March 1999 that related to the
prepayment is being recognized as revenue ratably over the remaining
contractual term of the prepaid arrangement. Accordingly, we recognized revenue
of $1.9 million for the year ending June 30, 1999 and will recognize
approximately $1.25 million in each of the quarters ending September 30, 1999,
and December 31, 1999, associated with the prepayment.

   We expect that our gross profit on revenues derived from sales through
indirect channel partners will be less than the gross profit on revenues from
direct sales. Our success, in particular in international markets, depends in
part on our ability to increase sales of our products and services through
value-added resellers and to expand our indirect distribution channels. In
addition, our agreements with our distribution partners generally do not
restrict the sale of products that are competitive with our products and
services, and each of our partners can cease marketing our products and
services at their option.

   International sales of products and services accounted for 7%, 44% and 66%
of our total revenues in the years ended June 30, 1997, 1998 and 1999,
respectively. We expect international sales to continue to account for a
significant portion of our revenues, although the percentage of our total
revenues derived from international sales may vary. In particular, a number of
manufacturers have delayed commercial release of WAP-compliant wireless
telephones, particularly affecting European and other markets based on the GSM
standard. Risks inherent in our international business activities, include:

  .  failure by us and/or third parties to develop localized content and
     applications that are used with our products;
  .  costs of localizing our products for foreign markets;
  .  difficulties in staffing and managing foreign operations;
  .  longer accounts receivable collection time;
  .  political and economic instability;
  .  fluctuations in foreign currency exchange rates;
  .  reduced protection of intellectual property rights in some foreign
     countries;
  .  contractual provisions governed by foreign laws;
  .  export restrictions on encryption and other technologies;
  .  potentially adverse tax consequences; and
  .  the burden of complying with complex and changing regulatory
     requirements.

   Since early 1997, we have invested substantially in research and
development, marketing, domestic and international sales channels, professional
services and our general and administrative infrastructure. These investments
have significantly increased our operating expenses, contributing to net losses
in each fiscal quarter since our inception. Our limited operating history makes
it difficult to forecast future operating results. Although our revenues have
grown in recent quarters, our revenues may not increase at a rate sufficient to
achieve and maintain profitability, if at all. We anticipate that our operating
expenses will increase substantially in absolute dollars for the foreseeable
future as we expand our product development, sales and marketing, professional
services and administrative staff. Even if we were to achieve profitability in
any period, we may not sustain or increase profitability on a quarterly or
annual basis.

Fiscal Years Ended June 30, 1997, 1998 and 1999

   License Revenues

   License revenues increased from $80,000 in the fiscal year ended June 30,
1997 to $522,000 in the fiscal year ended June 30, 1998, and $5.2 million in
the fiscal year ended June 30, 1999. The increase in license revenues was due
primarily to the launch of wireless Internet-based services by network
operators. The increase in license revenues in fiscal 1999 was due primarily to
the launch by CEGETEL/SFR, DDI and other network operators of commercial
services based on our products and the satisfaction of our deployment
obligations related to AT&T. License revenues recognized in fiscal 1999 with
respect to these three customers were $709,000, $1.5 million and $1.6 million,
respectively.

                                       25
Maintenance and Support Services Revenues

   Maintenance and support services revenues increased from $212,000 in the
fiscal year ended June 30, 1997 to $1.7 million in the fiscal year ended June
30, 1998, and $5.9 million in the fiscal year ended June 30, 1999. The increase
in maintenance and support services revenues reflects an increase in services
provided to wireless telephone manufacturers and increased installation and
support fees from network operators. Of the increase from fiscal 1998 to fiscal
1999, approximately $3.1 million was attributable primarily to increased demand
for maintenance and engineering support services by wireless telephone
manufacturers, and approximately $1.1 million was attributable to trials of our
UP.Link Server Suite software by wireless network operators.

   Consulting Services Revenues

   Consulting services revenues were $2.3 million for the fiscal year ended
June 30, 1999. No consulting services were performed in fiscal 1997 or fiscal
1998.

   Cost of License Revenues

   Cost of license revenues consists primarily of third-party license and
support fees. Cost of license revenues increased from $87,000 in the fiscal
year ended June 30, 1997 to $95,000 in the fiscal year ended June 30, 1998, and
$371,000 in the fiscal year ended June 30, 1999. As a percentage of license
revenues, cost of license revenues in the fiscal years ended June 30, 1997,
1998 and 1999 was 109%, 18% and 7%, respectively. Costs of license revenues in
the fiscal year ended June 30, 1997 included $74,000 attributable to non-
recurring third-party software license and software customization fees. The
decrease as a percentage of license revenues for fiscal 1999 was attributable
primarily to higher license revenues for fiscal 1999 and to the amortization of
fixed maintenance fees relating to third party software licenses. We expect
that cost of license revenues will vary as a percentage of license revenues
from period to period.

   Cost of Maintenance and Support Services Revenues

   Cost of maintenance and support services revenues consists of compensation
and related overhead costs for personnel engaged in the delivery of
installation, training and support services to network operators and
engineering and support services to wireless telephone manufacturers. The
engineering and support services performed for wireless telephone manufacturers
include assistance relating to integrating our UP.Browser software into the
manufacturers' wireless telephones. Cost of maintenance and support services
revenues increased from $266,000 in the fiscal year ended June 30, 1997 to $1.1
million in the fiscal year ended June 30, 1998, and $3.0 million in the fiscal
year ended June 30, 1999. As a percentage of maintenance and support services
revenues, cost of maintenance and support services revenues in the fiscal years
ended June 30, 1997, 1998 and 1999 was 125%, 63% and 51%, respectively. The
growth in cost of maintenance and support services revenues was attributable
primarily to an increase in personnel dedicated to support a larger number of
wireless telephone manufacturer customers, which increased costs by
approximately $1.1 million from fiscal 1998 to fiscal 1999, and increased
staffing in anticipation of growth in the number of network operator customers,
which increased costs by approximately $824,000 during the same period. Gross
profit on maintenance and support services increased from fiscal 1998 to fiscal
1999 due to the increase in the number of browser integration assignments for
wireless telephone manufacturers, which had the effect of spreading our costs
over a greater revenue base. In addition, the number of trials in progress by
network operators increased during this period. We anticipate that the cost of
maintenance and support services revenues will increase in absolute dollars in
future operating periods.

   Cost of Consulting Services Revenues

   Cost of consulting services revenues consists of compensation and
independent consultant costs for personnel engaged in our consulting services
operations and related overhead. We commenced our consulting operations in
fiscal 1999. Cost of consulting services revenues for the fiscal year ended
June 30, 1999 was

                                       26
$1.1 million. No consulting services were performed in fiscal 1997 or fiscal
1998. As a percentage of consulting services revenues, cost of consulting
services revenues for the fiscal year ended June 30, 1999 was 50%. Gross profit
on consulting services revenues is impacted by the mix of company personnel and
independent consultants assigned to projects. The gross profit we achieve is
also impacted by the contractual terms of the consulting assignments we
undertake, and the gross profit on fixed price contracts typically is more
susceptible to fluctuation than contracts performed on a time-and-materials
basis. We anticipate that the cost of consulting services revenues will
increase in absolute dollars as we continue to invest in the growth of our
consulting services operations.

   Research and Development Expenses

   Research and development expenses consist primarily of compensation and
related costs for research and development personnel. Research and development
expenses increased 45% from $4.0 million in the fiscal year ended June 30, 1997
to $5.7 million in the fiscal year ended June 30, 1998 and increased 128% to
$13.1 million in the fiscal year ended June 30, 1999. The increases were
attributable primarily to the addition of personnel in our research and
development organization associated with product development. We expect to
continue to make substantial investments in research and development and
anticipate that research expenses will continue to increase in absolute
dollars.

   Sales and Marketing Expenses

   Sales and marketing expenses consist primarily of compensation and related
costs for sales and marketing personnel, sales commissions, marketing programs,
public relations, promotional materials, travel expenses and trade show exhibit
expenses. Sales and marketing expenses increased 57% from $3.2 million in the
fiscal year ended June 30, 1997 to $5.0 million in the fiscal year ended June
30, 1998 and increased 116% to $10.8 million in the fiscal year ended June 30,
1999. The increases reflected the addition of personnel in our sales and
marketing organizations, as well as costs associated with increased selling
efforts to develop market awareness of our products and services. We anticipate
that sales and marketing expenses will increase in absolute dollars as we
increase our investment in these areas.

   General and Administrative Expenses

   General and administrative expenses consist primarily of salaries and
related expenses, accounting, legal and administrative expenses, professional
service fees and other general corporate expenses. General and administrative
expenses increased 46% from $1.2 million in the fiscal year ended June 30, 1997
to $1.8 million in the fiscal year ended June 30, 1998 and increased 146% to
$4.4 million in the fiscal year ended June 30, 1999. The increases were due
primarily to the addition of personnel performing general and administrative
functions and, to a lesser extent, legal expenses associated with increased
product licensing and patent activity. We expect general and administrative
expenses to increase in absolute dollars as we add personnel and incur
additional expenses related to the anticipated growth of our business and
operation as a public company.

   Stock-Based Compensation

   Some stock options granted and restricted stock sold during the fiscal years
ended June 30, 1998 and 1999 have been deemed to be compensatory. Total
deferred stock-based compensation associated with these equity arrangements
through June 30, 1999 amounted to $2.4 million related to stock options granted
and restricted stock issued from October 1997 through March 1999. These amounts
are being amortized over the respective vesting periods of these equity
arrangements in a manner consistent with Financial Accounting Standards Board
Interpretation No. 28. Of the total deferred stock-based compensation, $108,000
and $1.0 million was amortized in the fiscal years ended June 30, 1998 and
1999, respectively. We anticipate that we may issue stock options with exercise
prices below the then fair market value, which would increase deferred stock-
based compensation in the future. We expect amortization of approximately
$696,000, $375,000, $185,000 and $62,000 in the fiscal years ending June 30,
2000, 2001, 2002 and 2003, respectively. We recorded no deferred stock based
compensation for the fiscal year ended June 30, 1997.

                                       27
Interest Income, Net

   Net interest income was $464,000, $982,000 and $1.8 million in the fiscal
years ended June 30, 1997, 1998 and 1999, respectively. The year-to-year
increases resulted primarily from earnings on rising cash, cash equivalent and
short-term investment balances as a result of our private placement financings
in February 1998 and March 1999 and our initial public offering in June 1999,
partially offset in the fiscal years ended June 30, 1998 and 1999 by interest
expense related to obligations under capital leases and our equipment loan.

   Income Taxes

   Income tax expense of $2.1 million for the fiscal year ended June 30, 1999,
consisted of foreign withholding taxes. Since inception, we have incurred net
losses for federal and state tax purposes and have not recognized any tax
provision or benefit. As of June 30, 1999, we had net operating loss
carryforwards of approximately $36.0 million, for both federal and California
income tax purposes. These carryforwards, if not utilized, expire beginning in
the year 2004 through 2019. We also had research and development credit
carryforwards of approximately $400,000 and $303,000 for federal and California
income tax purposes, respectively. We also have a foreign tax credit
carryforward of $2.0 million, which expires in 2004. Federal and California tax
laws impose significant restrictions on the utilization of net operating loss
carryforwards in the event of a shift in our ownership that constitutes an
"ownership change," as defined in Section 382 of the Internal Revenue Code. If
we have an ownership change, the ability to utilize the stated carryforwards
could be significantly reduced. See Note 6 of Notes to Consolidated Financial
Statements.

   As of June 30, 1999, we had deferred tax assets of $19.2 million, which were
fully offset by a valuation allowance. Deferred tax assets consist principally
of the federal and state net operating loss carryforwards, capitalized start-up
expenditures, accruals and reserves not currently deductible for tax purposes,
research and development credits and foreign tax credit carryforwards. We have
provided a valuation allowance due to the uncertainty of generating future
profits that would allow for the realization of these deferred tax assets.
Accordingly, no tax benefit was recorded in the accompanying consolidated
statements of operations.

                                       28
Quarterly Results of Operations

   The following table sets forth our consolidated operating results for each
of the eight quarters ended June 30, 1999. This data has been derived from
unaudited consolidated financial statements that, in the opinion of our
management, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of this information when read in
conjunction with our annual audited consolidated financial statements and notes
thereto appearing elsewhere in this prospectus. These operating results are not
necessarily indicative of results of any future period.
Quarter Ended
                          -------------------------------------------------------------------------------------
                          Sept. 30,  Dec. 31,   March 31,  June 30,   Sept. 30,  Dec. 31,   March 31,  June 30,
                            1997       1997       1998       1998       1998       1998       1999       1999
                          ---------  --------   ---------  --------   ---------  --------   ---------  --------
                                             (In thousands, except per share data)
Revenues:
 License................   $    17   $   158     $   114   $   233     $   202   $    64     $ 1,264   $ 3,699
 Maintenance and support
  services..............        94       222         319     1,048       1,005     1,327       1,454     2,135
 Consulting services....        --        --          --        --         161       426         814       891
                           -------   -------     -------   -------     -------   -------     -------   -------
 Total revenues.........       111       380         433     1,281       1,368     1,817       3,532     6,725
                           -------   -------     -------   -------     -------   -------     -------   -------
Cost of revenues:
 License................         5        25          29        36          62        26          84       199
 Maintenance and support
  services..............       175       245         295       348         433       676         767     1,146
 Consulting services....        --        --          --        --          58        77         511       500
                           -------   -------     -------   -------     -------   -------     -------   -------
 Total cost of
  revenues..............       180       270         324       384         553       779       1,362     1,845
                           -------   -------     -------   -------     -------   -------     -------   -------
 Gross profit (loss)....       (69)      110         109       897         815     1,038       2,170     4,880
                           -------   -------     -------   -------     -------   -------     -------   -------
Operating expenses:
 Research and
  development...........     1,072     1,381       1,418     1,861       2,446     2,492       3,468     4,676
 Sales and marketing....       837     1,128       1,342     1,704       1,801     2,074       2,629     4,336
 General and
  administrative........       341       403         441       616         684       955       1,092     1,701
 Stock-based
  compensation..........        --         6          39        63         249       255         280       227
                           -------   -------     -------   -------     -------   -------     -------   -------
 Total operating
  expenses..............     2,250     2,918       3,240     4,244       5,180     5,776       7,469    10,940
                           -------   -------     -------   -------     -------   -------     -------   -------
 Operating loss.........    (2,319)   (2,808)     (3,131)   (3,347)     (4,365)   (4,738)     (5,299)   (6,060)
Interest income, net....        96        76         356       454         415       365         359       664
                           -------   -------     -------   -------     -------   -------     -------   -------
 Loss before income
  taxes.................    (2,223)   (2,732)     (2,775)   (2,893)     (3,950)   (4,373)     (4,940)   (5,396)
Income taxes............        --        --          --        --          --        --         710     1,394
                           -------   -------     -------   -------     -------   -------     -------   -------
 Net loss...............   $(2,223)  $(2,732)    $(2,775)  $(2,893)    $(3,950)  $(4,373)    $(5,650)  $(6,790)
                           =======   =======     =======   =======     =======   =======     =======   =======
Basic and diluted net
 loss per share.........   $ (0.44)  $ (0.53)    $ (0.53)  $ (0.53)    $ (0.71)  $ (0.78)    $ (0.99)  $ (0.62)
                           =======   =======     =======   =======     =======   =======     =======   =======
Shares used in computing
 basic and diluted net
 loss per share.........     5,050     5,147       5,230     5,459       5,539     5,617       5,699    11,023
                           =======   =======     =======   =======     =======   =======     =======   =======
As a Percentage of Total
 Revenues
Revenues:
 License................        15%       42%         26%       18%         15%        4%         36%       55%
 Maintenance and support
  services..............        85        58          74        82          73        73          41        32
 Consulting services....        --        --          --        --          12        23          23        13
                           -------   -------     -------   -------     -------   -------     -------   -------
 Total revenues.........       100       100         100       100         100       100         100       100
                           -------   -------     -------   -------     -------   -------     -------   -------
Cost of revenues:
 License................         4         7           7         3           4         2           2         3
 Maintenance and support
  services..............       158        64          68        27          32        37          23        17
 Consulting services....        --        --          --        --           4         4          14         7
                           -------   -------     -------   -------     -------   -------     -------   -------
 Total cost of
  revenues..............       162        71          75        30          40        43          39        27
                           -------   -------     -------   -------     -------   -------     -------   -------
 Gross profit (loss)....       (62)       29          25        70          60        57          61        73
                           -------   -------     -------   -------     -------   -------     -------   -------
Operating expenses:
 Research and
  development...........       966       363         327       145         179       137          98        70
 Sales and marketing....       754       297         310       133         132       114          74        64
 General and
  administrative........       307       106         102        48          50        53          31        26
 Stock-based
  compensation..........        --         2           9         5          18        14           8         3
                           -------   -------     -------   -------     -------   -------     -------   -------
 Total operating
  expenses..............     2,027       768         748       331         379       318         211       163
                           -------   -------     -------   -------     -------   -------     -------   -------
 Operating loss.........    (2,089)     (739)       (723)     (261)       (319)     (261)       (150)      (90)
Interest income, net....        86        20          82        35          30        20          10        10
                           -------   -------     -------   -------     -------   -------     -------   -------
 Loss before income
  taxes.................    (2,003)     (719)       (641)     (226)       (289)     (241)       (140)      (80)
Income taxes............        --        --          --        --          --        --          20        21
                           -------   -------     -------   -------     -------   -------     -------   -------
 Net loss...............    (2,003)%    (719)%      (641)%    (226)%      (289)%    (241)%      (160)%    (101)%
                           =======   =======     =======   =======     =======   =======     =======   =======
As a Percentage of
 Related Revenues
Cost of license
 revenues...............        29%       16%         25%       15%         31%       41%          7%        5%
Cost of maintenance and
 support services
 revenues...............       186%      110%         92%       33%         43%       51%         53%       54%
Cost of consulting
 services revenues......        --        --          --        --          36%       18%         63%       56%
29
During the six quarters ended December 31, 1998, our license revenues were
not significant and varied widely, as we continued to make substantial
investments in our business. In the quarters ended March 31, 1999 and June 30,
1999 our license revenues increased substantially to $1.3 million and $3.7
million, respectively, as we recognized previously deferred revenue under
agreements with CEGETEL/SFR, DDI Corporation and AT&T Wireless Services and due
to the launch of commercial services by other network operators.

   Revenues from maintenance and support services were not significant through
the quarter ended March 31, 1998. Beginning in the quarter ended June 30, 1998,
our revenues from maintenance and support services increased substantially due
principally to increasing UP.Browser license activity with wireless telephone
manufacturers and UP.Link Server Suite trial agreements with network operators.

   Cost of license revenues increased from $26,000 in the quarter ended
December 31, 1998 to $84,000 in the quarter ended March 31, 1999, and $199,000
in the quarter ended June 30, 1999. As a percentage of license revenues, cost
of license revenues was 41%, 7% and 5% in the quarters ended December 31, 1998,
March 31, 1999 and June 30, 1999, respectively. The decrease as a percentage of
license revenues was attributable primarily to higher license revenues in the
quarters ended March 31, 1999 and June 30, 1999, and to the amortization of
fixed maintenance fees relating to third party software licenses. Because this
fixed cost has been amortized over revenues that vary from quarter to quarter,
our cost of license revenues as a percentage of license revenues has fluctuated
historically. We expect that cost of license revenues will vary as a percentage
of license revenues from period to period.

   Cost of maintenance and support services as a percentage of related revenues
declined from 186% for the quarter ended September 30, 1997 to 33% for the
quarter ended June 30, 1998 as increased efficiencies were realized as revenues
increased over the corresponding period. Cost of maintenance and support
services as a percentage of related revenues increased from 33% for the quarter
ended June 30, 1998 to 54% for the quarter ended June 30, 1999 as personnel
were added in anticipation of increased demand for maintenance and support
services.

   Cost of consulting services revenues increased from $77,000 in the quarter
ended December 31, 1998 to $511,000 in the quarter ended March 31, 1999, and
declined to $500,000 in the quarter ended June 30, 1999. As a percentage of
consulting services revenues, cost of consulting services revenues was 18%, 63%
and 56% in the quarters ended December 31, 1998, March 31, 1999 and June 30,
1999, respectively. The increase reflects a higher mix of consulting services
performed on a time and materials basis during the later periods, and we expect
that cost of consulting services revenues will vary as a percentage of
consulting services revenues from period to period.

   The total number of our employees grew from 47 at September 30, 1997 to 217
at June 30, 1999. As a result of the growth in the number of employees in our
research and development, sales and marketing, and general and administrative
organizations, our research and development, sales and marketing, and general
and administrative expenses have increased on a quarter-to-quarter basis.

   We believe that period-to-period comparisons of our operating results are
not necessarily meaningful. You should not rely on them to predict future
performance. The amount and timing of our operating expenses generally may
fluctuate significantly in the future as a result of a variety of factors. We
face a number of risks and uncertainties encountered by early stage companies,
particularly those in rapidly evolving markets such as the wireless
telecommunications and the Internet software industries. We may not be able to
successfully address these risks and difficulties. In addition, although we
have experienced revenue growth recently, our revenue growth may not continue,
and we may not achieve or maintain profitability in the future.

   Our quarterly revenues and operating results are difficult to predict and
may fluctuate significantly from quarter to quarter due to a number of factors,
some of which are outside of our control. These factors include, but are not
limited to:

  .  delays in market acceptance or implementation by our customers of our
     products and services;
  .  changes in demand by our customers for additional products and services;

                                       30
.  our lengthy sales cycle, our concentrated target market and the
     potentially substantial effect on total revenues that may result from
     the gain or loss of business from each incremental network operator
     customer;
  .  introduction of new products or services by us or our competitors;
  .  delays in developing and introducing new products and services;
  .  changes in our pricing policies or those of our competitors or
     customers;
  .  changes in our mix of domestic and international sales;
  .  risks inherent in international operations;
  .  changes in our mix of license, consulting and maintenance and support
     services revenues;
  .  changes in accounting standards, including standards relating to revenue
     recognition, business combinations and stock-based compensation; and
  .  the impact of year 2000 concerns on the timing of capital expenditures
     by network operators and their launches of commercial services utilizing
     our products and services.

   Our sales cycle, which is lengthy--typically between nine and twelve
months--contributes to fluctuations in our quarterly operating results. Many
factors outside our control add to the lengthy education and customer approval
process for our products. For example, many of our prospective customers have
neither budgeted expenses for the provision of Internet-based services to
wireless subscribers nor specifically dedicated personnel for the procurement
and implementation of our products and services. Further, the emerging and
evolving nature of the market for Internet-based services via wireless
telephones may lead prospective customers to postpone their purchasing
decisions. In addition, general concerns regarding year 2000 compliance may
further delay purchase decisions by prospective customers.

   Most of our expenses, such as employee compensation and lease payments for
facilities and equipment, are relatively fixed. In addition, our expense levels
are based, in part, on our expectations regarding future revenues. As a result,
any shortfall in revenues relative to our expectations could cause significant
changes in our operating results from quarter to quarter. Due to the foregoing
factors, we believe period to period comparisons of our revenue levels and
operating results are not meaningful. You should not rely on our quarterly
revenues and operating results to predict our future performance.

Liquidity and Capital Resources

   Since inception, we have financed our operations through private sales of
convertible preferred stock which totaled $66.0 million in aggregate net
proceeds through March 31, 1999, through our initial public offering in June
1999 which generated net proceeds of $66.8 million, and through an equipment
loan and a capitalized lease, which totaled $922,000 in principal amount
outstanding at June 30, 1999. As of June 30, 1999, we had $79.8 million of cash
and cash equivalents and $33.3 million of short-term investments, and working
capital of $88.3 million.

   Net cash used for operating activities was $6.6 million, $5.1 million and
$917,000 for the fiscal years ended June 30, 1997, 1998 and 1999, respectively.
For each of the fiscal years ended June 30, 1997, 1998 and 1999, cash used for
operating activities was attributable primarily to net losses and an increase
in accounts receivable offset in part by depreciation and amortization,
increases in accounts payable and accrued liabilities, and increases in
deferred revenue. For the fiscal year ended June 30, 1999, accounts receivable
increased by approximately $17.8 million. This increase was due to increased
sales to both wireless telephone manufacturers and network operators. To date,
we have had no write-offs of accounts receivable and we have not recorded any
allowance for doubtful accounts. Accrued liabilities increased by approximately
$5.3 million for the fiscal year ended June 30, 1999, which was primarily due
to an increase of $1.3 million in accruals of incentive compensation for sales
personnel reflective of the increased billings of license prepayments from
network operators and increased fees from wireless telephone manufacturers in
the quarter ended June 30, 1999, the accrual of approximately $471,000 of costs
associated with the initial public offering completed in June 1999 and an
increase in accrued consulting costs of approximately $1.0 million. Deferred
revenue increased by approximately $29.8 million for the fiscal year ended June
30, 1999, as a result of increased deferred license

                                       31
prepayments by network operators of approximately $27.5 million and increased
deferred fees from wireless telephone manufacturers of approximately $2.3
million.

   Net cash used for investing activities was $4.8 million, $18.0 million and
$15.2 million for the fiscal years ended June 30, 1997, 1998 and 1999,
respectively. For each of the fiscal years, cash used in investing activities
reflects purchases of property and equipment, with increased purchases of
short-term investments in the fiscal years ended June 30, 1997, 1998 and 1999.

   Net cash provided by financing activities was $9.7 million, $31.7 million
and $83.2 million for the fiscal years ended June 30, 1997, 1998 and 1999,
respectively. Cash provided by financing activities in fiscal 1997 and 1998 was
attributable to proceeds from the issuance of preferred stock, and for the
fiscal year ended June 30, 1998, cash provided by financing activities also was
attributable in part to proceeds from our equipment loan. In March 1999 we
completed the sale of 2,458,543 shares of Series E convertible preferred stock
at a purchase price of $7.24 per share, which resulted in net proceeds to us of
approximately $16.7 million. In June 1999, we completed an initial public
offering of 4,600,000 shares of our common stock at a public offering price of
$16.00 per share, which resulted in net proceeds to us of approximately $66.8
million. All of the outstanding shares of convertible preferred stock were
automatically converted into shares of common stock upon the closing of the
initial public offering in June 1999.

   As of June 30, 1999, our principal commitments consisted of obligations
outstanding under operating leases, our equipment loan and capitalized lease
obligations. Although we have no material commitments for capital expenditures,
we expect to increase capital expenditures and lease commitments consistent
with our anticipated growth in operations, infrastructure and personnel. We
also may increase our capital expenditures as we expand into additional
international markets. See Notes 3, 4 and 5 of Notes to Consolidated Financial
Statements.

   We believe that our current cash, cash equivalents and short-term
investments, will be sufficient to meet our anticipated cash needs for working
capital and capital expenditures for at least the next twelve months. If cash
generated from operations is insufficient to satisfy our liquidity
requirements, we may seek to sell additional equity or debt securities or to
obtain a credit facility. If additional funds are raised through the issuance
of debt securities, these securities could have rights, preferences and
privileges senior to holders of common stock, and the terms of any debt could
impose restrictions on our operations. The sale of additional equity or
convertible debt securities could result in additional dilution to our
stockholders, and additional financing may not be available in amounts or on
terms acceptable to us, if at all. If we are unable to obtain this additional
financing, we may be required to reduce the scope of our planned product
development and marketing efforts, which could harm our business, financial
condition and operating results.

Year 2000 Readiness Disclosure

   Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These systems and
software products will need to accept four digit entries to distinguish 21st
century dates from 20th century dates. This problem may result in software
failures or the creation of erroneous results.

   We have conducted a year 2000 readiness review for the current versions of
our products. The review includes assessment, implementation (including
remediation, upgrading and replacement of some product versions), validation
testing, and contingency planning. We have largely completed all phases of this
plan, except for contingency planning, for the current versions of our
products. As a result, we believe all current versions of our products are
capable of properly distinguishing between 20th and 21st century dates, when
configured and used in accordance with the related documentation, and provided
that the underlying operating system of the host machine and any other software
used with our products are also capable of properly distinguishing between 20th
and 21st century dates. We have not tested all noncurrent versions of our
products and do not intend to do so. However, we have delivered software
releases containing corrections to all identified

                                       32
year 2000 errors in our UP.Link Server Suite software to our network operator
customers with our software in production and expect that those releases will
be implemented by our customers prior to December 31, 1999.

   We are testing software obtained from third parties (licensed software,
shareware, and freeware) that is incorporated into our products, and we have
contacted our vendors to confirm that licensed software is capable of properly
distinguishing between 20th and 21st century dates. We have been informed by
many of our vendors that their products that we use are capable of properly
distinguishing between 20th and 21st century dates. Despite testing by us and
by current and potential customers, and assurances from developers of products
incorporated into our products, our products may contain undetected errors or
defects associated with year 2000 date functions. Known or unknown errors or
defects in our products could result in delay or loss of revenues, diversion of
development resources, damage to our reputation, or increased service and
warranty costs, any of which could materially and adversely affect our
business, operating results or financial condition. Some commentators have
predicted significant litigation regarding year 2000 compliance issues, and we
are aware of lawsuits against other software vendors. Because of the
unprecedented nature of this litigation, it is uncertain whether or to what
extent we may be affected by it.

   Our internal systems include our information technology, or IT, non-IT
systems and embedded systems. We have completed an assessment of our material
internal IT, non-IT and embedded systems, including both our own software
products and third-party software and hardware technology. We expect to
complete validation testing of our IT systems and related contingency planning
by October 1999. To the extent that we are not able to test the technology
provided by third-party vendors, we are seeking assurances from vendors that
their systems are year 2000 compliant. We are not currently aware of any
material operational issues associated with preparing our internal IT, non-IT
and embedded systems for the year 2000. However, we may experience material
unanticipated problems or additional costs caused by undetected errors or
defects in the technology used in our internal IT, non-IT and embedded systems.

   We do not currently have any information concerning the year 2000 compliance
status of our customers. Our network operator customers face implementation and
support challenges in introducing Internet-based services via wireless
telephones. Historically, network operators have been relatively slow to
implement new complex services, such as Internet-based services, and year 2000
compliance issues could slow adoption or implementation of our products. If our
current or future customers fail to achieve year 2000 compliance or if they
divert technology expenditures, especially technology expenditures that were
earmarked for our products, to address year 2000 compliance problems, our
business could suffer.

   We have funded our year 2000 plan from available cash and have not
separately accounted for these expenses in the past. To date, these expenses
have not been material. Most of our expenses have related to, and are expected
to continue to relate to, the operating costs associated with time spent by
employees and management consultants in the evaluation process and year 2000
compliance matters generally. We expect to incur approximately $500,000 to
verify that our IT, non-IT and embedded systems are capable of properly
distinguishing between 20th century and 21st century dates. In addition, we may
experience material problems and expenses associated with year 2000 compliance
that could adversely affect our business, results of operations, and financial
condition. Finally, we are also subject to external forces that might generally
affect industry and commerce, such as year 2000 compliance failures by utility
or transportation companies and related service interruptions.

Quantitative and Qualitative Disclosures About Market Risk

   Foreign Currency Hedging Instruments

   We transact business in various foreign currencies and, accordingly, we are
subject to exposure from adverse movements in foreign currency exchange rates.
To date, the effect of changes in foreign currency exchange rates on revenues
and operating expenses have not been material. Substantially all of our
revenues are earned in U.S. dollars. Operating expenses incurred by our
European and Japanese subsidiaries are denominated primarily in U.K. pounds
sterling and Japanese yen, respectively.

                                       33
We currently do not use financial instruments to hedge operating expenses in
the U.K. or Japan denominated in their respective local currency. We intend to
assess the need to utilize financial instruments to hedge currency exposures on
an ongoing basis.

   We do not use derivative financial instruments for speculative trading
purposes, nor do we currently hedge our foreign currency exposure to offset the
effects of changes in foreign exchange rates.

   Fixed Income Investments

   Our exposure to market risks for changes in interest rates relates primarily
to corporate debt securities. We place our investments with high credit quality
issuers and, by policy, limit the amount of the credit exposure to any one
issuer.

   Our general policy is to limit the risk of principal loss and ensure the
safety of invested funds by limiting market and credit risk. All highly liquid
investments with a maturity of less than three months at the date of purchase
are considered to be cash equivalents; all investments with maturities of three
months or greater are classified as available-for-sale and considered to be
short-term investments.

                                       34
BUSINESS

Phone.com, Inc.

   We are a leading provider of software that enables the delivery of Internet-
based services to mass-market wireless telephones. Using our software, network
operators can provide Internet-based services to their wireless subscribers,
and wireless telephone manufacturers can turn their mass-market wireless
telephones into mobile Internet appliances. Wireless subscribers thus have
access to Internet- and corporate intranet-based services, including email,
news, stocks, weather, travel and sports. In addition, subscribers have access
via their wireless telephones to network operators' intranet-based telephony
services, which may include over-the-air activation, call management, billing
history information, pricing plan subscription and voice message management.
Our software platform consists of the UP.Link Server Suite, which is installed
on network operators' systems, and UP.Browser, which is embedded in wireless
telephones. As of August 1999, 31 network operators have licensed our software
and have commenced or announced commercial service or are in market or
laboratory trials. In addition, 25 wireless telephone manufacturers have
licensed UP.Browser.

   In September 1999, we announced the MyPhone service, our mobile portal
platform that is complementary to our existing business. The MyPhone service
enables network operators to rapidly deploy branded portal sites for their
wireless subscribers. With MyPhone, network operators can provide their
subscribers with a customized set of information services and applications that
are optimized for the mobile user, thereby enhancing subscriber loyalty and
capturing new revenue opportunities.

Industry Background

Growth of the Internet

   The Internet has emerged as a global communications medium enabling millions
of people to share information and conduct business electronically.
International Data Corporation, or IDC, estimates that there were approximately
159 million users of the Internet worldwide at the end of 1998 and that the
number of users will grow to 410 million by the end of 2002. We cannot assure
you that this estimate will be achieved. The dramatic growth in the number of
business and consumer Internet users has led to a proliferation of useful
information and services on the Internet, including email, news, electronic
commerce, educational and entertainment applications and a multitude of other
value-added services. As a result, the Internet has become a primary and
ubiquitous daily resource for millions of people.

Growth of Wireless Telecommunications

   Worldwide use of wireless telecommunications has grown rapidly as cellular
and other emerging wireless communications services have become more widely
available and affordable for the mass business and consumer markets. Advances
in technology, changes in telecommunications regulations and the allocation and
licensing of additional radio spectrum have contributed to this growth
worldwide. Dataquest estimates that there were approximately 187 million
digital wireless subscribers worldwide at the end of 1998 and that the number
of subscribers will grow to 590 million by the end of 2002. We cannot assure
you that this estimate will be achieved.

The Wireless Network Operator Environment

   As a result of deregulation, new radio frequency spectrum licenses,
privatizations and rapid network expansion by new entrants, the competitive
environment among network operators in major markets worldwide has become
intense. Efforts to attract and retain subscribers have resulted in significant
price-based competition. Increased competition has in turn raised the costs
associated with acquiring new subscribers, has lowered average revenues per
subscriber, and has increased the propensity of subscribers to switch from one
network operator to another. For these reasons, network operators are looking
for new revenue sources in the form of value-added services they can deliver to
their wireless subscribers. They are also looking for ways to differentiate
their product offerings in an effort to retain subscribers. Finally, they are
focused on finding and deploying solutions that enable them to deliver and
support their services in a more cost-effective manner.

                                       35
The Convergence of the Internet and Mobile Telephony

   As people have become increasingly dependent on email services, remote
access to corporate intranets, and other Internet-based services, mass-market
wireless telephones that provide mobile access to these resources have become
increasingly useful tools. Phone.com was a pioneer in the convergence of the
Internet and mobile telephony. In 1995, Phone.com developed its initial
technology, which enables the delivery of Internet-based services to wireless
telephones. In 1996, Phone.com introduced and deployed its first products based
on this technology.

   To provide a worldwide open standard enabling the delivery of Internet-based
services to mass-market wireless telephones, Phone.com, Ericsson, Motorola and
Nokia formed the Wireless Application Protocol Forum. In 1998, the WAP Forum
published technical specifications for application and content development and
product interoperability based on Internet technology and standards. By
complying with WAP specifications, wireless telephone manufacturers, network
operators, content providers and application developers can provide Internet-
based products and services that are interoperable.

   In 1998, the WAP Forum published the Wireless Markup Language, or WML. WML
is compliant with the Extensible Markup Language, or XML, specification
published by the World Wide Web Consortium. XML is a programming language that
provides a means of describing and exchanging data in an open format. Content
providers and application developers use WML to optimize the display of, and
interaction with, Web-based data on wireless telephones. Based substantially on
technology that Phone.com contributed to the public domain, WML is optimized
for delivery of Internet content to mass-market wireless telephones, which have
numeric keypads instead of full keyboards, small screens, and limited memory
capacity, processing power, battery life and bandwidth. In the same manner that
the programming language known as Hypertext Markup Language, or HTML, has
provided an open standard that has fueled the development of Internet
applications and content for personal computers, WML is designed to be an
industry standard that will encourage the development of Internet applications
and content for wireless telephones.

   Leading network operators, telecommunications device and equipment
manufacturers, and software and services companies worldwide have sanctioned
the specifications promulgated by the WAP Forum. Charles Parrish, Executive
Vice President of Phone.com, currently serves as the Vice Chairman of the WAP
Forum, which has grown to over 150 members as of September 1999, including the
following companies:

                                 Board Members

----------------------------------------------------------------------------
Phone.com                   Motorola
  Alcatel                     Nokia Mobile Phones
  CEGETEL/SFR (Societe        NTT Mobile Communications Network (NTT DoCoMo)
   Francaise du Radio
   Telephone)                 SBC Communications
  DDI Corporation             Sprint PCS
  Ericsson Mobile
   Communications AB          Telstra Corporation
  IBM
  Matsushita Communication
   Industrial

                               Network Operators
----------------------------------------------------------------------------
  AT&T Wireless Services      Mannesmann
  Bell Atlantic Mobile        Nextel Communications
  BellSouth Cellular          Omnitel
  Bouygues Telecom            One 2 One
  Cable & Wireless            Orange Communications
  Cellnet Communications      Radiolinja
  CoCoNet Global Interchange  Rogers Cantel Mobile Communications
  Connect Austria             SK Telecom
36
Deutsche Telecom Mobilnet GmbH           Sonera Corporation
  FarEasTone Telecommunications            SWISSCOM LTD.
  Finnet                                   Telefonica Servicios Moviles
  France Telecom                           Telia Mobile AB
  Giesecke & Devrient                      Tokyo Digital Phone
  Hongkong Telecom Mobile Services         Telecom Italia Mobile
  IDO Corporation                          Telenor Mobil Group
  Japan Telecom                            TU-KA Cellular Tokyo
  KPN                                      Vodafone
  LG TeleCom

                       Device and Equipment Manufacturers
------------------------------------------------------------------------------
  Acer Peripherals                         ORGA Kartensysteme GmbH
  Bosch Telecom Danmark A/S                Philips Consumer Communications
  Bull CP8                                 Pioneer
  CMG Telecommunications & Utilities       Qualcomm
  De La Rue Card Systems                   RTS Wireless
  DENSO                                    Samsung Electronics
  Gemplus                                  Schlumberger Industries S.A.
  Hewlett-Packard                          Sema Group Telecom
  Hitachi                                  Sharp
  ICO Global Communications                Siemens AG
  Intel Corporation                        Sony International (Europe) GmbH
  LG Information & Communications          Tecnomen Oy
  Logica Aldiscon                          Telital S.p.A.
  Lucent Technologies                      Toshiba
  Mitsubishi Wireless Communications       Uniden
  NEC Technologies (UK)                    Unisys
  Nissan Communications Systems
  Nortel

                        Software and Services Companies
------------------------------------------------------------------------------
  @MOTION                                  M.D. Communications
  Advance Systems Limited                  Merita Bank
  Aether Systems                           Microsoft
  Agency.com                               Mobile Services Group
  ApiON                                    Myalertcom
  AU-System Mobile                         Oracle Corporation
  Baltimore Technologies                   Peramon Technology
  BEA Systems                              ProxiNet
  Bussan Systems Integration Company       Puma Technology
  Certicom                                 RSA Data Security
  Charles Schwab & Co.                     Saraide
  Comverse Network Systems                 Sendit AB
  CCL (Computer & Communications           Scandinavian Softline Technology Oy
  Research Laboratories, ITRI)             Softline
  CTC (Itochu Techno-Science Corporation)  Spyglass
  CycleLogic                               Symbian
  Dr. Materna GmbH                         Systems Engineering Consultants
  Digital Mobility                         TANTAU Software
37
Diversinet                    Tegic Communications
  Dolphin Telecommunications    TWS
  Evolving Systems              Union Bank of Switzerland
  Fantastic Corporation         Usha Communications Technology
  Fujitsu Software Corporation  VTT Information Technology
  Geoworks Corporation          VeriSign
  Glenayre Technologies         Visa International
  Lexacom                       WapIT
  LPG Innovations               Wireless Knowledge
  MapQuest.com
The Market Opportunity

   In response to an increasingly competitive environment, network operators
are seeking to deliver Internet-based services to their wireless subscribers as
a means to generate revenues from new sources, differentiate their service
offerings, and reduce subscriber turnover and operating costs. To do this,
network operators require a scalable turnkey software and services solution to
deliver Internet-based services and content to their wireless subscribers.

The Phone.com Solution

   We provide a leading software infrastructure platform that enables the
delivery of Internet-based services to mass-market wireless telephones. Using
our scalable platform, network operators can provide Internet-based content,
applications and services to their wireless subscribers, and wireless telephone
manufacturers can turn their mass-market wireless telephones into mobile
Internet appliances. Wireless subscribers thus have access to Internet- and
corporate intranet-based services, including email, news, stocks, weather,
travel and sports. In addition, the MyPhone service, our mobile Internet portal
platform, is designed to enable network operators to rapidly deploy branded
portal sites for their wireless subscribers and deliver Internet content and
applications optimized for the mobile user.

 [Diagram depicting components of UP.Link platform and relationships of various
         systems, including wireless telephones, servers and Internet]

   Our infrastructure platform consists of the UP.Link Server Suite and
UP.Browser software products. The UP.Link Server Suite includes:

  .  a means of exchanging data between the Internet and mass-market wireless
     telephones, commonly referred to as a gateway;
  .  a service platform that performs subscriber management and service
     provisioning functions, as well as communicating with the network
     operator's customer care and billing systems; and
  .  Internet-based applications such as email and personal information
     management software.

                                       38
The UP.Browser is a browser and messaging software product that is designed and
optimized for mass-market wireless telephones. In addition, as of August 1999,
approximately 10,700 third-party developers have registered to use our UP.SDK
software development kit, and a variety of third-party content is currently
available for wireless telephones equipped with UP.Browser, including
information from ABCNews.com, Bloomberg, Reuters, Quote.com and ESPN
Sportszone.

   With the introduction of the next version of our software solution,
currently available as a beta release, our products will provide an open,
interoperable, WAP-compliant platform for the delivery of Internet-based
services. Our software solution supports all major digital wireless telephony
standards in use around the world:

  .  CDMA (Code Division Multiple            .  GSM (Global System for Mobile
     Access)                                    Communication)
  .  TDMA (Time Division Multiple            .  CDPD (Cellular Digital Packet
     Access)                                    Data)
  .  iDEN (Integrated Digital Enhanced       .  PDC (Personal Digital Cellular)
     Network)
  .  PHS (Personal Handyphone System)

   The MyPhone service is complementary to our infrastructure platform and is
designed to allow network operators to rapidly deploy customized, branded
Internet portals for their wireless subscribers. MyPhone offers a framework for
the delivery of Internet applications, content and services optimized for
wireless telephones. Initial information services available through MyPhone
will include news feeds and financial information, as well as email, address
book and calendar functionality. The MyPhone service can be customized to
enable network operators to offer their wireless subscribers a branded portal
with a differentiated look and feel, content, customer care functionality and
other unique features. Wireless subscribers will also be able to access the
information services and applications available on MyPhone through a standard
PC web browser. MyPhone's extensible architecture is designed to facilitate the
development of new applications and services. MyPhone will be hosted by
Phone.com, and we expect to operate all back-end systems involved in offering
this service.

   Key benefits of our products and services for network operators include the
following:

  .  Opportunity to generate incremental revenues. Network operators can
     generate additional revenues by offering value-added Internet-based
     services. They can also charge for the increased data and voice airtime
     that these applications encourage. For example, a user can access an
     email message via UP.Mail and initiate a voice call to any phone number
     appearing in the message with the press of one button.

  .  Ability to differentiate services and improve subscriber
     retention. Using our products and services, network operators can offer
     new Internet-based services to wireless subscribers. In addition, by
     enabling wireless subscribers to store personal contact information in
     their networks and to personalize the selection and presentation of
     Internet content such as stock quotes, sports scores and news, network
     operators can enhance subscriber retention.

  .  Opportunity to reduce operating costs. Our UP.Link Server Suite can also
     be used by network operators to reduce operating costs. For example,
     network operators' call centers are burdened by high rates of calls from
     subscribers inquiring about billing, service availability, usage and
     other service-related matters. Our software platform enables network
     operators to leverage standards-based Internet technology to allow
     subscribers to make many of these inquiries using their wireless
     telephones without assistance by customer care representatives. By
     bypassing the call center infrastructure for these activities, network
     operators can reduce their operating costs.

  .  Ability to rapidly deploy a branded mobile Internet portal site. MyPhone
     is designed to allow network operators to rapidly deploy a customized
     and branded Internet portal for its wireless subscribers. We believe
     that by aggregating content and applications optimized for mobile users
     in a customized, branded portal service, network operators will be able
     to increase subscriber loyalty and generate new revenue opportunities.
     MyPhone's extensible architecture will facilitate new application
     development, allowing network operators to continue to deliver new and
     enhanced services to their subscribers.

                                       39
The Phone.com Strategy

   Our objective is to be the leading supplier to network operators of software
and services that enable the convergence of the Internet and mobile telephony.
Key elements of our strategy include:

  .  Focus on Providing Products and Services to Network Operators. We focus
     on providing comprehensive solutions that enable network operators to
     deliver Internet-based services to their wireless subscribers. Our close
     working relationships with network operators provide us with a valuable
     understanding of our customers' technology and operations, which we
     intend to leverage to accelerate time to market of our products and
     identify new sales opportunities. In order to drive revenues from our
     UP.Link Server software and related services, we utilize direct and
     indirect sales channels. Our direct sales force focuses on selling
     products and consulting services and assists our indirect channel
     partners in selling our products and services. Our indirect sales
     channel partners are currently Alcatel, Itochu Techno-Science
     Corporation, Sema Group and Siemens. These partners sell our products
     and services as an integral part of their product and service offerings
     to network operators primarily in international markets. We intend to
     add new partners to our indirect sales channel to serve customers in key
     markets and expect that sales through our indirect sales channel
     partners will represent an increasing portion of our revenues. In
     addition, we intend to invest significantly in the development of new
     mobile Internet applications and services for the MyPhone service.

  .  Continue to Invest in our Technology. Network operators have stringent
     requirements for server software performance, scalability and
     reliability. Extensive technical expertise is required to integrate
     these solutions with the network operators' complex systems. We also
     expect that network operators will demand regular upgrades that include
     new functions and features. Consequently, we intend to continue to
     invest heavily in research and product development. We also intend to
     maintain our technology leadership by leveraging our role in prominent
     industry standard-setting organizations such as the WAP Forum and the
     World Wide Web Consortium.

  .  Drive the Sale and Development of Internet-Based Applications and
     Services. Network operators that offer Internet-based services by using
     our UP.Link Server Suite generally seek new value-added applications to
     offer to their subscribers. We currently offer the following Internet-
     based applications:

    .  UP.Mail, which delivers email to wireless telephones,
    .  UP.Organizer, a personal information management application, and
    .  UP.Web, which enables subscribers to access, manage and update their
       personal information and configuration for UP.Mail and UP.Organizer
       from their personal computers.

   We are continuously enhancing our existing products and developing new
   applications and services to provide additional functionality for network
   operators and wireless subscribers. In September 1999, we announced the
   MyPhone service, a turnkey solution designed to provide network operators
   a means to rapidly deploy customized mobile Internet portals. We intend
   to market this service aggressively through our existing sales channels.
   We believe that the adoption of our MyPhone service by network operators
   will accelerate the adoption by subscribers of Internet-based services
   using their wireless telephones as well as the development of new WAP-
   compatible information services and applications.

  .  Propagate Widespread Use of UP.Browser in Mass-Market Wireless
     Telephones. We believe that increasing the number of wireless telephone
     manufacturers that incorporate UP.Browser into their mass-market
     wireless telephones enhances the attractiveness of our UP.Link server
     software to network operators. Therefore, in order to drive widespread
     adoption, we license UP.Browser to wireless telephone manufacturers,
     free of per-unit royalties. As of September 1999, we have licensed
     UP.Browser to 25 wireless telephone manufacturers.

  . Promote the Development of Internet-Based Services Over Mass-Market
    Wireless Telephones. To encourage the growth of our business, we actively
    encourage Internet content and application developers to create WML
    applications. In connection with this activity, we provide our UP.SDK
    software

                                       40
development kit and support to Internet content and application developers
   free of charge. As of August 1999, there were approximately 10,700
   registered developers in our Developer Program. Internet content providers
   that currently deliver content for wireless telephones equipped with
   UP.Browser include ABCNews.com, BizTravel.com, Bloomberg, Data
   Broadcasting Corporation, ESPN Sportszone, InfoSpace.com, Quote.com,
   Reuters and Sportsfeed.

Products and Services

Products

   Our software products enable the delivery of Internet-based services to
mass-market wireless telephones. Our software products include:

  . UP.Link Server Suite--a product that network operators use to connect
    their subscribers' mass-market wireless telephones to Internet services
  . UP.Browser--a browser that is embedded in mass-market wireless telephones
    and enables wireless subscribers to access Internet services
  . UP.Smart--a suite of software applications that delivers personal digital
    assistant features to smartphones
  . UP.SDK--a software development kit that Internet content providers and
    third-party developers use to create WML-compliant applications

UP.Link Server Suite

   UP.Link Server Suite is a turnkey software solution with features and
applications that enable network operators to offer Internet-based services to
their wireless subscribers. UP.Link Server Suite connects data-enabled
wireless telephones to applications and content hosted by Web servers on the
Internet or private intranets. UP.Link Server Suite also provides network
operators with subscriber provisioning and network management functions on a
robust and scalable software platform. The UP.Link Server Suite consists of
the following components:

 Components        Description
-------------------------------------------------------------------------------
Gateway         UP.Link Gateway provides the network-layer functions of the UP.Link
                  Server Suite, and connects Internet- and intranet-based services to
                  wireless networks and wireless telephones. UP.Link Gateway connects
                  the multiple protocols for wireless data communications to the open
                  standards of the Internet, thereby enabling Web servers to
                  recognize a wireless telephone as an Internet standards- compliant
                  client.

  Administration  The UP.Link administration component provides a Web-based
                  administration control system to keep the network operator's
                  Internet-based network components up and running, assess system
                  status and provision new subscribers.

                  The UP.Link Provisioning Application Programming Interface, or
                  PAPI, enables integration of UP.Link with the network operator's
                  existing customer care, help desk and billing systems.

  Services        The services component provides an open application programming
                  framework with interfaces, or APIs, that standardize the way that
                  the services component interacts with applications. These services
                  include:

                  . Push Server--allows applications to push information to wireless
                    subscribers. For example, an email application can use the Push
                    Server to notify a wireless subscriber of new messages.
                  . Fax Server--enables the forwarding of email attachments and other
                    data content to fax machines for printing.
41
. Identity Server--maintains a subscriber registry that retains
                  wireless subscribers' service settings and allows network
                  operators to track their subscribers' service usage.
                . Content Translation Framework--provides forward and backward
                  compatibility of content formats between different generations of
                  browsers and wireless telephones. Translates between
                  international character sets in real-time. Also translates
                  standard HTML Web pages into WML pages for viewing on wireless
                  telephones.
                . Application Registry--provides a structure for the
                  interoperability of different applications. For example, third-
                  party applications can retrieve and store contact records in the
                  UP.Organizer's address book or pass an email address to UP.Mail.

  Applications  UP.Applications is a suite of wireless Internet-based applications,
                including:

                . UP.Mail--provides access to the same email account through both
                  wireless telephones and personal computers.
                . UP.Organizer--provides a suite of synchronized Internet-based
                  personal information management applications, including an
                  address book, calendar and to-do list.
                . UP.Web--a Web-based user interface that allows subscribers to use
                  their personal computers to perform many of the same tasks they
                  perform on their wireless telephones with UP.Organizer.
UP.Browser

   UP.Browser is a browser and messaging software product that is designed and
optimized for mass-market wireless telephones. Using UP.Browser, subscribers
can access Web-based information and services that are hosted on network
operators' or third-party Web servers. Due to its open and highly portable
architecture, UP.Browser can be embedded into different types of wireless
telephones and utilize each telephone's specific display and input
characteristics, such as graphical displays and programmable keys. Key features
of UP.Browser include:

 Components         Description
--------------------------------------------------------------------------------
Browsing           UP.Browser displays WML-designed pages from any Web or intranet
                     site. In addition, UP.Browser incorporates text-input software from
                     Tegic Communications.

  Universal Inbox    Notifies subscribers with a visual or audible indication when a Web
                     page or other data has been proactively "pushed" to their wireless
                     telephones. Universal Inbox also integrates in a single local
                     mailbox diverse alert types, including email and voice mail, as
                     well as Web-based content such as stock quotes, traffic alerts and
                     flight information.

  Local Application  Allows access to important information when out of network
  Environment        coverage. Increases efficiency of applications and minimizes
                     perceived delay when used over bandwidth-constrained networks.

  Security           UP.Browser employs the same encryption technology used by many
                     commercial Web sites. Consequently, all interaction between the
                     wireless telephone and a Web site can be authenticated and
                     encrypted.
42
UP.Smart

   UP.Smart is a suite of software applications that augments UP.Browser with a
set of popular functions commonly found on personal digital assistants.
UP.Smart includes address book, calendar, to-do list and memo functions.
UP.Smart also utilizes Puma Technology's synchronization software to enable a
user to synchronize UP.Smart with PC-based personal information management
applications by connecting the UP.Smart-equipped wireless telephone to a
personal computer through a serial cable. The information is stored both on the
wireless telephone and personal computer, making it accessible even when the
wireless telephone is not connected to the network.

UP.SDK

   Our software development kit, known as UP.SDK, provides tools and
documentation for Internet content providers and developers to create and
maintain WML-based Internet services. UP.SDK consists of the following
components:

  . The UP.Simulator, a Windows-based application that simulates the behavior
    of UP.Browser-equipped wireless telephones, allowing developers to more
    easily test WML services.

  . Specialized functions and libraries that simplify the process of
    generating WML applications.

  . Tools for establishing secure communications between WML applications and
    UP.Link Servers.

  . Sample WML files and application source code.

Services

   We offer consulting services to network operators and wireless telephone
manufacturers. Our consulting services help us to shorten our software license
sales cycle, accelerate deployment of our technology and deepen our
understanding of our customers' networks. We also provide both customer support
and custom software development services for network operators, as well as
software consulting services to wireless telephone manufacturers that license
UP.Browser.

New Services and Products under Development

 MyPhone

   In September 1999, we announced the MyPhone service, our mobile portal
platform that is complementary to our existing business. The MyPhone service
enables network operators to rapidly deploy branded portal sites for their
wireless subscribers. With MyPhone, network operators can provide their
subscribers with a customized set of information services and applications that
are optimized for the mobile user, thereby enhancing subscriber loyalty and
capturing new revenue opportunities. MyPhone offers a framework for the
delivery of Internet applications, content and services optimized for wireless
telephones. Initial information services available through MyPhone will include
news feeds and financial information, as well as email, address book and
calendar functionality. The MyPhone service can be customized to enable network
operators to offer their wireless subscribers a branded portal with a
differentiated look and feel, content, customer care functionality and other
unique features. Wireless subscribers will also be able to access the
information services and applications available on MyPhone through a standard
PC web browser. MyPhone's extensible architecture is designed to facilitate the
development of new applications and services. MyPhone will be hosted by
Phone.com, and we expect to operate all back-end systems involved in offering
this service.

 Over-the-Air Provisioning

   In July 1999, we announced a collaborative effort with Bell Atlantic Mobile
and Motorola to develop WAP-based over-the-air provisioning technology. Through
this collaboration, we are designing a system capable of delivering
provisioning information as well as electronic customer care to Bell Atlantic
Mobile's

                                       43
subscribers via CDMA wireless telephones. The system is being designed to
automatically update wireless telephones with current versions of network
information such as roaming lists, area code information, and other data
parameters. In addition, the system is being designed to enable subscribers to
check their bill and interactively manage their individual account features
directly from their wireless telephones.

Customers

 Wireless Network Operators

   We sell our UP.Link Server Suite and related technical support to network
operators worldwide to enable them to offer a variety of wireless Internet
services to their subscribers. These network operators have licensed our
software and have either announced a commercial service launch or are in a
market or laboratory trial phase.

   As of August 1999, 31 network operators, including the following companies,
have licensed our software:

 Name                              Stage              Technology    Country

--------------------------------------------------------------------------------------
AT&T Wireless Services         Deployed in July 1996            CDPD         USA
  Bell Atlantic Mobile         Deployed in September 1996         CDPD         USA
  GTE Wireless                    Deployed in May 1997            CDPD         USA
  SFR/CEGETEL                    Deployed in March 1999           GSM        France
  DDI Corporation                Deployed in April 1999           CDMA        Japan
  IDO Corporation                Deployed in April 1999           CDMA        Japan
  Bell Mobility                   Deployed in May 1999            CDMA       Canada
  LG Telecom                     Deployed in June 1999            CDMA     South Korea
  Omnitel                        Deployed in June 1999            GSM         Italy
  Sprint PCS                   Deployed in September 1999         CDMA         USA
  Mannesmann Mobilfunk        Announced Commercial Launch         GSM        Germany
   (D2)                           (expected fall 1999)
  Nextel Communications       Announced Commercial Launch         iDEN         USA
                                  (expected fall 1999)
  Southern LINC               Announced Commercial Launch         iDEN         USA
                                  (expected fall 1999)
  Shinsegi Telecom            Announced Commercial License        CDMA        Korea
  US West                     Announced Commercial License        CDMA         USA
  Telstra Corporation         Announced Commercial License        GSM       Australia
  Deutsche Telekom                       Trial                    GSM        Germany
   Mobilnet GmbH (T-
   Mobile)
  France Telecom Mobile                  Trial                    GSM        France
  Telecom Italia Mobile                  Trial                    GSM         Italy
We also provide our network operator customers with consulting services
that enable them to rapidly adopt our technology and bring wireless Internet-
based services to market. Our consulting services focus on those areas where
our products interface with the network operators' internal systems such as
billing, provisioning and customer care. We also provide our network operator
customers with assistance in choosing the appropriate content and applications
for their subscribers and creating the promotion and pricing strategies for
their service.

   Our agreements with network operators provide these customers with a non-
exclusive license to use our UP.Link Server Suite software in connection with
providing Internet-based services to their subscribers. Pricing

                                      44
and payment terms for these licenses are negotiated with the customer based on
the number of subscriber licenses purchased by the network operator, and the
licenses can be purchased on an as-deployed basis or on a prepaid basis. While
these agreements do not provide for a right of return, these agreements
typically provide for a six-month warranty, indemnification against
intellectual property infringement claims, a commitment to provide standards-
compliant products, and a source code escrow. In addition, we typically provide
fee-based maintenance and support services to these customers, under which they
receive error corrections and remote support. They can also elect to receive
new releases of UP.Link Server Suite for an additional fee.

Wireless Telephone Manufacturers

   We license our UP.Browser software to wireless telephone manufacturers, who
embed UP.Browser into their products. In order to encourage these manufacturers
to include UP.Browser in their wireless telephone models, no per-unit royalty
is charged. In addition, we provide engineering and support services to
accelerate the introduction of new wireless telephone models that contain
UP.Browser. These services are provided to manufacturers on an annual flat-fee
basis per digital wireless telephony standard.

   As of September 1999, 25 wireless telephone manufacturers have licensed
UP.Browser, and the following manufacturers have publicly announced products
that will include UP.Browser:
. Alcatel                          .Nokia
   . Bosch                            .Panasonic (Matsushita)
   . Casio                            .Philips
   . Hitachi                          .Qualcomm
   . Hyundai Electronics              .Sagem
   . IGS                              .Samsung Electronics
   . Kyocera                          .Sharp
   . LG Information & Communications  .Siemens
   . Mitsubishi                       .Sony
   . Motorola                         .Toshiba
   . NEC                              .3Com (Palm Computing division)
   . Neopoint
Additionally, Ericsson has announced that it will introduce wireless
telephones that will be compatible with our UP.Link Server Suite. As of
September 1999, ten wireless telephone manufacturer customers had made
commercial shipments of telephones with the UP.Browser embedded. In addition,
we are currently providing engineering support services in connection with 60
browser integration projects.

   Our agreements with wireless telephone manufacturers generally provide these
customers with a non-exclusive, royalty-free license to sell wireless
telephones containing UP.Browser. These agreements typically provide for a 90-
day warranty, indemnification against intellectual property infringement claims
and a source code escrow. In addition, customers can elect to receive varying
levels of maintenance and support services for a fee.

   For the year ended June 30, 1999, AT&T Wireless Services and DDI Corporation
accounted for approximately 17% and 14%, respectively, of our total revenues.
For the year ended June 30, 1998, AT&T Wireless Services and Matsushita
Communication Industrial accounted for approximately 22% and 18%, respectively,
of our total revenues. The foregoing calculations are based on revenues derived
from direct and indirect sales to these customers.

Research and Product Development

   We continue to enhance the features and performance of our existing products
and introduce new products. For example, we have recently released in beta
version the fourth generation of our UP.Link Server Suite and UP.Browser
products. These products are expected to be compliant with version 1.1 of the
specifications promulgated by the WAP Forum. We are currently developing other
applications, including a

                                       45
secure provisioning server, which enables network operators to automate
customer provisioning, and compatibility with two-way short messaging service
systems. In addition, we continue to develop the My Phone service to provide
outsourced application development and services to our network operator
customers.

   Our success depends on a number of factors, which include our ability to
identify and respond to emerging technological trends in our target markets,
develop and maintain competitive products, enhance our existing products by
adding features and functionality that differentiate them from those of our
competitors and bring products to market on a timely basis and at competitive
prices. As a result, we have made, and we intend to continue to make,
significant investments in research and product development. Our research and
development expenses were $4.0 million, $5.7 million and $13.1 million for the
years ended June 30, 1997, 1998 and 1999, respectively. As of August 31, 1999,
we had 129 employees engaged in research and product development activities. We
are recruiting additional skilled engineers for research and product
development, and our business could be adversely affected if we are unable to
hire these engineers on a timely basis.

Technology

   Our technology has contributed both to driving open standards for the
delivery of Internet-based services to mass-market wireless telephones and to
providing network operators and wireless telephone manufacturers with software
solutions that are robust and scalable, and take into account the specific
characteristics of wireless telephony networks and telephones.

Wireless Application Protocol and Wireless Markup Language

   Phone.com, along with Ericsson, Motorola and Nokia, founded the WAP Forum in
1997, and published open standards-based technical specifications for
application and content development, as well as product interoperability based
on Internet technology and standards. Leading network operators,
telecommunications device and equipment manufacturers, and software companies
worldwide have joined the WAP Forum, which has grown to over 150 members as of
September 1999.

   The WAP specifications consist of the following components:

  . A Transport Specification, which defines the way in which data is
    exchanged between the network operator's server and the wireless
    telephone. The WAP Transport Specification mirrors the Internet-standard
    secure HTTP protocol, but is optimized for wireless telephone networks.
    For example, on a typical PC-based Internet connection, all functions
    such as security provisioning and application downloading and interaction
    are performed on the PC. In the WAP Transport Specification, functions
    are divided between the wireless telephone and the network operator's
    server because of the bandwidth constraints over the wireless network and
    the wireless telephone's limited processing power.

  . A Wireless Markup Language (WML), which optimizes the display of and
    interaction with Web-based content on wireless telephones and allows
    Internet applications to take advantage of the voice capabilities of the
    wireless telephony network. WML is compliant with the Extensible Markup
    Language, or XML, specification published by the World Wide Web
    Consortium.

  . WML Script, which enables a developer to add procedural logic to WML
    pages.

   In order to implement interoperability with Internet-based content, the WAP
Transport Specification and WML use the open standards-based Internet model of
interaction, in which content and applications reside on Web servers that are
physically distributed, and requests for the data on these servers are sent via
open-standard Internet addresses, commonly known as URLs.

   On standard Internet Web servers, content typically resides in databases,
but is provided to users via a number of content formats, including HTML and
Java. WML and WML Script function as standard content formats, so Internet
content providers can add WML and WML Script access to their servers without
having to

                                       46
change the underlying data. WML and WML Script applications deliver content in
a format that is optimized for wireless telephone interfaces.

Components of UP.Link Technology

   Our UP.Link Server Suite is designed to be modular, expandable, flexible,
scalable and reliable. Using an architecture based on scalable, object-oriented
technology, the UP.Link Server Suite typically runs on a large, distributed set
of servers. The UP.Link Server Suite, which runs on Sun Microsystems' Solaris
operating system, is designed to meet the stringent performance, scalability
and reliability requirements of network operators.

   Server Side Agents. Since wireless networks have limited bandwidth and
wireless telephones have limited processing power and memory, programs called
agents that reside on the server are used to provide processing power and other
computing resources to UP.Browser-enabled wireless telephones. These agents
allow some operations to be offloaded from the wireless telephone to the
UP.Link server. This means that the duties that are typically performed by the
Web browser on standard personal computers can be divided between the browser
on the wireless telephone and a "proxy" running in the agent. The exact split
of functionality can vary depending on the particular capabilities of the
wireless telephone. The agent can perform many functions, including translating
wireline Internet protocols such as HTTP to wireless Internet protocols such as
WAP, as well as compiling Internet content so that it is more compact to
transmit and easier to display on the wireless telephone.

   Dispatcher. At the core of our scalable server architecture is a dispatcher
that dynamically load balances user proxies between a number of agents. The
dispatcher is much like the line at a bank that funnels a queue of customers to
the next available teller. The dispatcher also provides a basic level of
protection against faults by automatically rerouting subscriber requests if a
proxy server malfunctions.

   Messenger. The UP.Link messenger server provides store-and-forward messaging
capabilities from Web servers to UP.Browser-enabled wireless telephones over a
wide range of wireless protocols such as Short Message Service and Cellular
Digital Packet Data. Store-and-forward means that if a wireless telephone is
turned off or out of its coverage area, the message will be stored and
delivered once the wireless telephone is connected to the network. The
messenger accepts data through standard Web interfaces such as HTTP and
converts the data for transmittal over the wireless network without requiring
modifications to the Web server.

   Narrow Band Router. The Narrow Band Router provides a common interface to a
wide range of narrow band, or low-bandwidth, wireless networks. This feature
makes the protocol-specific components of message addressing, routing and
delivery transparent to Internet applications, enabling developers to easily
create applications for wireless networks without customizing their
applications to work with each individual protocol. Thus the same application
can work across a number of wireless data networks and protocols in a
transparent manner.

   Translation Framework. Wireless telephones are different than personal
computers in that they are mass-market consumer devices with software that is
embedded in the wireless telephone at the factory and very difficult and costly
to modify in the field. The WML specification, however, is regularly evolving
as features and functionality are introduced and refined. To address this
issue, the translation framework enables the translation of content in real-
time. Software translators can be implemented that transparently translate
content based on newer versions of WML to make it compatible with wireless
telephones that contain older versions of UP.Browser, or vice versa.

Sales and Marketing

   We sell our products through both a direct sales force and third-party
resellers, currently Alcatel, Itochu Techno Science Corporation, Sema Group and
Siemens. In addition, we have a joint sales and marketing

                                       47
relationship with Lucent Technologies. As of August 31, 1999, we had 47 persons
in sales and marketing serving the United States market, and 20 persons in
sales and marketing outside the United States. We plan to significantly expand
this group over the next 12 months. In addition, we have offices in London and
Tokyo. Our direct sales force focuses on selling products and consulting
services and assists our indirect channel partners in selling our products and
services. International sales of products and services accounted for 44% and
66% of our total revenues for the years ended June 30, 1998 and 1999,
respectively. We expect international revenues to continue to account for a
significant portion of our revenues, although the percentage of our total
revenues derived from international sales may vary. Our international sales
strategy is to partner with leading distributors and systems integrators that
have strong industry backgrounds and market presence in their respective
markets and geographic regions.

   Our success depends in part on our ability to increase sales of our products
and services through value-added resellers and to expand our indirect
distribution channels. Under the arrangements that we make with our value-added
resellers, a value-added reseller sells, installs and services our products to
wireless network operators. These agreements are not exclusive and do not have
territorial restrictions. Our value-added resellers generally are not
restricted from selling products that are competitive with our products, and
each of our partners can cease marketing our products and services at their
option.

   We believe that customer service and ongoing technical support is an
essential part of the sales process in the wireless communications industry. In
order to provide high levels of customer service, senior management and
assigned account managers play a role in ongoing account management and
relationships. We believe these customer relationships enable us to improve
customer satisfaction and develop products to meet specific customer needs. Our
agreements with our network operator customers provide for 24 hour per day
support seven days per week.

   We actively recruit content and application developers to our platform and
provide to them free of charge our software developer's kit, UP.SDK. We also
provide them with free membership in our Developer Program, free email-based
support and the opportunity to participate in our Alliances Program. As of
August 1999, approximately 10,700 registered developers in our Developer
Program have downloaded UP.SDK, including:
. 724 Solutions                  .Lotus
   . biztravel.com                  .Mapquest.com
   . BroadVision                    .NewsAlert
   . CableData                      .Reuters
   . Comverse Network Systems       .SmartServOnline
   . Data Broadcasting Corporation  .Sportsfeed.com
   . eDispatch.com                  .StockTips
   . InfoSpace.com                  .Vantive
   . Internet Travel Network        .The Weather Underground
   . KLELine                        .Webraska Mobile Technologies
   . Lightbridge
Our Alliances Program is comprised of a select group of our content and
application developers. We screen applications to our Alliances Program based
on the availability and quality of the content or applications produced by the
partner. We perform joint marketing activities with the partner, as well as
provide introductions between our wireless network operators and our Alliances
Program members.

Competition

   The market for our products and services is becoming increasingly
competitive. The widespread adoption of open industry standards such as the WAP
specifications may make it easier for new market entrants and existing
competitors to introduce products that compete with our software products. In
addition, a number of our competitors, including Nokia, have announced or are
expected to announce enhanced features and

                                       48
functionality as proprietary extensions to the WAP protocol. Furthermore, some
of our competitors, such as NTT, have introduced or may introduce services
based on proprietary wireless protocols that are not compliant with the WAP
specifications.

   We expect that we will compete primarily on the basis of price, time-to-
market, functionality, quality and breadth of product and service offerings.
Our current and potential competitors include the following:

  . Wireless equipment manufacturers, such as Ericsson and Nokia, which are
    developing and marketing competitive server, browser and application
    software products. These companies already sell billions of dollars of
    wireless telephones and other telecommunications products to network
    operators which are our existing and potential customers.
  . Microsoft, which recently announced plans to deliver a wireless portal
    designed to work with handheld devices, wireless telephones and
    interactive pagers via Microsoft's MSN network of Internet services.
    Nextel is Microsoft's first customer for these services. Nextel plans to
    use a co-branded version of Microsoft's MSN portal to enable Nextel
    customers to access a customized set of Internet services. This
    arrangement also provides for Microsoft to invest $600 million in Nextel
    to support Nextel's development of wireless Internet services. In
    addition, Microsoft has announced that it intends to enable its Windows
    CE operating system to run on wireless handheld devices, including
    wireless telephones, and to develop and market its own browser for these
    devices.
  . Wireless Knowledge, a joint venture of Microsoft and Qualcomm, which has
    announced its intention to introduce products and services that may
    compete directly with our UP.Link and UP.Browser products, as well as our
    UP.Applications.
  . Systems integrators, such as CMG, and software companies, such as Oracle
    Corporation, which are developing and marketing server software that is
    compliant with the specifications promulgated by the WAP Forum.
  . Providers of Internet software applications and content, electronic
    messaging applications and personal information management software
    solutions, any of whom could offer products and services that compete
    with ours.

   As we enter new markets and introduce new services, such as the MyPhone
service, we will face additional competitors. These competitors may include
telecommunications companies such as Lucent Technologies, traditional Internet
portals such as AOL, InfoSpace, Microsoft and Yahoo!, Internet infrastructure
software companies and several private mobile Internet portal companies.

   Many of our existing competitors as well as potential competitors have
substantially greater financial, technical, marketing and distribution
resources than we do. Several of these companies also have greater name
recognition and more well-established relationships with our target customers.
Furthermore, these competitors may be able to adopt more aggressive pricing
policies and offer more attractive terms to customers than we can. We may face
increasing price pressure from our network operator customers. In addition,
current and potential competitors have established or may establish cooperative
relationships among themselves or with third parties to compete more
effectively. Finally, existing and potential competitors may develop
enhancements to, or future generations of, competitive products that will have
better performance features than our products.

Intellectual Property Rights

   Our performance depends significantly on our ability to protect our
proprietary rights to the technologies used in our products. If we are not
adequately protected, our competitors could use the intellectual property that
we have developed to enhance their products and services, which could harm our
business. As of August 1999, we had three issued United States patents. We also
had one United States patent application with allowed claims and 73 pending
United States patent applications, as well as foreign counterparts with respect
to many of these applications. In addition, we rely on a combination of
copyright and trademark laws, trade secrets, confidentiality provisions and
other contractual provisions to protect our proprietary rights, but these legal

                                       49
means afford only limited protection. Despite any measures taken to protect our
intellectual property, unauthorized parties may attempt to copy aspects of our
products or to obtain and use information that we regard as proprietary. In
addition, the laws of some foreign countries may not protect our proprietary
rights as fully as do the laws of the United States. Thus, the measures we are
taking to protect our proprietary rights in the United States and abroad may
not be adequate. Finally, our competitors may independently develop similar
technologies.

   The telecommunications and Internet software industries are characterized by
the existence of a large number of patents and frequent litigation based on
allegations of patent infringement. As the number of entrants into our market
increases, the possibility of an infringement claim against us grows. For
example, we may be inadvertently infringing a patent of which we are unaware.
In addition, because patent applications can take many years to issue, there
may be a patent application now pending of which we are unaware, which will
cause us to be infringing when it issues in the future. To address any patent
infringement claims, we may have to enter into royalty or licensing agreements
on disadvantageous commercial terms. A successful claim of product infringement
against us, and our failure to license the infringed or similar technology,
would harm our business. In addition, any infringement claims, with or without
merit, would be time-consuming and expensive to litigate or settle and could
divert management attention from administering our core business.

   We rely on a license of encryption technology from RSA Data Security, Inc.
The license from RSA is perpetual unless terminated by either party as the
result of a material breach or insolvency or, at our election, for convenience.

   As a member of the WAP Forum, we have agreed to license our intellectual
property to other WAP members on fair and reasonable terms to the extent that
the license is required to develop noninfringing products under the
specifications promulgated by the WAP Forum. Each other member of the WAP Forum
has entered into a reciprocal agreement.

Employees

   As of August 31, 1999, we had a total of 233 employees. None of our
employees is covered by any collective bargaining agreements. We believe that
our relations with our employees are good. In addition, we expect to add 114
employees in connection with the APiON acquisition.

Facilities

   Our principal offices are located in Redwood City, California in two
buildings aggregating 65,000 square feet under a lease expiring in May 2006,
with a renewal option for an additional five-year term. We also lease space for
our offices in London, Belfast, Dublin and Tokyo.

Legal Proceedings

   We are not currently subject to any material legal proceedings; however, we
may from time to time become a party to various legal proceedings arising in
the ordinary course of our business.

                                       50
MANAGEMENT

Executive Officers and Directors

   Our executive officers and directors and their ages as of September 30, 1999
are as follows:
Name                 Age Position
 ----                 --- --------
Alain Rossmann......  43 Chairman and Chief Executive Officer

 Charles Parrish ...   52 Executive Vice President and Director

 Alan Black..........  39 Vice President, Finance and Administration, Chief
                           Financial Officer
                           and Treasurer

 Andrew Laursen......  41 Vice President, Product Development and Engineering

 Benjamin Linder.....  33 Vice President, Marketing

 Maurice Jeffery.....  35 Vice President, North America Sales

 Tony Miranzadeh.....  36 Vice President of Sales and Business Development,
                           Asia Pacific and
                           Latin America

 Malcolm Bird........  43 Managing Director, Phone.com (Europe) Ltd.

 Roger Evans(1)(2)...  54 Director

 Reed Hundt..........  51 Director

 David Kronfeld(1)...  51 Director

 Andrew Verhalen(2)..  43 Director
--------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.

   Alain Rossmann. Mr. Rossmann is the founder, Chairman and Chief Executive
Officer of Phone.com. Prior to founding Phone.com in December 1994, he was
Chief Executive Officer of EO Corporation, a pioneer in personal digital
assistant devices, from 1991 to 1993, when it was sold to AT&T. Prior to his
involvement with EO, he was Vice President of Operations for C-Cube
Microsystems Inc., a semiconductor design company, from 1989 to 1991. From 1986
to 1989, Mr. Rossmann co-founded and served as Vice President of Marketing and
Sales at Radius, Inc., a developer of digital video products. From 1983 to
1986, Mr. Rossmann was manager of the third-party developer group at Apple
Computer, Inc. Mr. Rossmann holds an M.S. degree in Mathematics from the Ecole
Polytechnique, an M.S. degree in Civil Engineering from Ecole Nationale des
Ponts et Chaussees and an M.B.A. degree from Stanford University.

   Charles Parrish. Mr. Parrish joined Phone.com as President and a director in
June 1995, and was appointed Executive Vice President in June 1997. Mr. Parrish
was General Manager of the Mobile Data Division of GTE Mobile Communications, a
telecommunications company, from 1994 to June 1995, and Vice President of
Marketing for GTE, from 1991 to 1994. Prior to working for GTE, Mr. Parrish was
Senior Vice President of Operations for Contel Cellular, a telecommunications
company, from July 1990 to 1991, when Contel was acquired by GTE. Prior to
serving at Contel, he was the co-Founder, President and Chief Executive Officer
of AmeriCom Corporation, a telecommunications equipment company, from 1984 to
June 1990. Mr. Parrish served as Executive Assistant to the Secretary of the
United States Department of the Interior under the Carter Administration. Mr.
Parrish holds a B.S. degree in Industrial Management from the Georgia Institute
of Technology.

   Alan Black. Mr. Black joined Phone.com as Vice President of Finance and
Administration and Chief Financial Officer in August 1997 and was appointed to
the additional office of Treasurer in September 1997. Mr. Black was Chief
Financial Officer of Vicor, Inc., a provider of Internet information capture
and delivery systems for financial services firms, from August 1992 to August
1997. Prior to his tenure at Vicor, Mr. Black

                                       51
was with KPMG LLP between 1982 and 1992, most recently with the firm's High
Technology practice. Mr. Black holds a Bachelor of Commerce and a graduate
diploma in Public Accountancy from McGill University. Mr. Black is a member of
the California Society of Certified Public Accountants and the Canadian
Institute of Chartered Accountants.

   Andrew Laursen. Mr. Laursen joined Phone.com as Vice President of Product
Development and Engineering in June 1996, after working from August 1986 to
June 1996 at Oracle Corporation, most recently as the Vice President and
general manager of the Network Computer Division. Prior to this position, he
pioneered Oracle's efforts in the area of digital video and worked in various
management and development roles in the database server division. Before
working at Oracle, Mr. Laursen was employed with Tolerant Systems, a computer
systems company, where he was responsible for the development of their fault-
tolerant UNIX file system. Mr. Laursen began his career at AT&T Bell
Laboratories. He holds a B.S. degree in Computer Science from Michigan State
University and an M.S. degree in Computer Science from the University of
Illinois.

   Benjamin Linder. Mr. Linder joined Phone.com in January 1996 as Vice
President of Product Management and was appointed as Vice President of
Marketing in October 1996. From July 1987 to December 1995 Mr. Linder worked at
Oracle Corporation, where he most recently served as Vice President of
Marketing, co-founding Oracle's New Media Division in 1992. Prior to working in
the New Media division of Oracle, Mr. Linder was Director of Technical Services
for the massively parallel processing technology at Oracle. He holds B.S.
degrees in Electrical Engineering and Computer Science from the Massachusetts
Institute of Technology.

   Maurice Jeffery. Mr. Jeffery joined Phone.com in August 1996 as Director of
Business Development and was promoted to Vice President of North American Sales
in August 1997. Prior to joining Phone.com, Mr. Jeffery held various management
positions, including European Managing Director, at General Magic, Inc., a
telecommunications software and services infrastructure company, from September
1994 to August 1996. Prior to working at General Magic, he held various
management positions in technical support, business development and marketing
at Hewlett-Packard Company from September 1984 to September 1994. Mr. Jeffery
holds a B.S. degree in Computer Science and Commercial Studies from GCAT,
England.

   Tony Miranzadeh. Tony Miranzadeh joined Phone.com as Vice President of Sales
and Business Development, Asia Pacific and Latin America in March 1999. From
April 1984 to February 1999, Mr. Miranzadeh held various management positions
with Lucent Technologies, including Director of Business Development and
Strategy in the United Kingdom, where he was responsible for the
commercialization and introduction of third generation wireless technologies.
Mr. Miranzadeh also held the position of Director of Sales and Business
Development for GSM and CDMA network technologies for the Asia Pacific region.
Mr. Miranzadeh holds a B.S. degree in Electrical Engineering from the
University of Illinois and an M.S. degree in Electrical and Computer
Engineering from the Illinois Institute of Technology.

   Malcolm Bird. Prior to joining Phone.com as Vice President of Europe in
September 1997, Mr. Bird worked at Acorn Computer Group, Plc., a computer
company, from November 1989 to April 1997, serving most recently as divisional
chief executive for the network computing and online media divisions. While at
Acorn, Mr. Bird directed the design of Oracle's Network Computer, launched
Acorn's entry into the emerging interactive television market and co-founded
Advanced RISC Machines, Ltd. (ARM), a joint venture between Acorn, Apple
Computer and VLSI Technology. Before working at Acorn, Mr. Bird worked with the
PA Consulting Group, a consulting company. Mr. Bird holds a B.S. degree in
Mechanical Engineering from Imperial College, London University.

   Roger Evans. Mr. Evans has been a director of Phone.com since September
1995. Mr. Evans has been associated with Greylock Management Corporation, a
Boston-based venture capital firm, since 1989, serving as a general partner
since January 1991. He also serves as a director of Maker Communications, Inc.,
a communications semiconductor company, and several other privately-held
companies.

                                       52
Reed Hundt. Mr. Hundt has been a director of Phone.com since April 1999.
Since November 1998, Mr. Hundt has been a senior advisor on information
industries to McKinsey & Company, a worldwide management consulting firm. He
has also been a principal of Charles Ross Partners, LLC, a Bethesda, Maryland
firm that provides consulting and investment advice on telecommunications,
since November 1997. From November 1993 to November 1997, Mr. Hundt was
Chairman of the Federal Communications Commission. Prior to joining the FCC,
Mr. Hundt was a partner at the law firm of Latham & Watkins. Mr. Hundt serves
on the boards of directors of Allegiance Telecom, Inc., NorthPoint
Communications, Inc., and Novell, Inc.

   David Kronfeld. Mr. Kronfeld has been a director of Phone.com since February
1998. Mr. Kronfeld founded JK&B Capital in January 1996 and is the managing
member. Mr. Kronfeld is also a general partner at Boston Capital Ventures,
where he specializes in the telecommunications and software industries. Before
joining Boston Capital Ventures in October 1989, Mr. Kronfeld was the Vice
President of Acquisitions and Venture Investments at Ameritech, a
telecommunications company, from October 1984 to October 1989. Prior to working
for Ameritech, Mr. Kronfeld was a Senior Manager at Booz Allen & Hamilton, an
international management consulting firm, from 1977 to 1981. Mr. Kronfeld is a
director of SCC Communications, Inc., a 911 service provider, MGC
Communications, Inc., a local exchange carrier, and 21st Century Telecom Group,
a telecommunications company. He holds a B.S. degree in Electrical Engineering
and an M.S. degree in Computer Science from Stevens Institute of Technology and
an M.B.A. degree from The Wharton School of Business.

   Andrew Verhalen. Mr. Verhalen has been a director of Phone.com since
September 1995. Mr. Verhalen is a general partner of Matrix Partners, a venture
capital firm, which he joined in 1992. From 1986 to 1991, Mr. Verhalen worked
at 3Com Corporation, a network equipment manufacturer, initially as a Vice
President of Marketing, then as Vice President and General Manager of the
Network Adapter Division. Prior to joining 3Com, he worked for five years in
the Microprocessor Group at Intel Corporation, in various marketing, management
and strategic planning roles. He currently is a director of Alteon WebSystems,
an Internet equipment manufacturer, Copper Mountain Networks, a network
equipment manufacturer, WatchGuard Technologies, a network security company,
and several private technology companies. Mr. Verhalen holds a B.S. degree in
Electrical Engineering, an M. Eng. degree in Electrical Engineering and an
M.B.A. degree from Cornell University.

Board Composition

   Our bylaws currently provide for a board of directors consisting of six
members. The term of each of our current directors will expire at the next
annual meeting of stockholders. Commencing at the first annual meeting of
stockholders following the annual meeting of stockholders when we shall have
had at least 800 stockholders, the board of directors will be divided into
three classes, each serving staggered three-year terms: Class I, whose term
will expire at the first annual meeting of stockholders following the annual
meeting of stockholders when we shall have had at least 800 stockholders; Class
II, whose term will expire at the second annual meeting of stockholders
following the annual meeting of stockholders when we shall have had at least
800 stockholders; and Class III, whose term will expire at the third annual
meeting of stockholders following the annual meeting of stockholders when we
shall have had at least 800 stockholders. As a result, only one class of
directors will be elected at each annual meeting of our stockholders, with the
other classes continuing for the remainder of their respective terms.

Board Compensation

   Except for reimbursement for reasonable travel expenses relating to
attendance at board meetings and the grant of stock options, directors are not
compensated for their services as directors. Directors who are employees of
Phone.com are eligible to participate in our 1995 and 1996 stock plans and in
our employee stock purchase plan. Directors who are not employees of Phone.com
are eligible to participate in our 1996 stock plan and in our directors' stock
option plan.

   1999 Directors' Stock Option Plan. The directors' stock option plan was
adopted by the board of directors in March 1999 and was approved by our
stockholders in May 1999. A total of 600,000 shares of

                                       53
common stock has been reserved for issuance under the directors' stock option
plan, all of which remain available for future grants. The directors' stock
option plan provides for the grant of nonstatutory stock options to nonemployee
directors. The directors' stock option plan is designed to work automatically
without administration; however, to the extent administration is necessary, it
will be performed by the board of directors. To the extent they arise, it is
expected that conflicts of interest will be addressed by abstention of any
interested director from both deliberations and voting regarding matters in
which a director has a personal interest.

   The directors' stock option plan provides that each person who becomes a
nonemployee director or will be granted a nonstatutory stock option to purchase
33,333 shares of common stock on the date on which the individual first becomes
a nonemployee director. Thereafter, on the first board of directors meeting
date of each calendar quarter beginning on or after October 1, 2000, each
nonemployee director who was a member of the board of directors prior to our
initial public offering in June 1999 will be granted an option to purchase
2,500 shares of common stock. In addition, on the first board of directors
meeting date of each calendar quarter that begins at least one year following
the initial option grant to a nonemployee director who becomes a director after
the completion of our initial public offering in June 1999, but in no event
earlier than October 1, 2000, the director will be granted an option to
purchase 2,500 shares of common stock.

   The directors' stock option plan sets neither a maximum nor a minimum number
of shares for which options may be granted to any one nonemployee director, but
does specify the number of shares that may be included in any grant and the
method of making a grant. No option granted under the directors' stock option
plan is transferable by the optionee other than by will or the laws of descent
or distribution or pursuant to a qualified domestic relations order, and each
option is exercisable, during the lifetime of the optionee, only by the
optionee. All options granted under the directors' stock option plan shall vest
in full immediately upon grant of the option. If a nonemployee director ceases
to serve as a director for any reason other than death or disability, he or she
may, but only within 90 days after the date he or she ceases to be a director,
exercise options granted under the directors' stock option plan. If he or she
does not exercise the option within the 90-day period, the option shall
terminate. The exercise price of all stock options granted under the directors'
stock option plan shall be equal to the fair market value of a share of our
common stock on the date of grant of the option. Options granted under the
directors' stock option plan have a term of five years.

   In the event of a sale of all or substantially all of our assets, our merger
with or into another corporation or any other reorganization of Phone.com in
which more than 50% of the shares of Phone.com entitled to vote are exchanged,
each nonemployee director shall have either (i) a reasonable time within which
to exercise the option prior to the effectiveness of the dissolution,
liquidation, sale, merger or reorganization, at the end of which time the
option shall terminate, or (ii) the right to exercise the option or receive a
substitute option with comparable terms, as to an equivalent number of shares
of stock of the corporation succeeding Phone.com or acquiring its business. Our
board of directors may amend or terminate the directors' stock option plan as
long as this action does not adversely affect any outstanding option, and we
shall obtain stockholder approval for any amendment to the extent required by
applicable law.

Board Committees

   The compensation committee currently consists of Messrs. Evans and Verhalen.
The compensation committee:

  . reviews and approves the compensation and benefits for our executive
    officers and grants stock options under our stock option plans; and
  . makes recommendations to the board of directors regarding executive
    compensation matters.

   The audit committee currently consists of Messrs. Kronfeld and Evans. The
audit committee:

  . makes recommendations to the board of directors regarding the selection
    of independent auditors.
  . reviews the results and scope of the audit and other services provided by
    our independent auditors; and
  . reviews and evaluates our audit and control functions.

                                       54
Compensation Committee Interlocks and Insider Participation

   The members of our compensation committee are currently Messrs. Evans and
Verhalen, neither of whom has at any time been an officer or employee of
Phone.com. We have issued and sold in private placement transactions shares of
preferred stock to Greylock Equity Limited Partnership and to Matrix Partners
IV, L.P. and Matrix IV Entrepreneurs Fund. Mr. Evans is a general partner of
Greylock Equity GP Limited Partnership, the general partner of Greylock Equity
Limited Partnership, and Mr. Verhalen is a general partner of Matrix Partners,
the general partner of Matrix Partners IV, L.P. and of Matrix IV Entrepreneurs
Fund. The following summarizes these transactions:

Greylock Equity Limited Partnership

  . June 1995: 1,999,999 shares of Series A preferred stock at $0.50 per
    share.
  . January 1996: 786,566 shares of Series B preferred stock at $1.68 per
    share.
  . October 1996: 78,718 shares of Series C preferred stock at $3.81 per
    share.
  . January 1998: 78,716 shares of Series D preferred stock at $5.08 per
    share.

Entities affiliated with Matrix Partners
  . June 1995: 1,999,998 shares of Series A preferred stock at $0.50 per
    share.
  . January 1996: 786,565 shares of Series B preferred stock at $1.68 per
    share.
  . October 1996: 78,718 shares of Series C preferred stock at $3.81 per
    share.
  . January 1998: 78,715 shares of Series D preferred stock at $5.08 per
    share.

Executive Compensation

   Summary Compensation. The following table sets forth compensation awarded
to, earned by, or paid to our Chief Executive Officer and the four other most
highly compensated executive officers whose total cash compensation exceeded
$100,000 during the years ended June 30, 1998 and 1999 (collectively, the
"named executive officers").

                           Summary Compensation Table
Long-Term
                                                          Compensation
                                Annual Compensation          Awards
                                ----------------------    ------------
                                                           Securities
   Name and Principal    Fiscal                            Underlying     All Other
        Position          Year  Salary($)    Bonus($)      Options(#)  Compensation($)
   ------------------    ------ ---------    ---------    ------------ ---------------
Alain Rossmann            1999  $200,000            --           --        $ 1,092
Chairman and Chief
 Executive Officer......  1998   157,500            --           --        $   806(1)

Charles Parrish           1999   180,000     $  42,840(2)    60,000          1,090(1)
Executive Vice
 President..............  1998   167,500       107,352(3)   106,666            935(1)

Andrew Laursen            1999   180,000            --       63,333          1,030(1)
Vice President, Product
 Development and
 Engineering............  1998   145,000            --       66,666            833(1)

Maurice Jeffery           1999   120,000       511,922(4)    20,000            704(1)
Vice President, North
 American Sales.........  1998   118,508        56,667(4)    55,000            600(1)

Malcolm Bird              1999   132,480(5)    139,548(4)    13,333         18,000(7)
Managing Director,
 Phone.com (Europe)
 Ltd....................  1998   103,000(6)    137,224(4)   120,000         15,000(7)
--------
(1) Consists of life insurance premiums paid by Phone.com.
(2) Consists of monthly payments for housing expenses pursuant to relocation
    agreement.
(3) Consists of sales commissions, payments for moving and relocation costs and
    monthly payments for housing expenses pursuant to relocation agreement.

                                       55
(4) Consists of sales commissions.
(5) Includes auto allowance of approximately $12,480.
(6) Includes auto allowance of approximately $3,000.
(7) Consists of contribution to pension plan.

   Option Grants. The following table shows information regarding stock options
granted to the Named Executive Officers during the fiscal year ended June 30,
1999. No stock appreciation rights were granted to these individuals during the
year.

                       Option Grants in Last Fiscal Year
Potential Realizable Value
                         Number of   Percentage                     at Assumed Annual Rates Of
                           Shares     of Total  Exercise             Stock Price Appreciation
                         Underlying   Options    Price                  for Option Term(1)
                          Options    Granted to   per    Expiration ---------------------------
                          Granted    Employees   Share      Date         5%            10%
Name                     ----------  ---------- -------- ---------- ------------ --------------
Alain Rossmann..........       --        --          --         --            --             --
Charles Parrish.........   60,000(2)    2.7%     $16.00  6/10/2009       603,739      1,529,993
Andrew Laursen..........   63,333(2)    2.9       16.00  6/10/2009       637,277      1,614,984
Maurice Jeffrey.........   20,000(2)    0.9       16.00  6/10/2009       201,246        509,998
Malcolm Bird............   13,333(2)    0.6       16.00  6/10/2009       134,161        339,990
--------
(1) The 5% and 10% assumed annual rates of compounded stock price appreciation
    are mandated by the Securities and Exchange Commission. There is no
    assurance provided to any executive officer or any other holder of our
    securities that the actual stock price appreciation over the 10-year option
    term will be at the assumed 5% and 10% levels or at any other defined
    level.
(2) These stock options, which were granted under the 1996 stock plan, become
    exercisable as to an aggregate of 5% of the total number of shares on a
    monthly basis during the first year after grant, as to an aggregate of 10%
    of the total number of shares on a monthly basis during the second year
    after grant, as to an aggregate of 45% of the shares on a monthly basis
    during the third, fourth and fifth years after grant and as to an aggregate
    of 40% of the shares on a monthly basis during the sixth and seventh years
    after grant., as long as the optionee remains an employee with, consultant
    to, or director of Phone.com.

   Aggregate Option Exercises and Holdings. The following table provides
certain summary information concerning the shares of common stock represented
by outstanding stock options held by each of the Named Executive Officers as of
June 30, 1999.
Number of Securities
                                             Underlying Unexercised     Value of Unexercised
                                               Options at June 30,    In- the-Money Options at
                                                     1999(#)             June 30, 1999($)(1)
                                            ------------------------- -------------------------
                  Number of
                   Shares
                 Acquired on     Value
Name             Exercise(#) Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
----             ----------- -------------- ----------- ------------- ----------- -------------
Alain Rossmann         -            -
Charles Parrish        -            -              -       166,666              -  $8,109,298
Andrew Laursen         -            -         83,333       213,332    $ 4,634,148  10,735,766
Maurice Jeffery        -            -         21,146        74,273      1,174,996   3,773,272
Malcolm Bird           -            -         43,750        89,583      2,432,938   4,731,833
Fiscal Year-End Option Values

--------
(1) The amount set forth represents the difference between the fair market
    value of the underlying common stock at June 30, 1999 and the exercise
    price of the option.

   We have entered into agreements with each of our executive officers which
provide that if the officer's employment is terminated involuntarily other than
for cause within 18 months following a change of control transaction, then
subject to limitations, the vesting of any stock option or restricted stock
held by the officer shall be automatically accelerated so that the option or
restricted stock becomes completely vested.

Stock Plans

   1995 Stock Plan. Our 1995 stock plan provides for the grant of incentive
stock options to employees and nonstatutory stock options and stock purchase
rights to employees, directors and consultants. The purposes of

                                       56
the 1995 stock plan are to attract and retain the best available personnel, to
provide additional incentives to our employees and consultants and to promote
the success of our business. The 1995 stock plan was originally adopted by our
board of directors in October 1995 and approved by our stockholders in October
1995. Unless terminated earlier by the board of directors, the 1995 stock plan
shall terminate in October 2005. A total of 1,649,462 shares of common stock
have been reserved for issuance under the 1995 stock plan. As of June 30, 1999,
options to purchase 401,343 shares of common stock were outstanding at a
weighted average exercise price of $0.16 per share, 1,248,136 shares had been
issued upon exercise of outstanding options or pursuant to restricted stock
purchase agreements, and no shares remained available for future grant.

   The administrator of the 1995 stock plan may be either the board of
directors or a committee of the board. The administrator determines the terms
of options granted under the 1995 stock plan, including the number of shares
subject to the option, exercise price, term and exercisability. Incentive stock
options granted under the 1995 stock plan must have an exercise price of at
least 100% of the fair market value of the common stock on the date of grant
and at least 110% of the fair market value in the case of an optionee who holds
more than 10% of the total voting power of all classes of our stock.
Nonstatutory stock options granted under the 1995 stock plan must have an
exercise price of at least 85% of the fair market value of the common stock on
the date of grant (or at least 110% of the fair market value in the case of an
optionee who holds more than 10% of the total voting power of all classes of
our stock). Payment of the exercise price may be made in cash or other
consideration as determined by the administrator.

   The administrator determines the term of options, which may not exceed 10
years (or five years in the case of an option granted to a holder of more than
10% of the total voting power of all classes of our stock). No option may be
transferred by the optionee other than by will or the laws of descent or
distribution. Each option may be exercised during the lifetime of the optionee
only by the optionee. The administrator determines when options become
exercisable. Options granted under the 1995 stock plan generally must be
exercised within 60 days after the termination of the optionee's status as an
employee, director or consultant of Phone.com, or within 12 months if
termination is due to the death or disability of the optionee, but in no event
later than the expiration of the option's term. Options granted under the 1995
stock plan generally vest at the rate of 1/4 of the total number of shares
subject to the option 12 months after the date of grant, and 1/48 of the total
number of shares subject to the option each month thereafter.

   In the event of our merger with or into another corporation, each option may
be assumed or an equivalent option substituted by the successor corporation.
The administrator has the authority to amend or terminate the 1995 stock plan
provided that no action that impairs the rights of any holder of an outstanding
option may be taken without the holder's consent. In addition, stockholder
approval will be obtained for any amendment to the extent required by
applicable law.

   In addition to stock options, the administrator may issue stock purchase
rights under the 1995 stock plan to employees, directors and consultants. The
administrator determines the number of shares, price, terms, conditions and
restrictions related to a grant of stock purchase rights. The purchase price of
a stock purchase right granted under the 1995 stock plan must be at least 85%
of the fair market value of the shares as of the date of the offer. The period
during which the stock purchase right is held open is determined by the
administrator, but in no case shall this period exceed 30 days. Unless the
administrator determines otherwise, the recipient of a stock purchase right
must execute a restricted stock purchase agreement granting Phone.com an option
to repurchase unvested shares at cost upon termination of the recipient's
relationship with us.

   1996 Stock Plan. Our 1996 stock plan provides for the grant of incentive
stock options to employees and nonstatutory stock options and stock purchase
rights to employees, directors and consultants. The purposes of the 1996 stock
plan are to attract and retain the best available personnel, to provide
additional incentives to our employees and consultants and to promote the
success of our business. The 1996 stock plan was originally adopted by our
board of directors in September 1996 and approved by our stockholders in
October 1996. The 1996 stock plan was amended by our board of directors in
March 1999 to increase the total number of shares reserved for issuance by
4,250,000 shares and to incorporate other changes. This amendment to the 1996
stock

                                       57
plan was approved by our stockholders in May 1999. Unless terminated earlier by
the board of directors, the 1996 stock plan shall terminate in September 2006.
A total of 7,734,425 shares of common stock have been reserved for issuance
under the 1996 stock plan. In addition, the number of shares reserved under the
plan will automatically be increased each year, beginning on July 1, 2000 in an
amount equal to the lesser of (a) 1,500,000 shares, (b) four percent of the
shares outstanding on the last day of the preceding fiscal year or (c) a lesser
number of shares as is determined by the board of directors. As of June 30,
1999, options to purchase 4,349,846 shares of common stock were outstanding at
a weighted average exercise price of $6.92 per share, 447,753 shares had been
issued upon exercise of outstanding options or pursuant to restricted stock
purchase agreements, and 2,936,826 shares remained available for future grant.

   The administrator of the 1996 stock plan may be either the board of
directors or a committee of the board. The administrator determines the terms
of options granted under the 1996 stock plan, including the number of shares
subject to the option, exercise price, term and exercisability. In no event,
however, may an individual receive option grants for more than 1,000,000 shares
under the 1996 plan in any fiscal year. Incentive stock options granted under
the 1996 stock plan must have an exercise price of at least 100% of the fair
market value of the common stock on the date of grant and at least 110% of the
fair market value in the case of an optionee who holds more than 10% of the
total voting power of all classes of our stock. Nonstatutory stock options
granted under the 1996 stock plan must have an exercise price of at least 85%
of the fair market value of the common stock on the date of grant. Payment of
the exercise price may be made in cash or other consideration as determined by
the administrator.

   The administrator determines the term of options, which may not exceed 10
years (or five years in the case of an option granted to a holder of more than
10% of the total voting power of all classes of our stock). No option may be
transferred by the optionee other than by will or the laws of descent or
distribution provided, however, that the administrator may in its discretion
provide for the transferability of nonstatutory stock options granted under the
1996 stock plan. Each option may be exercised during the lifetime of the
optionee only by the optionee or permitted transferee. The administrator
determines when options become exercisable. Options granted under the 1996
stock plan generally must be exercised within 30 to 90 days, as determined by
the administrator, after the termination of the optionee's status as an
employee, director or consultant of Phone.com, or within 12 months if
termination is due to the death or disability of the optionee, but in no event
later than the expiration of the option's term. Options granted under the 1996
stock plan generally vest over a period of four or five years.

   In the event of our merger with or into another corporation, each option may
be assumed or an equivalent option substituted by the successor corporation.
However, if the successor corporation does not agree to assume or substitute
the option, the option will terminate. The administrator has the authority to
amend or terminate the 1996 stock plan provided that no action that impairs the
rights of any holder of an outstanding option may be taken without the holder's
consent. In addition, stockholder approval is required to increase the number
of shares subject to the 1996 stock plan, to change the designation of the
class of persons eligible to be granted options or to increase the individual
grant limitation.

   In addition to stock options, the administrator may issue stock purchase
rights under the 1996 stock plan to employees, directors and consultants. The
administrator determines the number of shares, price, terms, conditions and
restrictions related to a grant of stock purchase rights. The purchase price of
a stock purchase right granted under the 1996 stock plan must be at least 85%
of the fair market value of the shares as of the date of the offer. The period
during which the stock purchase right is held open is determined by the
administrator, but in no case shall this period exceed 30 days. Unless the
administrator determines otherwise, the recipient of a stock purchase right
must execute a restricted stock purchase agreement granting Phone.com an option
to repurchase the unvested shares at cost upon termination of the recipient's
relationship with us.

   1999 Employee Stock Purchase Plan. Our employee stock purchase plan was
adopted by the board of directors in March 1999 and was approved by our
stockholders in May 1999. A total of 600,000 shares of common stock has been
reserved for issuance under the employee stock purchase plan, plus an automatic
annual

                                       58
increase on the first day of each of our fiscal years beginning in 2000, 2001,
2002, 2003 and 2004 equal to the lesser of 500,000 shares or 1% of our
outstanding common stock on the last day of the immediately preceding fiscal
year. Unless terminated earlier by the board of directors, the employee stock
purchase plan shall terminate in March 2019.

   The employee stock purchase plan, which is intended to qualify under Section
423 of the Code, will be implemented by a series of overlapping offering
periods of approximately 24 months' duration, with new offering periods (other
than the first offering period) commencing on May 1 and November 1 of each
year. Each offering period will generally consist of four consecutive purchase
periods of six months' duration, at the end of which an automatic purchase will
be made for participants. The initial offering period commenced on June 11,
1999 and will end on April 30, 2001; the initial purchase period began on June
11, 1999 and will end on January 31, 2000, with subsequent purchase periods
ending on April 30, 2000, October 31, 2000 and April 30, 2001. The employee
stock purchase plan will be administered by the board of directors or by a
committee appointed by the board. Our employees (including officers and
employee directors), or of any majority-owned subsidiary designated by the
board, are eligible to participate in the employee stock purchase plan if they
are employed by us or a subsidiary of ours for at least 20 hours per week and
more than five months per year. The employee stock purchase plan permits
eligible employees to purchase common stock through payroll deductions, which
in any event may not exceed 20% of an employee's base salary. The purchase
price is equal to the lower of 85% of the fair market value of the common stock
at the beginning of each offering period or at the end of each purchase period.
Employees may end their participation in the employee stock purchase plan at
any time during an offering period, and participation ends automatically on
termination of employment.

   An employee cannot be granted an option under the employee stock purchase
plan if immediately after the grant the employee would own stock and/or hold
outstanding options to purchase stock equaling 5% or more of the total voting
power or value of all classes of our stock or stock of our subsidiaries, or if
the option would permit an employee to purchase stock under the employee stock
purchase plan at a rate that exceeds $25,000 of fair market value of stock for
each calendar year in which the option is outstanding. In addition, no employee
may purchase more than 2,500 shares of common stock under the employee stock
purchase plan in any one purchase period. If the fair market value of the
common stock on a purchase date is less than the fair market value at the
beginning of the offering period, each participant in that offering period
shall automatically be withdrawn from the offering period as of the end of the
purchase date and re-enrolled in the new twenty-four month offering period
beginning on the first business day following the purchase date.

   If we merge or consolidate with or into another corporation or sell all or
substantially all of our assets, each right to purchase stock under the
employee stock purchase plan will be assumed or an equivalent right substituted
by the successor corporation. However, the board of directors will shorten any
ongoing offering period so that employees' rights to purchase stock under the
employee stock purchase plan are exercised prior to the transaction in the
event that the successor corporation refuses to assume each purchase right or
to substitute an equivalent right of the acquiring corporation. The board of
directors has the power to amend or terminate the employee stock purchase plan
and to change or terminate offering periods as long as this action does not
adversely affect any outstanding rights to purchase stock thereunder. However,
the board of directors may amend or terminate the employee stock purchase plan
or an offering period even if it would adversely affect outstanding options in
order to avoid our incurring adverse accounting charges.

Limitation of Liability and Indemnification Matters

   Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that a director
of a corporation will not be personally liable for monetary damages for breach
of an individual's fiduciary duties as a director except for liability:

  .  for any breach of a director's duty of loyalty to Phone.com or to its
     stockholders,
  .  for acts or omissions not in good faith or that involve intentional
     misconduct or a knowing violation of law,

                                       59
.  for unlawful payments of dividends or unlawful stock repurchases or
     redemptions as provided in Section 174 of the Delaware General
     Corporation Law or
  .  for any transaction from which a director derives an improper personal
     benefit.

   Our bylaws provide that Phone.com shall indemnify its directors and
executive officers and may indemnify its officers, employees and other agents
to the full extent permitted by law. We believe that indemnification under our
bylaws covers at least negligence and gross negligence on the part of an
indemnified party. Our bylaws also permit us to advance expenses incurred by an
indemnified party in connection with the defense of any action or proceeding
arising out of a party's status or service as a director, officer, employee or
other agent of Phone.com upon an undertaking by the party to repay the advances
if it is ultimately determined that he or she is not entitled to
indemnification.

   We have entered into separate indemnification agreements with each of our
directors and officers. These agreements require us to, among other things,
indemnify the director or officer against expenses (including attorney's fees),
judgments, fines and settlements paid by the individual in connection with any
action, suit or proceeding arising out of the individual's status or service as
a director or officer of Phone.com (other than liabilities arising from willful
misconduct or conduct that is knowingly fraudulent or deliberately dishonest)
and to advance expenses incurred by the individual in connection with any
proceeding against the individual with respect to which he or she may be
entitled to indemnification by us. We believe that our certificate of
incorporation and bylaw provisions and indemnification agreements are necessary
to attract and retain qualified persons as directors and officers. We also
maintain directors' and officers' liability insurance.

   At present we are not aware of any pending litigation or proceeding
involving any director, officer, employee or agent of Phone.com where
indemnification will be required or permitted. Furthermore, we are not aware of
any threatened litigation or proceeding that might result in a claim for
indemnification.

                                       60
CERTAIN TRANSACTIONS

   Some stock option grants to directors and executive officers of Phone.com
are described herein under the caption "Management--Executive Compensation."

   Since our inception, we have issued, in private placement transactions,
shares of preferred stock as follows: an aggregate of 4,731,997 shares of
Series A Preferred Stock at $0.50 per share in June 1995, an aggregate of
3,999,987 shares of Series B Preferred Stock at $1.68 per share in December
1995, January 1996 and February 1996, an aggregate of 2,538,766 shares of
Series C Preferred Stock at $3.81 per share in October 1996, an aggregate of
6,444,877 shares of Series D Preferred Stock at $5.08 per share in January and
February 1998 and an aggregate of 2,458,543 shares of Series E Preferred Stock
at $7.24 per share in March 1999. The following table summarizes the shares of
preferred stock purchased by named executive officers, directors and 5%
stockholders of Phone.com and persons and entities associated with them in the
private placement transactions:
Series A  Series B  Series C  Series D
                                        Preferred Preferred Preferred Preferred
Investor                                  Stock     Stock     Stock     Stock
--------                                --------- --------- --------- ---------
Alain Rossmann........................    132,000       --       --         --
Greylock Equity Limited Partnership
 (Roger Evans)........................  1,999,999  786,566   78,718     78,716
Entities Affiliated with Matrix
 Partners (Andrew Verhalen)...........  1,999,998  786,565   78,718     78,715
Entities Affiliated with JK&B Capital,
 L.P. (David Kronfeld)................         --       --       --    590,370
Shares held by affiliated persons and entities have been aggregated. See
"Principal Stockholders."

   The following officers and one director issued full recourse promissory
notes to us to purchase restricted stock under the 1995 stock plan and the 1996
stock plan. The full principal amount and accrued interest under each note
remain outstanding. The terms of the notes are summarized below:
Principal                  Interest
Name                          Date of Note    Amount       Date Due       Rate
----                        ---------------- --------- ---------------- --------
Alan Black................. October 31, 1997 $ 52,000  October 31, 2001   6.24%
                            July 20, 1998    $123,750  July 20, 2002      5.49%
Andrew Laursen............. July 11, 1996    $ 85,000  July 11, 2000      6.48%
Benjamin Linder............ July 11, 1996    $ 23,800  July 11, 2000      6.48%
Reed Hundt................. April 16, 1999   $200,000  April 16, 2004     5.28%
We have entered into indemnification agreements with our officers and
directors containing provisions requiring us to, among other things, indemnify
our officers and directors against liabilities that may arise by reason of our
status or service as officers or directors (other than liabilities arising from
willful misconduct of a culpable nature) and to advance their expenses incurred
as a result of any proceeding against them as to which they could be
indemnified.

   We have entered into agreements with each of our executive officers which
provide that if the officer's employment is terminated involuntarily other than
for cause within 18 months following a change of control transaction, then
subject to limitations, the vesting of any stock option or restricted stock
held by the officer shall be automatically accelerated so that the option or
restricted stock becomes completely vested.

   We entered into a relocation agreement with Charles Parrish on December 23,
1996 pursuant to which we have agreed to pay Mr. Parrish a housing allowance of
$3,570 per month starting in September 1996 through the earlier of August 2003
or the date that Mr. Parrish's terminates employment with Phone.com. We have
also entered into a loan agreement with Mr. Parrish on December 23, 1996, under
which we have agreed to lend Mr. Parrish $300,000 less the aggregate amount of
all payments made to him under the relocation agreement

                                       61
upon Mr. Parrish's request before August 1, 2003 in order to assist him in
purchasing a residence. In addition, we have agreed to pay Mr. Parrish a
severance payment equal to six months of his base salary if Mr. Parrish's
employment with us is involuntarily terminated. We have entered into a letter
agreement with Malcolm Bird on August 18, 1997, which provides that if Mr.
Bird's employment with us is involuntarily terminated by us other than for
cause, he will receive a severance payment equal to six months of his base
salary and continue to receive his medical insurance benefits for a period of
six months following his termination.

   In connection with Mr. Hundt's appointment as a director in April 1999, he
received a stock option to purchase 33,333 shares of common stock at an
exercise price of $12.00 per share under our 1996 stock plan. This option is
fully exercisable as of the date of grant. In addition, in April 1999, we
issued and sold 16,667 shares of common stock to Mr. Hundt at a purchase price
of $12.00 shares under our 1996 stock plan. The aggregate purchase price of
$200,000 was paid by Mr. Hundt through the issuance of a full recourse
promissory note, which bears interest at the rate of 5.28% per annum. The
principal and interest under this note become due and payable on the earlier of
April 16, 2004 or the date of termination of Mr. Hundt's employment or
consulting relationship with Phone.com.

                                       62
PRINCIPAL AND SELLING STOCKHOLDERS

   The following table sets forth certain information with respect to
beneficial ownership of our common stock as of September 30, 1999, and as
adjusted to reflect the sale of 1,000,000 shares of common stock offered by
Phone.com in this offering, as to:

  .  each person (or group of affiliated persons) known by us to own
     beneficially more than 5% of our outstanding common stock,
  .  each of our directors,
  .  each of the executive officers named in the summary compensation table,
     and
  .  the selling stockholders.

   Except as indicated in the footnotes to this table and under applicable
community property laws, to our knowledge, the persons named in the table have
sole voting and investment power with respect to all shares of common stock.
Options exercisable on or before November 30, 1999, are included as shares
beneficially owned. For the purposes of calculating percent ownership, as of
June 30, 1999, 31,213,094 shares were issued and outstanding, and, for any
individual who beneficially owns shares represented by options exercisable on
or before November 30, 1999, these shares are treated as if outstanding for
that person, but not for any other person. Unless otherwise indicated, the
address of each of the individuals named below is: c/o Phone.com, Inc., 800
Chesapeake Drive, Redwood City, California 94063.
Shares
                                        Shares                Beneficially
                                  Beneficially Owned          Owned After
                                  Prior to Offering  Shares     Offering
                                  ------------------  Being  --------------
Name of Beneficial Owners          Number    Percent Offered Number Percent
-------------------------         ---------- ------- ------- ------ -------
Alain Rossmann (1)...............  3,723,582  11.9%
Roger Evans (2)..................  3,037,476   9.7%
 c/o Greylock Management
 One Federal Street
 Boston, MA 02110
Andrew Verhalen (3)..............  3,037,475   9.7%
 c/o Matrix Partners
 Bay Colony Corporate Center
 1000 Winter Street, Suite 4500
 Waltham, MA 02154
Greylock Equity Limited
 Partnership ....................  3,004,143   9.6%
 c/o Greylock Management
 One Federal Street
 Boston, MA 02110
Entities Affiliated with Matrix
 Partners (4) ...................  3,004,142   9.6%
 c/o Matrix Partners
 Bay Colony Corporate Center
 1000 Winter Street, Suite 4500
 Waltham, MA 02154
Charles Parrish (5)..............    754,072   2.4%
David Kronfeld (6) ..............    635,763   2.0%
 c/o JK&B Capital
 205 North Michigan Avenue, Suite
  808
 Chicago, IL 60601
Andrew Laursen (7)...............    598,677   1.9%
Malcolm Bird (8).................     55,195     *
Reed Hundt (9)...................     49,999     *
Maurice Jeffery (10).............     43,437     *
All directors and executive
 officers as a group (12
 persons)........................ 12,396,300  39.2%
--------
*  Less than 1%.

                                       63
(1) Includes 74,832 shares held by Platane Fund and 32,584 held by Mr.
    Rossmann's minor children. Mr. Rossmann is the manager of Platane Fund, and
    disclaims beneficial ownership of these shares except to the extent of his
    pecuniary interest therein.
(2) Consists of 33,333 shares issuable upon exercise of outstanding options
    exercisable on or before November 30, 1999 and 3,004,143 shares held by
    Greylock Equity Limited Partnership. Mr. Evans is a director of Phone.com
    and a general partner of Greylock Equity GP Limited Partnership, the
    general partner of Greylock Equity Limited Partnership. Mr. Evans disclaims
    beneficial ownership of these shares except to the extent of his pecuniary
    interest therein. The other general partners of Greylock Equity GP Limited
    Partnership with whom Mr. Evans shares voting and dispositive powers over
    these shares are Henry F. McCance, Howard E. Cox, Jr., David N. Strohm,
    William W. Helman and William S. Kaiser.
(3) Consists of 33,333 shares issuable upon exercise of outstanding options
    exercisable on or before November 30, 1999, 2,853,936 shares held by Matrix
    Partners IV, L.P. and 150,206 shares held by Matrix IV Entrepreneurs Fund.
    Mr. Verhalen is a director of Phone.com and a general partner of Matrix
    Partners, the general partner of each of Matrix Partners IV, L.P. and
    Matrix IV Entrepreneurs Fund. Mr. Verhalen disclaims beneficial ownership
    of these shares except to the extent of his pecuniary interest therein. The
    other general partners of Matrix Partners with whom Mr. Verhalen shares
    voting and dispositive powers over these shares are Paul J. Ferri,
    W. Michael Humphreys, Timothy A. Barrows and Andrew Marcuvitz.
(4) Consists of 2,853,936 shares held by Matrix Partners IV, L.P. and 150,206
    shares held by Matrix IV Entrepreneurs Fund. Mr. Verhalen is a director of
    Phone.com and a general partner of Matrix Partners, the general partner of
    each of Matrix Partners IV, L.P. and Matrix IV Entrepreneurs Fund. Mr.
    Verhalen disclaims beneficial ownership of these shares except to the
    extent of his pecuniary interest therein. The other general partners of
    Matrix Partners with whom Mr. Verhalen shares voting and dispositive powers
    over these shares are Paul J. Ferri, W. Michael Humphreys, Timothy A.
    Barrows and Andrew Marcuvitz.
(5) Includes 1,250 shares issuable upon exercise of outstanding options
    exercisable on or before November 30, 1999.
(6) Consists of 33,333 shares issuable upon exercise of outstanding options
    exercisable on or before November 30, 1999, 401,620 shares held by JK&B
    Capital, L.P. and 200,810 shares held by JK&B Capital II, L.P. Mr. Kronfeld
    is a director of Phone.com and general partner of JK&B Capital, the general
    partner of JK&B Capital, L.P. and JK&B Capital II, L.P. Mr. Kronfeld
    disclaims beneficial ownership of these shares except to the extent of his
    pecuniary interest therein. The other general partners of JK&B Capital with
    whom Mr. Kronfeld shares voting and dispositive powers over these shares
    are George Spencer and Eileen Richardson.
(7) Includes 3,332 shares held by Mr. Laursen's minor children and 102,013
    shares issuable upon exercise of outstanding options exercisable on or
    before November 30, 1999.
(8) Includes 54,445 shares issuable upon exercise of outstanding options
    exercisable on or before November 30, 1999.
(9) Includes 16,666 shares held by Charles Ross Investment Fund Number 6, which
    is affiliated with Charles Ross Partners, LLC, of which Mr. Hundt is a
    principal. Mr. Hundt disclaims beneficial ownership of such shares except
    to the extent of his pecuniary interest therein. Also includes 33,333
    shares issuable upon exercise of outstanding options exercisable on or
    before November 30, 1999.
(10) Includes 28,856 shares issuable upon exercise of outstanding options
     exercisable on or before November 30, 1999.

                                       64
DESCRIPTION OF CAPITAL STOCK

   As of June 30, 1999, our authorized capital stock consisted of 100,000,000
shares of common stock, $0.001 par value, and 5,000,000 shares of preferred
stock, $0.001 par value.

Common Stock

   As of June 30, 1999, there were 31,213,094 shares of common stock
outstanding that were held of record by approximately 131 stockholders. There
will be 32,213,094 shares of common stock outstanding (assuming no exercise of
the underwriters' over-allotment option and no exercise or conversion of
outstanding convertible securities after June 30, 1999) after giving effect to
the sale of the shares of common stock offered hereby by us.

   The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may
be applicable to any outstanding preferred stock, the holders of common stock
are entitled to receive ratably any dividends that may be declared from time to
time by the board of directors out of funds legally available therefor. In the
event of a liquidation, dissolution or winding up of Phone.com, the holders of
common stock are entitled to share ratably in all assets remaining after
payment of liabilities, subject to prior rights of preferred stock, if any,
then outstanding. The common stock has no preemptive or conversion rights or
other subscription rights. There are no redemption or sinking fund provisions
available to the common stock. All outstanding shares of common stock are fully
paid and non-assessable.

Preferred Stock

   We are authorized to issue 5,000,000 shares of undesignated preferred stock.
The board of directors has the authority to issue the undesignated preferred
stock in one or more series and to determine the powers, preferences and rights
and the qualifications, limitations or restrictions granted to or imposed upon
any wholly unissued series of undesignated preferred stock and to fix the
number of shares constituting any series and the designation of a series,
without any further vote or action by the stockholders. The issuance of
preferred stock may have the effect of delaying, deferring or preventing a
change in control of Phone.com without further action by the stockholders and
may adversely affect the voting and other rights of the holders of common
stock. At present, we have no plans to issue any shares of preferred stock.

Registration Rights of Stockholders

   The holders of 20,174,170 shares of common stock or their transferees are
entitled to rights to register these shares, called "registrable securities,"
under the Securities Act. These rights are provided under the terms of an
agreement between Phone.com and the holders of registrable securities. Subject
to limitations in this agreement, the holders of the registrable securities may
require, on two occasions at any time after six months from the effective date
of our initial public offering in June 1999, that Phone.com use its best
efforts to register the registrable securities for public resale, provided that
the proposed aggregate offering price is in excess of $15,000,000. If we
register any of our common stock either for our own account or for the account
of other security holders, the holders of registrable securities are entitled
to include their shares of common stock in the registration. A holder's right
to include shares in an underwritten registration is subject to the ability of
the underwriters to limit the number of shares included in this offering. All
fees, costs and expenses of these registrations must be borne by us and all
selling expenses (including underwriting discounts, selling commissions and
stock transfer taxes) relating to registrable securities must be borne by the
holders of the securities being registered.

Anti-Takeover Provisions of Delaware Law and Charter Provisions

   We are subject to the provisions of Section 203 of the Delaware Law. In
general, the statute prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date that the person became an interested
stockholder unless

                                       65
(with exceptions) the business combination or the transaction in which the
person became an interested stockholder is approved in a prescribed manner.
Generally, a "business combination" includes a merger, asset or stock sale or
other transaction resulting in a financial benefit to the stockholder, and an
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior, did own) 15% or more of the
corporation's outstanding voting stock. This provision may have the effect of
delaying, deferring or preventing a change in control of Phone.com without
further action by the stockholders. In addition, provisions of our charter
documents, including a provision eliminating the ability of stockholders to
take actions by written consent, may have the effect of delaying or preventing
changes in control or management of Phone.com, which could have an adverse
effect on the market price of our common stock. Our stock option and purchase
plans generally provide for assumption of our plans or substitution of an
equivalent option of a successor corporation or, alternatively, at the
discretion of the board of directors, exercise of some or all of the options
stock, including non-vested shares, or acceleration of vesting of shares issued
pursuant to stock grants, upon a change of control or similar event. The board
of directors has authority to issue up to 5,000,000 shares of preferred stock
and to fix the rights, preferences, privileges and restrictions, including
voting rights, of these shares without any further vote or action by the
stockholders. The rights of the holders of the common stock will be subject to,
and may be adversely affected by, the rights of the holders of any preferred
stock that may be issued in the future. The issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire a majority of our outstanding voting stock, thereby
delaying, deferring or preventing a change in control of Phone.com.
Furthermore, this preferred stock may have other rights, including economic
rights senior to the common stock, and, as a result, the issuance of preferred
stock could have a material adverse effect on the market value of the common
stock. We have no present plan to issue shares of preferred stock.

   Commencing at the first annual meeting of stockholders following the date on
which we shall have had at least 800 stockholders, the board of directors will
be divided into three classes, each serving staggered three-year terms: Class
I, whose term will expire at the first annual meeting of stockholders following
the annual meeting of stockholders when we shall have had at least 800
stockholders; Class II, whose term will expire at the second annual meeting of
stockholders following the annual meeting of stockholders when we shall have at
least 800 stockholders; and Class III, whose term will expire at the third
annual meeting of stockholders following the annual meeting of stockholders
when we shall have had at least 800 stockholders. As a result, only one class
of directors will be elected at each annual meeting of our stockholders, with
the other classes continuing for the remainder of their respective terms. These
provisions in our amended and restated certificate of incorporation may have
the effect of delaying or preventing changes in control or management of
Phone.com.

Warrants

   As of June 30, 1999, warrants were outstanding to purchase an aggregate of
31,486 shares of common stock at a weighted average exercise price of $3.81 per
share.

Transfer Agent and Registrar

   The transfer agent and registrar for our common stock is U.S. Stock Transfer
Corporation.

Listing

   Our common stock is traded on The Nasdaq Stock Market's National Market
under the trading symbol "PHCM."

                                       66
SHARES ELIGIBLE FOR FUTURE SALE

   Future sales of substantial amounts of our common stock in the public
market, or the possibility of these sales occurring, could adversely affect
prevailing market prices for our common stock or our future ability to raise
capital through an offering of equity securities.

   Upon completion of this offering, we will have outstanding 32,213,094 shares
of common stock, based on shares outstanding as of June 30, 1999. Of these
shares, 2,800,000 shares to be sold by us and certain of the selling
stockholders in this offering (3,295,000 shares if the underwriters' over-
allotment option is exercised in full), as well as the 4,600,000 shares sold in
our initial public offering, are freely tradable in the public market without
restriction under the Securities Act, unless the shares are held by
"affiliates" of Phone.com, as that term is defined in Rule 144 under the
Securities Act. In addition, the 500,000 shares to be sold by the former APiON
shareholders in this offering will be freely tradable.

   The remaining          shares outstanding upon completion of this offering
will be "restricted securities" as that term is defined under Rule 144. We
issued and sold these restricted securities in private transactions in reliance
on exemptions from registration under the Securities Act. Restricted securities
may be sold in the public market only if they are registered or if they qualify
for an exemption from registration under Rule 144 or Rule 701 under the
Securities Act, as summarized below.

   Pursuant to "lock-up" agreements entered into in connection with our initial
public offering in June 1999, all the executive officers, directors and
stockholders of Phone.com agreed not to dispose of their shares for a period of
180 days following the initial public offering; provided, however, that Credit
Suisse First Boston Corporation has the right, in its sole discretion, to
release all or any portion of the shares subject to the lock-up agreements at
any time and without notice. For example, in October 1999, Credit Suisse First
Boston Corporation released a portion of these shares from the lock-up
agreements. As of October 27, 1999, an aggregate of approximately 2.0 million
shares had been so released from the lock-up agreements. All of the
stockholders participating in this partial release of the lock-up agreements
have entered into additional lock-up agreements pursuant to which they have
agreed not to offer, sell, contract to sell, grant any option to purchase or
otherwise dispose of any shares of Phone.com common stock, other than the
shares to by sold by these stockholders in this offering, for a period of 90
days from the date of this prospectus. As a result, these stockholders, who
collectively hold an aggregate of approximately 9,612,896 shares (less any
shares sold pursuant to the lock-up release and the shares to be sold by these
stockholders in this offering), as well as the other selling stockholders in
this offering, who now collectively hold an aggregate of approximately
10,198,879 shares (less the shares to by sold by these stockholders in this
offering), have entered into the additional 90-day lock-up agreements. However,
Credit Suisse First Boston Corporation may in its sole discretion, at any time
without notice, release all or any portion of the shares subject to these lock-
up agreements.

   Taking into account the lock-up agreements, and assuming Credit Suisse First
Boston does not release stockholders from these agreements, the following
shares will be eligible for sale in the public market at the following times:

  . On the date of this prospectus, the 3,300,000 shares sold in the offering
    will be immediately available for sale in the public market.
  . On December 8, 1999, approximately         shares will be eligible for
    sale,           of which     will be subject to volume, manner of sale
    and other limitations under Rule 144.
  . On     1999, approximately    shares will be eligible for sale, of which
        will be subject to volume, manner of sale and other limitations under
    Rule 144.
  . The remaining           shares will be eligible for sale under Rule 144
    upon the expiration of various one-year holding periods after the
    expiration of the lock-up period.

   Following the expiration of the lock-up period, shares issued upon exercise
of options we granted prior to the date of this prospectus will also be
available for sale in the public market pursuant to Rule 701 under the
Securities Act. In general, under Rule 144, after the expiration of the lock-up
period, a person who has

                                       67
beneficially owned restricted securities for at least one year would be
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of:

  . 1% of the then-outstanding shares of common stock, or
  . the average weekly trading volume of the common stock during the four
    calendar weeks preceding the sale.

   Sales under Rule 144 are also subject to manner of sale and notice
requirements and to the availability of current public information about
Phone.com. Under Rule 144(k), a person who has not been our affiliate at any
time during the three months before a sale and who has beneficially owned the
shares proposed to be sold for at least two years can sell these shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.

   We have filed, a registration statement on Form S-8 to register
approximately 8,994,153 shares of common stock reserved for issuance under the
1995 stock plan, the 1996 stock plan, the employee stock purchase plan and the
directors' stock option plan. Shares issued under the foregoing stock and
option plans, after the filing of the registration statement on Form S-8, may
be sold in the open market, subject, in the case of some holders, to the Rule
144 limitations applicable to affiliates, the lock-up agreements and vesting
restrictions imposed by us.

   In addition, following this offering, the holders of           shares of
outstanding common stock will, under some circumstances, have rights to require
us to register their shares for future sale. See "Description of Capital
Stock--Registration Rights of Stockholders."

                                       68
UNDERWRITING

   Under the terms and subject to the conditions contained in an underwriting
agreement dated October   , 1999, we have agreed to sell to the underwriters
named below the following respective numbers of shares of common stock:
Number of
   Underwriter                                                          Shares
   -----------                                                         ---------
Credit Suisse First Boston Corporation.............................
   Goldman, Sachs & Co. ..............................................
   Hambrecht & Quist LLC .............................................
   BancBoston Robertson Stephens Inc. ................................
   U.S. Bancorp Piper Jaffray Inc. ...................................
                                                                       ---------
     Total............................................................ 3,300,000
                                                                       =========
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.

   The underwriters have been granted a 30-day option to purchase up to 495,000
additional shares at the public offering price less the underwriting discounts
and commissions. The option may be exercised only to cover any over-allotments
of common stock.

   The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $     per share. The
underwriters and selling group members may allow a discount of $     per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to dealers may be changed by the
underwriters.

   The following table summarizes the compensation and estimated expenses we
will pay.
Per share                  Total
                               ----------------------------- -------------------
                                                              Without    With
                                  Without          With        Over-     Over-
                               Over-Allotment Over-Allotment Allotment Allotment
                               -------------- -------------- --------- ---------
Underwriting discounts and
    commissions payable by
    Phone.com................
   Expenses payable by
    Phone.com................
   Underwriting discounts and
    commissions payable by
    the selling
    stockholders.............
We and certain of our stockholders have agreed that we and they will not
offer, sell, contract to sell, or publicly disclose the intention to make any
such offer, sale, pledge, disposition or filing, pledge or otherwise dispose
of, directly or indirectly, or file with the Commission a registration
statement under the Securities Act relating to, any additional shares of our
common stock or securities convertible into or exchangeable or exercisable for
any of our common stock without the prior written consent of Credit Suisse
First Boston Corporation for a period of 90 days after the date of this
prospectus, except in the case of issuances pursuant to the exercise of
employee stock options outstanding on the date hereof.

   We have agreed to indemnify the underwriters against liabilities under the
Securities Act or contribute to payments which the underwriters may be required
to make in that respect.

                                       69
Our common stock is traded on The Nasdaq Stock Market's National Market
under the symbol "PHCM."

   The representatives on behalf of the underwriters may engage in over-
allotment, stabilizing transactions, syndicate covering transactions, penalty
bids and "passive" market making in accordance with Regulation M under the
Securities Exchange Act of 1934.
  .  Over-allotment involves syndicate sales in excess of the offering size,
     which creates a syndicate short position.
  .  Stabilizing transactions permit bids to purchase the underlying security
     so long as the stabilizing bids do not exceed a specified maximum.
  .  Syndicate covering transactions involve purchases of the common stock in
     the open market after the distribution has been completed in order to
     cover syndicate short positions.
  .  Penalty bids permit the representatives to reclaim a selling concession
     from a syndicate member when the common stock originally sold by the
     syndicate member are purchased in a stabilizing or syndicate covering
     transaction to cover syndicate short positions.
  .  In "passive" market making, market makers in the securities who are
     underwriters or prospective underwriters may, subject to certain
     limitations, make bids for or purchases of the securities until the
     time, if any, at which a stabilizing bid is made.

   These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on The Nasdaq Stock Market's National Market or otherwise and, if
commenced, may be discontinued at any time.

   In March 1999, we issued an aggregate of 2,458,543 shares of our Series E
preferred stock at a per share price of $7.24. Credit Suisse First Boston
Corporation acted as the placement agent for this private placement of our
Series E preferred stock, for which it received a customary fee for its
services. In connection with this financing, a director of Credit Suisse First
Boston Corporation purchased 4,143 shares of Series E preferred stock in the
private placement and has agreed not to sell, pledge, transfer or hypothecate
his shares for a one year period after the date of our initial public offering
in June 1999.

   In connection with our acquisition of APiON Telecoms Ltd., which was
completed in October 1999, Credit Suisse First Boston Corporation acted as our
financial advisor. For these services, we will pay a customary fee to Credit
Suisse First Boston Corporation.

                                      70
NOTICE TO CANADIAN RESIDENTS

Resale Restrictions

   The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we and the selling
stockholders prepare and file a prospectus with the securities regulatory
authorities in each province where trades of common stock are effected.
Accordingly, any resale of the common stock in Canada must be made in
accordance with applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made in accordance
with available statutory exemptions or pursuant to a discretionary exemption
granted by the applicable Canadian securities regulatory authority. Purchasers
are advised to seek legal advice prior to any resale of the common stock.

Representations of Purchasers

   Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us, the selling stockholders and
the dealer from whom such purchase confirmation is received that (i) such
purchaser is entitled under applicable provincial securities laws to purchase
such common stock without the benefit of a prospectus qualified under such
securities laws, (ii) where required by law, that such purchaser is purchasing
as principal and not as agent, and (iii) such purchaser has reviewed the text
above under "Resale Restrictions."

Rights of Action (Ontario Purchasers)

   The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission of rights of action under the civil liability provisions
of the U.S. federal securities laws.

Enforcement of Legal Rights

   All of the issuer's directors and officers as well as the experts named
herein and the selling stockholders may be located outside of Canada and, as a
result, it may not be possible for Canadian purchasers to effect service of
process within Canada upon the issuer or such persons. All or a substantial
portion of the assets of the issuer and such persons may be located outside of
Canada and, as a result, it may not be possible to satisfy a judgment against
the issuer or such persons in Canada or to enforce a judgment obtained in
Canadian courts against such issuer or persons outside of Canada.

Notice to British Columbia Residents

   A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser in this offering. This report must be
in the form attached to British Columbia Securities Commission Blanket Order
BOR #95/17, a copy of which may be obtained from us. Only one report must be
filed in respect of common stock acquired on the same date and under the same
prospectus exemption.

Taxation and Eligibility for Investment

   Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.

                                       71
LEGAL MATTERS

   The validity of the common stock offered hereby will be passed upon for
Phone.com by Venture Law Group, A Professional Corporation, Menlo Park,
California. The underwriters have been represented by Wilson Sonsini Goodrich &
Rosati, Professional Corporation, Palo Alto, California. Venture Law Group
attorneys and an entity affiliated with Venture Law Group hold an aggregate of
11,179 shares of our common stock.

                                    EXPERTS

   The consolidated balance sheets as of June 30, 1998 and 1999, and the
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended June 30, 1999 of Phone.com,
Inc., have been included in the Registration Statement in reliance upon the
report of KPMG LLP, independent auditors, and upon the authority of said firm
as experts in accounting and auditing.

   The statement of assets acquired and liabilities assumed as of March 31,
1999, and the statement of operations and cash flows for the period from May 1,
1998 (inception) through March 31, 1999 of the WAP business of APiON, have been
included in the Registration Statement in reliance upon the report of
PricewaterhouseCoopers, independent auditors, and upon the authority of said
firm as experts in accounting and auditing.

                      WHERE YOU CAN FIND MORE INFORMATION

   We have filed with the Securities and Exchange Commission a Registration
Statement (which term shall include any amendments thereto) on Form S-1 under
the Securities Act with respect to the common stock offered hereby. This
prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, some
items of which are contained in exhibits to the Registration Statement as
permitted by the rules and regulations of the Commission. For further
information with respect to Phone.com and the common stock offered hereby,
reference is made to the Registration Statement, including the exhibits
thereto, and the financial statements and notes filed as a part thereof.
Statements made in this prospectus concerning the contents of any document
referred to herein are not necessarily complete. With respect to each document
filed with the Commission as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved. The Registration Statement, including exhibits thereto and the
financial statements and notes filed as a part thereof, as well as reports and
other information filed with the Commission, may be inspected without charge at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, NY 10048,
and the Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of all or any part thereof may be obtained from
the Commission upon payment of fees prescribed by the Commission. These reports
and other information may also be inspected without charge at a Web site
maintained by the Commission. The address of the site is http://www.sec.gov.

                                       72
INDEX TO FINANCIAL STATEMENTS
Page
                                                                           ----
Phone.com, Inc. Consolidated Financial Statements
  Independent Auditors' Report............................................  F-2
  Consolidated Balance Sheets.............................................  F-3
  Consolidated Statements of Operations...................................  F-4
  Consolidated Statements of Stockholders' Equity.........................  F-5
  Consolidated Statements of Cash Flows...................................  F-6
  Notes to Consolidated Financial Statements..............................  F-7

WAP Business of APiON Limited Financial Statements
  Report of Independent Accountants....................................... F-18
  Statement of Operations................................................. F-19
  Statement of Assets Acquired and Liabilities Assumed.................... F-20
  Cash Flow Statement..................................................... F-21
  Notes to Financial Statements........................................... F-22

Pro Forma Combined Condensed Financial Statements
  Introduction to Unaudited Pro Forma Combined Condensed Financial
   Statements............................................................. F-26
  Unaudited Pro Forma Combined Condensed Balance Sheet.................... F-27
  Unaudited Pro Forma Combined Condensed Statement of Operations.......... F-28
  Notes to Unaudited Pro Forma Combined Condensed Financial Statements.... F-29
F-1
INDEPENDENT AUDITORS' REPORT

The Board of Directors
Phone.com, Inc.:

   We have audited the accompanying consolidated balance sheets of Phone.com,
Inc. and subsidiaries (the Company) as of June 30, 1998 and 1999, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the three-year period ended June 30, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

   In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Phone.com,
Inc. and subsidiaries as of June 30, 1998 and 1999, and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 30, 1999, in conformity with generally accepted accounting
principles.

/s/ KPMG LLP
Mountain View, California
July 19, 1999

                                      F-2
PHONE.COM, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
               (In thousands, except share and per share amounts)
June 30,
                                                            ------------------
                                                              1998      1999
                                                            --------  --------
ASSETS
Current assets:
  Cash and cash equivalents................................ $ 12,677  $ 79,803
  Short-term investments...................................   20,787    33,283
  Accounts receivable......................................    2,724    20,474
  Prepaid expenses and other current assets................      352       865
                                                            --------  --------
    Total current assets...................................   36,540   134,425
Property and equipment, net................................    1,336     3,014
Deposits and other assets..................................    1,268     1,494
                                                            --------  --------
                                                            $ 39,144  $138,933
                                                            ========  ========
           LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of equipment loan and capital lease
   obligations............................................. $    424  $    424
  Accounts payable.........................................      532     1,749
  Accrued liabilities......................................    1,877     7,173
  Deferred revenue.........................................    7,003    36,797
                                                            --------  --------
    Total current liabilities..............................    9,836    46,143
Equipment loan and capital lease obligations, less current
 portion...................................................      915       498
                                                            --------  --------
    Total liabilities......................................   10,751    46,641
                                                            --------  --------
Commitments
Stockholders' equity:
  Convertible preferred stock, $0.001 par value; 17,843,550
   and 5,000,000 shares authorized as of June 30, 1998 and
   1999, respectively; 17,715,627 and no shares issued and
   outstanding as of June 30, 1998 and 1999, respectively;
   aggregate liquidation preference of $51,299 and $-0- as
   of June 30, 1998 and 1999, respectively.................       18        --
  Common stock, $0.001 par value; 32,000,000 and
   100,000,000 shares authorized as of June 30, 1998 and
   1999, respectively; 6,542,398 and 31,667,261 shares
   issued and 6,192,398 and 31,213,094 shares outstanding
   as of June 30, 1998 and 1999, respectively..............        6        31
  Additional paid-in capital...............................   51,611   136,209
  Deferred stock-based compensation........................   (1,786)   (1,318)
  Treasury stock, 350,000 and 454,167 shares as of June 30,
   1998 and 1999, respectively.............................      (72)     (196)
  Notes receivable from stockholders.......................     (197)     (484)
  Accumulated deficit......................................  (21,187)  (41,950)
                                                            --------  --------
    Total stockholders' equity.............................   28,393    92,292
                                                            --------  --------
                                                            $ 39,144  $138,933
                                                            ========  ========
See accompanying notes to consolidated financial statements.

                                      F-3
PHONE.COM, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (In thousands, except per share data)
Year ended June 30,
                                                  ---------------------------
                                                   1997      1998      1999
                                                  -------  --------  --------
Revenues:
  License........................................ $    80  $    522  $  5,229
  Maintenance and support services...............     212     1,683     5,921
  Consulting services............................      --        --     2,292
                                                  -------  --------  --------
    Total revenues...............................     292     2,205    13,442
                                                  -------  --------  --------
Cost of revenues:
  License........................................      87        95       371
  Maintenance and support services...............     266     1,063     3,022
  Consulting services............................      --        --     1,146
                                                  -------  --------  --------
    Total cost of revenues.......................     353     1,158     4,539
                                                  -------  --------  --------
    Gross (loss) profit..........................     (61)    1,047     8,903
                                                  -------  --------  --------
Operating expenses:
  Research and development.......................   3,959     5,732    13,082
  Sales and marketing............................   3,198     5,011    10,840
  General and administrative.....................   1,237     1,801     4,432
  Stock-based compensation.......................      --       108     1,011
                                                  -------  --------  --------
    Total operating expenses.....................   8,394    12,652    29,365
                                                  -------  --------  --------
    Operating loss...............................  (8,455)  (11,605)  (20,462)
Interest income, net.............................     464       982     1,803
                                                  -------  --------  --------
    Loss before income taxes.....................  (7,991)  (10,623)  (18,659)
Income taxes.....................................      --        --     2,104
                                                  -------  --------  --------
    Net loss..................................... $(7,991) $(10,623) $(20,763)
                                                  =======  ========  ========
Basic and diluted net loss per share............. $ (1.67) $  (2.03) $  (2.98)
                                                  =======  ========  ========
Shares used in computing basic and diluted net
 loss per share..................................   4,776     5,221     6,966
                                                  =======  ========  ========
See accompanying notes to consolidated financial statements.

                                      F-4
PHONE.COM, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                       (In thousands, except share data)
Convertible                                                                Notes
                   preferred stock       Common stock     Additional   Deferred               receivable
                  -------------------  ------------------  paid-in   stock-based   Treasury      from      Accumulated
                    Shares     Amount    Shares    Amount  capital   compensation   stock    stockholders    deficit
                  -----------  ------  ----------  ------ ---------- ------------  --------  ------------  -----------
Balances as of
June 30, 1996....   8,731,984     $ 9   4,743,806     $ 5   $  9,023      $    --     $  --         $  --     $ (2,573)
 Issuance of
 common stock to
 officers and
 employees for
 notes
 receivable......          --      --   1,065,000       1        192           --        --          (193)          --
 Issuance of
 common stock to
 consultant......          --      --      10,360      --          2           --        --            --           --
 Stock options
 exercised.......          --      --      93,084      --          9           --        --            --           --
 Issuance of
 Series C
 convertible
 preferred stock,
 net of $32
 issuance costs..   2,538,766       3          --      --      9,638           --        --            --           --
 Repurchase of
 common stock in
 settlement of
 notes receivable
 from
 stockholders....          --      --    (200,000)     --         --           --       (46)           46           --
 Net loss........          --      --          --      --         --           --        --            --       (7,991)
                  -----------     ---  ----------     ---   --------      -------     -----         -----     --------
Balances as of
June 30, 1997....  11,270,750      12   5,712,250       6     18,864           --       (46)         (147)     (10,564)
 Issuance of
 common stock to
 officers and
 employees for
 notes
 receivable......          --      --     226,667      --         88           --        --           (88)          --
 Repayment of
 notes receivable
 from
 stockholders....          --      --          --      --         --           --        --            12           --
 Stock options
 exercised.......          --      --     403,481      --         87           --        --            --           --
 Issuance of
 Series D
 convertible
 preferred stock,
 net of $2,056
 issuance costs..   6,444,877       6          --      --     30,678           --        --            --           --
 Repurchase of
 common stock in
 settlement of
 notes receivable
 from
 stockholders....          --      --    (150,000)     --         --           --       (26)           26           --
 Deferred
 compensation
 related to stock
 option grants...          --      --          --      --      1,894       (1,894)       --            --           --
 Amortization of
 stock-based
 compensation....          --      --          --      --         --          108        --            --           --
 Net loss........          --      --          --      --         --           --        --            --      (10,623)
                  -----------     ---  ----------     ---   --------      -------     -----         -----     --------
Balances as of
June 30, 1998....  17,715,627      18   6,192,398       6     51,611       (1,786)      (72)         (197)     (21,187)
 Issuance of
 common stock to
 officers and
 employees for
 notes
 receivable......          --      --     106,667      --        422           --        --          (422)          --
 Stock options
 exercised.......          --      --     244,026      --        131           --        --            --           --
 Issuance of
 Series E
 convertible
 preferred stock,
 net of $1,100
 issuance costs..   2,458,543       2          --      --     16,698           --        --            --           --
 Issuance of
 common stock in
 initial public
 offering, net of
 offering costs
 of $6,791.......          --      --   4,600,000       5     66,804           --        --            --           --
 Conversion of
 convertible
 preferred stock
 into common
 stock........... (20,174,170)    (20) 20,174,170      20         --           --        --            --           --
 Repurchase of
 common stock in
 settlement of
 notes receivable
 from
 stockholders....          --      --    (104,167)     --         --           --      (124)          124           --
 Repayment of
 notes receivable
 from
 stockholders....          --      --          --      --         --           --        --            11           --
 Deferred
 compensation
 related to stock
 option grants...          --      --          --      --        543         (543)       --            --           --
 Amortization of
 stock-based
 compensation....          --      --          --      --         --        1,011        --            --           --
 Net loss........          --      --          --      --         --           --        --            --      (20,763)
                  -----------     ---  ----------     ---   --------      -------     -----         -----     --------
Balances as of
June 30, 1999....          --     $--  31,213,094     $31   $136,209      $(1,318)    $(196)        $(484)    $(41,950)
                  ===========     ===  ==========     ===   ========      =======     =====         =====     ========
Total
                  stockholders'
                     equity
                  --------------
Balances as of
June 30, 1996....       $ 6,464
 Issuance of
 common stock to
 officers and
 employees for
 notes
 receivable......            --
 Issuance of
 common stock to
 consultant......             2
 Stock options
 exercised.......             9
 Issuance of
 Series C
 convertible
 preferred stock,
 net of $32
 issuance costs..         9,641
 Repurchase of
 common stock in
 settlement of
 notes receivable
 from
 stockholders....            --
 Net loss........        (7,991)
                  --------------
Balances as of
June 30, 1997....         8,125
 Issuance of
 common stock to
 officers and
 employees for
 notes
 receivable......            --
 Repayment of
 notes receivable
 from
 stockholders....            12
 Stock options
 exercised.......            87
 Issuance of
 Series D
 convertible
 preferred stock,
 net of $2,056
 issuance costs..        30,684
 Repurchase of
 common stock in
 settlement of
 notes receivable
 from
 stockholders....            --
 Deferred
 compensation
 related to stock
 option grants...            --
 Amortization of
 stock-based
 compensation....           108
 Net loss........       (10,623)
                  --------------
Balances as of
June 30, 1998....        28,393
 Issuance of
 common stock to
 officers and
 employees for
 notes
 receivable......            --
 Stock options
 exercised.......           131
 Issuance of
 Series E
 convertible
 preferred stock,
 net of $1,100
 issuance costs..        16,700
 Issuance of
 common stock in
 initial public
 offering, net of
 offering costs
 of $6,791.......        66,809
 Conversion of
 convertible
 preferred stock
 into common
 stock...........            --
 Repurchase of
 common stock in
 settlement of
 notes receivable
 from
 stockholders....            --
 Repayment of
 notes receivable
 from
 stockholders....            11
 Deferred
 compensation
 related to stock
 option grants...            --
 Amortization of
 stock-based
 compensation....         1,011
 Net loss........       (20,763)
                  --------------
Balances as of
June 30, 1999....       $92,292
                  ============== ===
See acccompanying notes to consolidated financial statements.

                                      F-5
PHONE.COM, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
Year ended June 30,
                                                    ---------------------------
                                                     1997      1998      1999
                                                    -------  --------  --------
Cash flows from operating activities:
  Net loss........................................  $(7,991) $(10,623) $(20,763)
  Adjustments to reconcile net loss to net cash
   used for operating activities:
    Depreciation and amortization.................      447       630     1,017
    Amortization of deferred stock-based
     compensation.................................       --       108     1,011
    Changes in operating assets and liabilities:
      Accounts receivable.........................     (126)   (2,598)  (17,750)
      Prepaid expenses and other assets...........     (233)     (427)     (739)
      Accounts payable............................       38       319     1,217
      Accrued liabilities.........................      462     1,312     5,296
      Deferred revenue............................      831     6,147    29,794
                                                    -------  --------  --------
        Net cash used for operating activities....   (6,572)   (5,132)     (917)
                                                    -------  --------  --------
Cash flows from investing activities:
  Purchases of property and equipment, net........     (914)     (367)   (2,695)
  Purchases of short-term investments.............   (3,924)  (32,338)  (54,125)
  Proceeds from sales and maturities of short-term
   investments....................................       --    15,475    41,629
  Other assets....................................       --      (800)       --
                                                    -------  --------  --------
        Net cash used for investing activities....   (4,838)  (18,030)  (15,191)
                                                    -------  --------  --------
Cash flows from financing activities:
  Net proceeds from sale of convertible preferred
   stock..........................................    9,641    30,684    16,700
  Issuance of common stock........................       11        87    66,940
  Repayment of notes receivable from
   stockholders...................................       --        12        11
  Proceeds from equipment loan....................       --     1,300        --
  Repayment of equipment loan and capital lease
   obligations....................................       --      (334)     (417)
                                                    -------  --------  --------
        Net cash provided by financing
         activities...............................    9,652    31,749    83,234
                                                    -------  --------  --------
Net (decrease) increase in cash and cash
 equivalents......................................   (1,758)    8,587    67,126
Cash and cash equivalents at beginning of year....    5,848     4,090    12,677
                                                    -------  --------  --------
Cash and cash equivalents at end of year..........  $ 4,090  $ 12,677  $ 79,803
                                                    =======  ========  ========
Supplemental disclosures of cash flow information:
  Property and equipment acquired under capital
   lease obligations..............................  $    --  $    373  $     --
                                                    =======  ========  ========
  Common stock issued to officers and employees
   for notes receivable...........................  $   193  $     88  $    422
                                                    =======  ========  ========
  Repurchase of common stock in settlement of
   notes receivable from stockholders.............  $    46  $     26  $    124
                                                    =======  ========  ========
  Deferred stock-based compensation...............  $    --  $  1,894  $    543
                                                    =======  ========  ========
  Conversion of convertible preferred stock into
   common stock...................................  $    --  $     --  $     20
                                                    =======  ========  ========
See accompanying notes to consolidated financial statements.

                                      F-6
PHONE.COM, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         June 30, 1997, 1998, and 1999

1. Organization and Significant Accounting Policies

   (a) Organization

   Phone.com, Inc. (the Company) was incorporated in Delaware in 1994 to
develop and market software that enables the delivery of Internet-based
services to mass-market wireless telephones. The Company was formerly known as
Unwired Planet, Inc., but changed its name to Phone.com, Inc. effective April
1999.

   (b) Basis of Consolidation

   The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries, Phone.com Japan, K.K. and
Phone.com (Europe) Limited. All significant intercompany accounts and
transactions have been eliminated in consolidation.

   (c) Revenue Recognition

   For agreements entered into prior to July 1, 1998, the Company recognized
revenues in accordance with the provisions of the American Institute of
Certified Public Accountants' Statement of Position (SOP) No. 91-1, Software
Revenue Recognition. Effective July 1, 1998, the Company adopted SOP 97-2,
Software Revenue Recognition, as amended by SOP 98-4 and SOP 98-9. SOP 97-2, as
amended, generally requires revenue earned on software arrangements involving
multiple elements to be allocated to each element based on the relative fair
value of the elements.

   The Company licenses its UP.Link Server Suite products to network operators
through its direct sales force and indirectly through its channel partners. The
Company's license agreements do not provide for a right of return. Allowances
for future estimated warranty costs are provided at the time revenue is
recognized. Licenses can be purchased on an as-deployed basis or on a prepaid
basis. For licenses purchased on an as-deployed basis, license revenue is
recognized as subscribers are activated to use the services that are based on
the Company's UP.Link Server Suite products. The Company has no obligation to
provide standards-compliant products once a subscriber has been activated. For
licenses purchased on a prepaid basis, prepaid license fees are recognized
under subscription accounting due to the Company's commitment to provide
standards-compliant products for each license covered by the prepaid
arrangement. This subscription revenue is recognized ratably over the
contractual term of the prepaid arrangement (i.e., the date the prepaid
licenses expire if not used), commencing at the beginning of the month delivery
and acceptance occur by the network operator. The prepaid license period is
generally 12 to 30 months. Licenses expire if not activated prior to the end of
the prepaid license term. The Company recognizes revenues from maintenance and
support services provided to network operators ratably over the term of the
agreement, generally one year, and recognizes revenues from consulting services
provided to network operators as the services are performed.

   The Company recognizes revenues from UP.Browser agreements with wireless
telephone manufacturers ratably over the period during which the services are
performed, generally one year. The Company provides its wireless telephone
manufacturer customers with support associated with their efforts to port its
UP.Browser software to their wireless telephones, software error corrections,
and new releases as they become commercially available.

   (d) Cash and Cash Equivalents

   Cash and cash equivalents consist of cash and highly liquid investments with
remaining maturities of less than 90 days at the date of purchase. The Company
is exposed to credit risk in the event of default by the

                                      F-7
PHONE.COM, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                         June 30, 1997, 1998, and 1999

financial institutions or the issuers of these investments to the extent of the
amounts recorded on the balance sheet in excess of amounts that are insured by
the FDIC. As of June 30, 1998 and 1999, cash equivalents consisted principally
of money market funds and commercial paper.

   (e) Accounting for Certain Investments in Debt and Equity Securities

   The Company classifies its investments in debt securities as available-for-
sale. Available-for-sale securities are carried at fair value, which
approximates amortized cost.

   (f) Financial Instruments and Concentration of Credit Risk

   The carrying value of the Company's financial instruments, including cash
and cash equivalents, short-term investments, accounts receivable, and
equipment loans approximates fair value. Financial instruments that subject the
Company to concentrations of credit risk consist primarily of cash and cash
equivalents and trade accounts receivable.

   The Company sells its products and services principally to leading wireless
network operators and prominent wireless telephone manufacturers. Credit risk
is concentrated in North America and Japan. The Company performs ongoing credit
evaluations of its customers' financial condition and, generally, requires no
collateral from its customers. The Company has had no write-offs of accounts
receivable and, based on an ongoing evaluation of its accounts receivable
collectibility and customer creditworthiness, has recorded no allowance for
doubtful accounts receivable to date.

   (g) Property and Equipment

   Property and equipment are recorded at cost less accumulated depreciation
and amortization. Depreciation is calculated using the straight-line method
over the estimated useful lives of the respective assets, generally three to
five years. Leasehold improvements are amortized over the shorter of the
estimated useful lives of the assets or the lease term.

   (h) Impairment of Long-Lived Assets

   The Company evaluates its long-lived assets for impairment whenever events
or changes in circumstances indicate that the carrying amount of such assets
may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of any asset to future net cash
flows expected to be generated by the asset. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount or fair
value less costs to sell.

   (i) Research and Development

   Research and development costs are expensed as incurred until technological
feasibility has been established. To date, the Company's software has been
available for general release concurrent with the establishment of
technological feasibility and, accordingly, no development costs have been
capitalized.

   (j) Use of Estimates

   The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets

                                      F-8
PHONE.COM, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                         June 30, 1997, 1998, and 1999

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

   (k) Income Taxes

   Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Valuation allowances are established when necessary to reduce
deferred tax assets to the amounts expected to be recovered.

   (l) Accounting for Stock-Based Compensation Plans

   The Company uses the intrinsic-value method to account for all of its
employee stock-based compensation plans. Expense associated with stock-based
compensation is being amortized on an accelerated basis over the vesting
period of the individual award consistent with the method described in
Financial Accounting Standards Board (FASB) Interpretation No. 28.

   (m) Foreign Currency Transactions

   The functional currency for the Company's foreign subsidiaries is the U.S.
dollar. Accordingly, such entities remeasure monetary assets and liabilities
at exchange rates in effect as of each reporting date while nonmonetary items
are remeasured at historical rates. Income and expense accounts are remeasured
at the average rates in effect during each such period, except for
depreciation which is remeasured at historical rates. Remeasurement
adjustments and transaction gains and losses are recognized in income in the
period of occurrence and have not been significant to date.

   (n) Comprehensive Income

   The Company has no material components of other comprehensive income (loss)
for all periods presented.

                                      F-9
PHONE.COM, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                         June 30, 1997, 1998, and 1999

   (o) Net Loss Per Share

   Basic net loss per share is computed using the weighted-average number of
outstanding shares of common stock excluding shares of restricted stock subject
to repurchase summarized below. Diluted net loss per share is computed using
the weighted-average number of shares of common stock outstanding and, when
dilutive, potential shares of restricted common stock subject to repurchase,
common stock from options, and warrants to purchase common stock using the
treasury stock method and from convertible securities using the "as if
converted" basis. The following potential shares of common stock have been
excluded from the computation of diluted net loss per share for all periods
presented because the effect would have been antidilutive (in thousands):
Year ended June 30,
                                                           -------------------
                                                            1997   1998  1999
                                                           ------ ------ -----
Shares issuable under stock options.......................  2,071  2,877 4,751
Shares of restricted stock subject to repurchase..........    715    670   353
Shares issuable pursuant to warrants to purchase common
 stock....................................................     --     31    31
Shares of convertible preferred stock on an "as if
 converted" basis......................................... 11,271 17,716    --
The weighted-average exercise price of stock options was $0.28, $1.00, and
$6.35 for the years ended June 30, 1997, 1998, and 1999, respectively. The
weighted-average purchase price of restricted stock was $0.26, $0.30, and $0.59
for the years ended June 30, 1997, 1998, and 1999, respectively. The weighted-
average exercise price of warrants was $3.81 for both the fiscal years ended
June 30, 1998 and 1999. In June 1999, all outstanding shares of the Company's
convertible preferred stock were automatically converted into common stock upon
completion of the Company's initial public offering (See Note 4a).

   (p) Recent Accounting Pronouncements

   In June 1998, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities.
SFAS No. 133, as amended by SFAS No. 137, establishes accounting and reporting
standards for derivative financial instruments and hedging activities related
to those instruments, as well as other hedging activities. Because the Company
does not currently hold any derivative instruments and does not engage in
hedging activities, the Company expects that the adoption of SFAS No. 133, as
amended, will not have a material impact on its consolidated financial
position, results of operations, or cash flows. The Company will be required to
adopt SFAS No. 133 in fiscal 2001.

2. Balance Sheet Components

   (a) Short-Term Investments

   All of the Company's investments are considered available-for-sale
securities and consisted of the following (in thousands):
June 30,
                                                               ----------------
                                                                 1998    1999
                                                               -------- -------
Commercial paper........................................... $ 13,594 $ 7,982
   Corporate bonds............................................    9,213  30,299
   Certificates of deposit....................................    7,238      --
                                                               -------- -------
                                                               $ 30,045 $38,281
                                                               ======== =======
As of June 30, 1998 and 1999, $9,258,000 and $4,998,000, respectively, of
the Company's investments are included in cash and cash equivalents.

                                      F-10
PHONE.COM, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                         June 30, 1997, 1998, and 1999

   All short-term investments as of June 30, 1999, contractually mature within
one year.

   (b) Property and Equipment

   Property and equipment, consisted of the following (in thousands):
June 30,
                                                                 --------------
                                                                  1998    1999
                                                                 ------  ------
Computer equipment and software.............................. $2,214  $4,785
   Furniture and equipment......................................    213     314
   Leasehold improvements.......................................     95     118
                                                                 ------  ------
                                                                  2,522   5,217
   Accumulated depreciation and amortization.................... (1,186) (2,203)
                                                                 ------  ------
                                                                 $1,336  $3,014
                                                                 ======  ======
Equipment under capital leases aggregated $373,000 as of June 30, 1998 and
1999. Accumulated amortization on the assets under capital leases aggregated
$42,000 and $167,000 as of June 30, 1998 and 1999, respectively.

3. Equipment Loan and Capital Lease Obligations

   In May 1997, the Company entered into a $2,000,000 credit facility with a
business credit corporation that consisted of a $1,300,000 equipment term loan
and a $700,000 lease line of credit. The equipment loan bears interest at 7.5%,
is collateralized by equipment, and is payable in 42 monthly installments of
$35,000 through January 2001. As of June 30, 1998 and 1999, $1,000,000 and
$712,000, respectively, was outstanding under the term loan. During fiscal
1998, the Company borrowed approximately $400,000 under the lease line of
credit with $339,000 and $210,000 outstanding as of June 30, 1998 and 1999,
respectively, bearing interest at an effective interest rate of 11.8%, and
payable in 42 monthly installments of $11,000 through December 2001. The unused
portion of the lease line of credit expired in July 1998.

   As of June 30, 1999, aggregate maturities for the equipment loan and capital
lease obligations for fiscal 2000, 2001, and 2002 are $424,000, $471,000, and
$27,000, respectively.

   In conjunction with the equipment loan and lease line of credit, the Company
issued warrants to purchase 20,466 and 11,020 shares, respectively, of the
Company's common stock at an exercise price of $3.81 per share. These warrants
expire in June 2004. The fair value of the warrants issued, calculated using
the Black-Scholes option pricing model, using the following assumptions: no
dividends; contractual life of 10 years; risk-free interest rate of 6.33%;
expected volatility of 60%, was not material.

4. Stockholders' Equity

   (a) Initial Public Offering

   On June 11, 1999, the Company completed an initial public offering (IPO) of
4,600,000 shares of its common stock at a price of $16.00 per share and
received net proceeds of approximately $66,809,000. At the IPO date, all
outstanding shares of the Company's convertible preferred stock were
automatically converted into common stock on a one-for-one basis.

                                      F-11
PHONE.COM, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                         June 30, 1997, 1998, and 1999

   (b) Reverse Stock Split

   On June 7, 1999, the Company effected a two-for-three reverse stock split of
its convertible preferred stock and common stock. The accompanying consolidated
financial statements have been retroactively restated to give effect to the
reverse stock split.

   (c) Stock Plans

   The Company is authorized to issue up to 9,383,887 shares of common stock in
connection with its 1995 and 1996 stock option plans (the Plans) to directors,
employees, and consultants. The Plans provide for the issuance of stock
purchase rights, incentive stock options, or nonstatutory stock options.

   The stock purchase rights are subject to a restricted stock purchase
agreement whereby the Company has the right to repurchase the stock upon the
voluntary or involuntary termination of the purchaser's employment with the
Company at the original issuance cost. The Company's repurchase right lapses at
a rate determined by the stock plan administrator, but at a minimum rate of 20%
per year. Through June 30, 1999, the Company has issued 1,381,667 shares under
restricted stock purchase agreements, of which 454,167 shares have been
repurchased and 352,778 are subject to repurchase at a weighted-average price
of $0.59 per share. Certain of these restricted shares were issued to officers
of the Company for full recourse promissory notes with interest rates ranging
from 5.49% to 6.48% and terms of four to five years.

   Under the Plans, the exercise price for incentive stock options is at least
100% of the stock's fair value on the date of grant for employees owning less
than 10% of the voting power of all classes of stock, and at least 110% of the
fair value on the date of grant for employees owning more than 10% of the
voting power of all classes of stock. For nonstatutory stock options, the
exercise price is also at least 110% of the fair value on the date of grant for
employees owning more than 10% of the voting power of all classes of stock and
no less than 85% for employees owning less than 10% of the voting power of all
classes of stock.

   Under the Plans, options generally expire in 10 years. However, the term of
the options may be limited to 5 years if the optionee owns stock representing
more than 10% of the voting power of all classes of stock. Vesting periods are
determined by the Company's Board of Directors and generally provide for shares
to vest ratably over a 4- to 5-year period.

   As of June 30, 1999, there were -0- and 2,936,826 additional shares
available for grant under the 1995 and 1996 stock option plans, respectively.

   On March 26, 1999, the Company adopted the 1999 Employee Stock Purchase Plan
(the Purchase Plan) and reserved a total of 600,000 shares of the Company's
common stock for issuance thereunder plus an automatic annual increase for
fiscal 2000 through 2004 equal to the lesser of 500,000 shares or 1% of the
Company's outstanding common stock on the last day of the immediately preceding
fiscal year. The Purchase Plan permits eligible employees to purchase common
stock through payroll deductions at a purchase price of 85% of the lower of the
fair value of the common stock at the beginning or end of each offering period,
generally 24 months in length.

   On March 26, 1999, the Company adopted the 1999 Directors Stock Option Plan
(the Directors Plan) and reserved a total of 600,000 shares of the Company's
common stock for issuance thereunder. Each nonemployee director who becomes a
member of the Board of Directors will initially be granted an option for 33,333
shares of the Company's common stock and, thereafter, an option to purchase an
additional 2,500 shares of the

                                      F-12
PHONE.COM, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                         June 30, 1997, 1998, and 1999

Company's common stock quarterly commencing in the fiscal quarter ending
September 30, 2000. Options granted under the Directors Plan vest immediately.
The exercise price of the options granted under the Directors Plan is equal to
the fair value of the Company's common stock on the date of grant.

   (d) Stock-Based Compensation

   The Company uses the intrinsic-value method in accounting for its employee
stock-based compensation plans. Accordingly, no compensation cost has been
recognized for any of its stock options granted or restricted stock sold
because the exercise price of each option or purchase price of each share of
restricted stock equaled or exceeded the fair value of the underlying common
stock as of the grant date for each stock option or purchase date of each
restricted stock share, except for stock options granted and restricted stock
sold from October 1997 through March 1999. With respect to the stock options
granted and restricted stock sold from October 1997 to March 1999, the Company
recorded deferred stock compensation of $2,437,000 for the difference at the
grant or issuance date between the exercise price of each stock option granted
or purchase price of each restricted share sold and the fair value of the
underlying common stock. This amount is being amortized on an accelerated basis
over the vesting period, generally four to five years, consistent with the
method described in FASB Interpretation No. 28. Had compensation costs been
determined in accordance with SFAS No. 123 for all of the Company's stock-based
compensation plans, net loss and basic and diluted net loss per share would
have been as follows (in thousands, except per share data):
Year ended June 30,
                                                ------------------------------
                                                  1997      1998       1999
                                                --------  ---------  ---------
Net loss:
  As reported.................................. $ (7,991) $ (10,623) $ (20,763)
  Pro forma.................................... $ (8,003) $ (10,656) $ (22,139)
Basic and diluted net loss per share:
  As reported.................................. $  (1.67) $   (2.03) $   (2.98)
  Pro forma.................................... $  (1.68) $   (2.04) $   (3.18)
The fair value of each option was estimated on the date of grant using the
minimum value method prior to the IPO and the Black-Scholes option pricing
model after the IPO, with no expected dividends and the following weighted-
average assumptions:
Year ended June 30,
                                             ----------------------------------
                                                1997        1998        1999
                                             ----------  ----------  ----------
Expected life............................... 3.84 years  3.23 years  3.17 years
Risk-free interest rate.....................       6.50%       5.55%       5.38%
Volatility..................................         --          --          54%
The fair value of purchase rights granted under the Purchase Plan is
estimated on the date of grant using the Black-Scholes option pricing model
with the following weighted-average assumptions for grants in the year ended
June 30, 1999: no expected dividends; expected volatility of 80%; risk-free
interest rate of 5.26%; and expected life of 1.25 years. The weighted-average
fair value of purchase rights granted under the Purchase Plan during 1999 was
$6.24 per share.

                                      F-13
PHONE.COM, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                         June 30, 1997, 1998, and 1999

   A summary of the status of the Company's options under the Plans, is as
follows (in thousands, except per share data):
Year ended June 30,
                              -----------------------------------------------------
                                    1997              1998              1999
                              ----------------- ----------------- -----------------
                                      Weighted-         Weighted-         Weighted-
                                       average           average           average
                                      exercise          exercise          exercise
                              Shares    price   Shares    price   Shares    price
                              ------  --------- ------  --------- ------  ---------
Outstanding at beginning of
 year.......................    646     $0.11   2,071     $0.28   2,877    $ 1.00
Granted.....................  1,630      0.34   1,422      1.73   2,338     11.89
Forfeited...................   (112)     0.26    (213)     0.30    (220)     1.72
Exercised...................    (93)     0.13    (403)     0.22    (244)     1.16
                              -----             -----             -----
Outstanding at end of year..  2,071      0.28   2,877      1.00   4,751      6.35
                              =====             =====             =====
Options exercisable at end
 of year....................    235      0.15     385      0.28   1,009      1.58
                              =====             =====             =====
Weighted-average fair value
 of options granted during
 the year with exercise
 prices equal to fair value
 at date of grant...........             0.07              0.06              7.77
Weighted-average fair value
 of options granted during
 the year with exercise
 prices less than fair value
 at date of grant...........               --              1.82              0.32
As of June 30, 1999, the range of exercise prices and weighted-average
remaining contractual life of outstanding options were as follows (number of
options in thousands):
Options outstanding         Options exercisable
                   --------------------------------- ---------------------
                                Weighted-
                                 average
                                remaining  Weighted-             Weighted-
       Range of                contractual  average   Number of   average
       exercise      Number       life     exercise    shares    exercise
        prices     outstanding   (years)     price   exercisable   price
      -----------  ----------- ----------- --------- ----------- ---------
$ 0.05-0.60     1,614       7.70      $ 0.34        783     $ 0.32
        1.20-2.10        64       8.81        1.76         14       1.57
        2.48-3.38     1,227       9.14        2.63         78       2.48
         7.25           242       9.68        7.25        101       7.25
         12.00          281       9.81       12.00         33      12.00
         16.00        1,323       9.95       16.00         --         --
                      -----                             -----
                      4,751       8.94        6.35      1,009       1.58
                      =====                             =====
5. Leases

   In fiscal 1998, the Company entered into a noncancelable operating lease for
its facilities expiring in June 2005. As of June 30, 1999, the Company has a
letter of credit collateralized by a certificate of deposit in the amount of
$686,000, included in deposits and other assets in the accompanying
consolidated balance sheet as of June 30, 1999, related to the new facility
lease. The Company has an additional noncancelable operating lease for its
previous facility, which expires in April 2001. However, the Company has
entered into a sublease for this facility, which also expires in April 2001.

                                      F-14
PHONE.COM, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                         June 30, 1997, 1998, and 1999

   In June 1999, the Company entered into an amendment to its noncancelable
operating lease for its facilities to add additional facilities and extend the
expiration date to May 2006.

   Future minimum lease payments under noncancelable operating leases, net of
sublease payments, as of June 30, 1999, are as follows (in thousands):
Net
                                                      Minimum  Minimum   minimum
   Year ending                                         lease   sublease   lease
   June 30,                                           payments payments  payments
   -----------                                        -------- --------  --------
2000.............................................. $  2,736 $  (722)  $ 2,014
   2001..............................................    2,926    (401)    2,525
   2002..............................................    2,613      --     2,613
   2003..............................................    2,686      --     2,686
   2004..............................................    2,758      --     2,758
   Thereafter........................................    3,599      --     3,599
                                                      -------- -------   -------
                                                      $ 17,318 $(1,123)  $16,195
                                                      ======== =======   =======
Rent expense for the years ended June 30, 1997, 1998, and 1999, was
approximately $451,000, $307,000, and $1,212,000, respectively.

6. Income Taxes

   The differences between the income tax expense computed at the federal
statutory rate and the Company's tax provision for all periods presented
primarily relate to net operating losses not benefited. Income tax expense for
the year ended June 30, 1999, relates to foreign withholding taxes.

   The individual components of the Company's deferred tax assets are as
follows (in thousands):
Years ended June
                                                                  30,
                                                            -----------------
                                                             1998      1999
                                                            -------  --------
Accruals and reserves not deductible for tax purposes... $   146  $    497
   Property and equipment..................................      15       103
   Capitalized start-up expenditures for tax purposes......     406       274
   Net operating loss carryovers...........................   7,600    15,598
   Research and development credit carryforwards...........     666       702
   Foreign tax credit carryforward.........................      --     2,011
                                                            -------  --------
     Total deferred tax assets.............................   8,833    19,185
   Valuation allowance.....................................  (8,833)  (19,185)
                                                            -------  --------
     Net deferred tax assets............................... $    --  $     --
                                                            =======  ========
In light of the Company's recent history of operating losses, the Company
has provided a valuation allowance for all of its deferred tax assets as it is
presently unable to conclude that it is more likely than not that the deferred
tax assets will be realized.

   As of June 30, 1999, the Company has a net operating loss carryover for
federal and California income tax purposes of approximately $36,000,000. In
addition, the Company had federal and California research and

                                      F-15
PHONE.COM, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                         June 30, 1997, 1998, and 1999

development credit carryforwards of approximately $400,000 and $303,000,
respectively. The Company's federal net operating loss and research and
development credit carryforwards will expire in the year 2011 through 2019 if
not utilized. The Company's California net operating loss carryforwards will
expire in the year 2004. The state research and development credit can be
carried forward indefinitely. The Company also has a foreign tax credit
carryforward of $2,011,000, which expires in the year 2004.

   Federal and California tax laws impose substantial restrictions on the
utilization of net operating loss and tax credit carryforwards in the event of
an "ownership change" as defined in Internal Revenue Code, Section 382. If the
Company has an ownership change, the Company's ability to utilize the above
mentioned carryforwards could be significantly reduced.

7. Geographic, Segment, and Significant Customer Information

   During 1999, the Company adopted the provision of SFAS No. 131, Disclosures
about Segments of an Enterprise and Related Information. SFAS No. 131
establishes standards for the reporting by public business enterprises of
information about operating segments, products and services, geographic areas,
and major customers. The method for determining what information to report is
based on the way that management organizes the operating segments within the
Company for making operational decisions and assessments of financial
performance.

   The Company's chief operating decision maker is considered to be the
Company's Chief Executive Officer (CEO). The CEO reviews financial information
presented on a consolidated basis accompanied by disaggregated information
about revenues by geographic region and by product for purposes of making
operating decisions and assessing financial performance. Therefore, the Company
operates in a single operating segment: software that enables the delivery of
Internet-based services to mass-market wireless telephones and related
services. The disaggregated information reviewed on a product basis by the CEO
is as follows (in thousands):
Years ended June
                                                                     30,
                                                             -------------------
                                                             1997  1998   1999
                                                             ---- ------ -------
Revenue:
     UP.Link Server Suite................................... $187 $1,335 $ 6,636
     UP.Browser.............................................  105    870   4,514
     Consulting services....................................   --     --   2,292
                                                             ---- ------ -------
                                                             $292 $2,205 $13,442
                                                             ==== ====== =======
The Company markets its products primarily from its operations in the United
States. International sales are primarily to customers in Asia Pacific and
Europe. Information regarding the Company's revenues in different geographic
regions is as follows (in thousands):
Years ended June
                                                                     30,
                                                             -------------------
                                                             1997  1998   1999
                                                             ---- ------ -------
North America............................................ $272 $1,220 $ 4,515
   Europe...................................................   20    513   4,317
   Asia Pacific.............................................   --    472   4,610
                                                             ---- ------ -------
                                                             $292 $2,205 $13,442
                                                             ==== ====== =======
F-16
PHONE.COM, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                         June 30, 1997, 1998, and 1999

   Significant customer information is as follows:
Percent of total revenue         Percent of
                                   ------------------------            total
                                    Years ended June 30,             accounts
                                  ==============================   receivable at
                                    1997       1998       1999     June 30, 1999
                                    ----       ----       ----     -------------
Customer A....................       20%        22%        17%        --
   Customer B....................       --         18%         6%        --
   Customer C....................       30%        --         --         --
   Customer D....................       19%         1%        --         --
   Customer E....................       10%         2%        --         --
   Customer F....................       --          2%        10%         2%
Revenues aggregating 41%, 37%, and 43% of total revenues for the years ended
June 30, 1997, 1998, and 1999, respectively, were generated from customers who
are also stockholders of the Company, and whose ownership percentages ranged
from 0.6% to 3.3% as of June 30, 1999.

                                      F-17
REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors and Stockholders of
Phone.com, Inc.

   In our opinion, the accompanying statement of assets acquired and
liabilities assumed and the related statement of operations and of cash flows
present fairly, in all material respects, the financial position of the WAP
business of APiON at March 31, 1999 and the results of its operations and cash
flows for the period from May 1, 1998 (inception) through March 31, 1999 in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of APiON's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
auditing standards generally accepted in the United Kingdom, which are
substantially consistent with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.

PricewaterhouseCoopers
Belfast, United Kingdom
26 October 1999

                                      F-18
WAP BUSINESS OF APiON

                            STATEMENT OF OPERATIONS
May 1, 1998
                                                                     (inception)
                                                                         to
                                                                      March 31,
                                                                        1999
                                                                     -----------
                                                                       $000's
Operating expenses:
  Salaries..........................................................      370
  Depreciation......................................................      143
  Government grants.................................................     (124)
  Other identifiable overhead costs.................................      260
  Allocated overhead costs..........................................      435
                                                                       ------
    Total operating expenses........................................    1,084
Tax expenses........................................................      147
                                                                       ------
Net operating expenses..............................................    1,231
                                                                       ======
The accompanying notes are an integral part of these financial statements.

                                      F-19
WAP BUSINESS OF APiON

              STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
As at
                                                                       March 31,
                                                                         1999
                                                                       ---------
                                                                        $000's
ASSETS
Cash..................................................................   1,414
Accounts receivable...................................................   3,062
Capitalised software development costs................................     180
Plant and equipment, net..............................................     321
                                                                         -----
                                                                         4,977
                                                                         =====
                             LIABILITIES
Current liabilities:
  Accounts payable....................................................   1,431
  Amounts due under capital leases....................................      31
  Bank loans..........................................................      53
                                                                         -----
    Total current liabilities.........................................   1,515
                                                                         -----
Non current liabilities:
  Amounts due under capital leases....................................       3
  Bank loans..........................................................      78
  Deferred government grants..........................................      96
  Deferred taxation...................................................     147
                                                                         -----
    Total non current liabilities.....................................     324
                                                                         -----
    Total liabilities.................................................   1,839
                                                                         -----
    Net assets acquired...............................................   3,138
                                                                         =====
The accompanying notes are an integral part of these financial statements.

                                      F-20
WAP BUSINESS OF APiON

                              CASH FLOW STATEMENT
May 1, 1998
                                                                (inception)  to
                                                                   March 31,
                                                                      1999
                                                                ---------------
                                                                    $000's
Operating activities:
  Net operating expenses.......................................     (1,231)
  Depreciation.................................................        143
  Amortization of government grants............................        (35)
  Changes in WAP operating assets and liabilities:
    Increase in accounts payable...............................        197
    Increase in deferred tax liabilities.......................        147
                                                                    ------
      Net cash outflow from operating activities...............       (779)
                                                                    ------
Investing activities:
  Capitalised software development costs.......................       (180)
  Purchase of plant and equipment..............................       (401)
  Government grants received...................................        131
                                                                    ------
      Net cash outflow from investing activities...............       (450)
                                                                    ------
Financing activities:
  Cash proceeds from bank loans................................        220
  Cash repaid against bank loans...............................        (89)
  Cash repaid against capital leases...........................        (29)
  Contribution of cash from the Services business..............      2,541
                                                                    ------
      Net cash provided by financing activities................      2,643
                                                                    ------
Net increase in cash...........................................      1,414
Balance at May 1, 1998.........................................         --
                                                                    ------
Balance at March 31, 1999......................................      1,414
                                                                    ======

Supplemental cash flow disclosures:
  Contribution of accounts receivable by the Services business
   to WAP......................................................      3,062
  Accounts payable transferred to WAP..........................     (1,234)
  Fixed assets acquired under capital leases...................        (63)
  Interest paid................................................          8
The accompanying notes are an integral part of these financial statements.

                                      F-21
WAP BUSINESS OF APiON

                       NOTES TO THE FINANCIAL STATEMENTS

1. Description of business

   APiON was incorporated in the United Kingdom in May 1995 to provide computer
software consulting services. Its WAP business was established in May 1998 to
develop wireless Internet products for sale to world wide telecommunications
service providers.

2. Accounting policies

   Basis of Presentation

   The activities referred to above were carried out jointly by APiON Limited
and by its related company, incorporated in the Republic of Ireland, APiON
Telecoms Limited (jointly referred to as "APiON").

   The operations of APiON consisted of the WAP business ("WAP"), and other
trading activities (the "Services business"). In conjunction with the
acquisition of WAP the trading activities associated with the Services business
have been spun off to the common shareholders of APiON. Please refer to the
Subsequent Events note for a discussion of the impact of this on WAP.

   Although APiON began research and development on WAP in 1998 it did not
commence commercial marketing of it until after March 31, 1999. As a result
there were no WAP revenues in the period to that date.

   The Statement of Operations reflects the direct operating expenses for WAP,
for which APiON maintained separate accounting information. Of APiON's total
operating costs of $8,852,000, $6,688,000 can be specifically identified with
the respective businesses. Of the residual total overhead costs, mainly
consisting of management and administration salaries, and property and
recruitment costs, $435,000 has been allocated to the WAP business on the basis
of the respective head counts of each business. Management believes that the
allocations described above provide a reasonable basis of allocating corporate
overhead costs.

   The Statement of Assets Acquired and Liabilities Assumed of WAP as at March
31, 1999 reflects the assets acquired and liabilities acquired assumed by
Phone.com in the transaction discussed in note 8. Since WAP had no revenue-
generating activities prior to March 31, 1999, the accounts receivable and
certain trade payables shown in the Statement of Assets Acquired and
Liabilities Assumed relate to the Services business, but have been included
since they were acquired by Phone.com in conjunction with its acquisition of
WAP.

   Development Stage Enterprise

   Since WAP has not commenced commercial operations, WAP is considered a
development stage enterprise as defined by Financial Accounting Standards Board
Opinion No. 7, Accounting and Reporting by Development Stage Enterprises. The
deficit accumulated in the development stage from May 1998 to March 31, 1999 is
$1,231,000.

   Financial Instruments and Concentration of Credit Risk

   The carrying value of WAP's financial instruments, including cash, accounts
receivable, bank loans and amounts due under capital leases, approximates fair
value. Financial instruments that subject WAP to concentrations of credit risk
consist primarily of trade accounts receivable.

   The receivables relate to the sale of services by the Services business,
principally to leading mobile telephone operators and manufacturers. Credit
risk is concentrated in the United Kingdom. As part of the ordinary course of
its business, the management of APiON performed credit evaluations of its
customers' financial condition and did not require collateral from its
customers. APiON has had no write-offs of accounts receivable and, based on its
evaluation of its accounts receivable collectibility and customer
creditworthiness, has recorded no allowance for doubtful accounts receivable.

                                      F-22
WAP BUSINESS OF APiON

                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)

   Research and Development

   Research and development costs are expensed as incurred until technological
feasibility has been established. Until January 1999, WAP's software was under
development and had not yet achieved technological feasibility and,
accordingly, only development costs incurred subsequent to that date have been
capitalised.

   Income taxes

   Income taxes are accounted for under the asset and liability method as if
WAP was filing a separate return. Deferred tax assets and liabilities are
recognised for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognised in income in the
period that includes the enactment date. Valuation allowances are established
when necessary to reduce deferred tax assets to the amounts expected to be
recovered.

   Tangible fixed assets

   The cost of tangible fixed assets is their purchase cost, together with any
incidental costs of acquisition. Depreciation is calculated so as to write off
the cost of tangible fixed assets, less their estimated residual values, on a
straight-line basis over the expected useful economic lives of the assets
concerned. The annual rate used for this purpose is 33% per annum.

   Capital leases

   Leasing agreements, which transfer to WAP substantially all the benefits and
risks of ownership of an asset are treated as if the asset had been purchased
outright. The assets are included in fixed assets and the capital element of
the leasing commitments is shown as obligations under capital leases. Assets
held under capital leases are depreciated over the shorter of the lease terms
and the useful lives of equivalent owned assets.

   Government grants

   Revenue grants against revenue expenditure are credited to profit and loss
in the same period as the related expenditure is incurred.

   Grants against capital expenditure are taken to deferred income and credited
to profit and loss on the same basis as depreciation is charged on the related
assets. These grants are repayable to the government agency concerned in the
event that the relevant assets are disposed of, or cease to be used for the
purpose of the trade, within four years of the receipt of the grant. In light
of the carve-out of certain fixed assets as described in the Subsequent Event
note, management of APiON and Phone.com have met with the government agency
concerned. Agreement has been reached that the related grants will not be
repayable, and that the shareholders of APiON rather than WAP will assume the
liability to repay the grants relating to the carve-out fixed assets in the
circumstances of any subsequent disposal or failure to use them for the purpose
intended.

   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.

                                      F-23
WAP BUSINESS OF APiON

                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)

   Comprehensive income

   WAP has no material components of other comprehensive income (loss) for all
periods presented.

3. Related party transactions

   During the period presented WAP purchased services from companies with
common shareholders and directors. WAP paid $38,455 during the period for
services rendered, at what the directors considered to be commercial market
prices.

4. Capitalised Software Development Costs
$000's
                                                                          ------
Cost:
     At May 1, 1998......................................................   --
     Additions...........................................................  180
                                                                           ---
     At March 31, 1999...................................................  180
                                                                           ===
There was no amortisation of the capitalised software development costs in
the period from May 1, 1998 to March 31, 1999 as no sales of WAP were made
before March 31, 1999.

5. Plant and Equipment
Fixtures &
                                                     Computers  Fittings  Total
                                                     --------- ---------- ------
                                                      $000's     $000's   $000's
Cost:
     At May 1, 1998.................................     --        --       --
     Additions......................................    392        72      464
     Disposals......................................     --       (13)     (13)
                                                        ---       ---      ---
     At March 31, 1999..............................    392        59      451
                                                        ===       ===      ===

   Depreciation:
     At May 1, 1998.................................     --        --       --
     Disposals......................................     --       (13)     (13)
     Charge for the period..........................    112        31      143
                                                        ---       ---      ---
     At March 31, 1999..............................    112        18      130
                                                        ---       ---      ---
   Net book value at March 31, 1999.................    280        41      321
                                                        ===       ===      ===
F-24
WAP BUSINESS OF APiON

                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)

6. Bank Loans and Capital Leases

   WAP has a series of bank loan facilities to finance the purchase of fixed
assets, each repayable in monthly installments over a three-year period at a
rate of interest of UK bank base rate plus 1.5% (currently 6.75% per annum). In
addition it has capital lease facilities, the final repayment on which falls
due in the year to March 2001. The repayment schedule for the total bank loan
and capital lease balances due at March 31,1999, was:
Bank  Capital
                                                                  Loans  leases
                                                                  ------ -------
                                                                  $000's $000's
Repayable in the year to March, 31:
     2000                                                           53      34
     2001                                                           49       3
     2003                                                           29      --
                                                                   ---     ---
   Total minimum payments........................................  131      37
   Less amounts representing interest............................   --       3
                                                                   ---     ---
                                                                   131      34
                                                                   ===     ===
7. Deferred taxation
As at
                                                                       March 31,
                                                                         1999
                                                                       ---------
                                                                        $000's
Fixed asset temporary differences..................................    147
   Net operating loss carry forwards..................................    373
   Less: Valuation allowance..........................................   (373)
                                                                         ----
   Total deferred tax liabilities, net................................    147
                                                                         ====
Management has evaluated the positive and negative evidence impacting the
realizability of the deferred tax assets that consist principally of net
operating losses carried forward in the UK. Management has considered the short
operating history of WAP as well as the uncertainty associated with the
Company's future profitability and has concluded that as of March 31, 1999,
such deferred tax assets are less likely than not to be realized in the
foreseeable future. Therefore management has recorded a full valuation
allowance against deferred tax assets. Management evaluates the positive and
negative evidence on a quarterly basis.

8. Subsequent events

   Subsequent to March 31, 1999, ownership of APiON Limited and APiON Telecoms
Limited was consolidated under a new United Kingdom company, also called APiON
Telecoms Limited, which was the statutory entity to be acquired by Phone.com.

   On October 26, 1999, all of the outstanding capital stock of APiON Telecoms
Limited was acquired by Phone.com, Inc. in exchange for 1,196,513 shares of
Phone.com common stock.

   Immediately prior to the acquisition, APiON spun off its Services business
to the vendor shareholders. The transfer involved certain employees, and fixed
assets employed in the Services business that had a net book value of $937,000
at March, 31 1999, and related asset finance liabilities of $573,000. The
Services business was transferred to the vendor shareholders for a cash payment
of $3,254,000, made in addition to the payment made for its book value of net
assets acquired.

                                      F-25
PHONE.COM, INC.

          UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

   The following unaudited pro forma combined condensed financial statements
are presented for illustrative purposes only and are not necessarily indicative
of the combined financial position or results of operations for future periods
or the results of operations or financial position that actually would have
been realized had Phone.com and the WAP Business of APiON been a combined
company during the specified periods. The unaudited pro forma combined
condensed financial statements, including the related notes, are qualified in
their entirety by reference to, and should be read in conjunction with, the
historical financial statements and related notes thereto of Phone.com and the
WAP Business of APiON, included elsewhere in this filing. The following
unaudited pro forma combined condensed financial statements give effect to the
acquisition of APiON by Phone.com using the purchase method of accounting. The
pro forma combined condensed financial statements are based on the respective
historical audited financial statements and related notes of Phone.com and the
WAP Business of APiON.

   The pro forma adjustments are preliminary and based on management's
estimates of the value of the tangible and intangible assets acquired. The
actual adjustments may differ materially from those presented in these pro
forma financial statements. A change in the pro forma adjustments would result
in a reallocation of the purchase price affecting the value assigned to the
long-term tangible and intangible assets or, in some circumstances, resulting a
charge to the statement of operations. The effect of these changes on the
statement of operations will depend on the nature and amounts of the assets and
liabilities adjusted. See note 1(b) to the pro forma combined condensed
financial statements.

   The unaudited pro forma combined condensed balance sheet assumes that the
acquisition took place on June 30, 1999, and combines Phone.com's audited June
30, 1999 consolidated balance sheet with the WAP Business of APiON's audited
March 31, 1999 statement of assets acquired and liabilities assumed. The pro
forma combined condensed statement of operations assumes the acquisition took
place on July 1, 1998, and combines Phone.com's audited consolidated statement
of operations for the year ended June 30, 1999, with the WAP Business of
APiON's audited statement of operations for the year ended March 31, 1999.

                                      F-26
PHONE.COM, INC.

              UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
                                 (In thousands)
June 30, 1999
                                    -----------------------------------------
                                       Historical          Pro forma
                                    ----------------- -----------------------
                                    Phone.com  APiON  Adjustments    Combined
                                    ---------  ------ -----------    --------
ASSETS
Current assets:
  Cash and cash equivalents........ $ 79,803   $1,414  $(11,711)(b)  $ 69,506
  Short-term investments...........   33,283       --                  33,283
  Accounts receivable..............   20,474    3,062                  23,536
  Prepaid expenses and other
   current assets..................      865      180                   1,045
                                    --------   ------  --------      --------
    Total current assets...........  134,425    4,656   (11,711)      127,370
Property and equipment, net........    3,014      321                   3,335
Deposits and other assets..........    1,494       --                   1,494
Goodwill and other intangible
 assets, net.......................       --       --   244,537 (b)   244,537
                                    --------   ------  --------      --------
                                    $138,933   $4,977  $232,826      $376,736
                                    ========   ======  ========      ========
   LIABILITIES AND STOCKHOLDERS'
               EQUITY
Current liabilities:
  Current portion of equipment loan
   and capital lease obligations... $    424   $   84  $               $  508
  Accounts payable.................    1,749    1,431                   3,180
  Accrued expenses.................    7,173      243                   7,416
  Deferred revenue.................   36,797       --                  36,797
                                    --------   ------  --------      --------
    Total current liabilities......   46,143    1,758        --        47,901
Equipment loans and capital lease
 obligations, less current
 portion...........................      498       81                     579
                                    --------   ------  --------      --------
    Total liabilities..............   46,641    1,839        --        48,480
                                    --------   ------  --------      --------
Stockholders' equity:
  Common stock.....................       31                  1 (b)        32
  Additional paid-in capital.......  136,209       --     5,095 (a)
                                                        235,963 (b)   377,267
  Deferred stock compensation......   (1,318)      --    (5,095)(a)    (6,413)
  Treasury stock...................     (196)      --                    (196)
  Notes receivable from
   stockholders....................     (484)      --                    (484)
  Accumulated (deficit)/net assets
   acquired........................  (41,950)   3,138    (3,138)(b)   (41,950)
                                    --------   ------  --------      --------
    Total stockholders' equity
     (deficit).....................   92,292    3,138   232,826       328,256
                                    --------   ------  --------      --------
                                    $138,933   $4,977  $232,826      $376,736
                                    ========   ======  ========      ========
See accompanying notes to unaudited pro forma combined condensed financial
                                   statements

                                      F-27
PHONE.COM, INC.

         UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
                     (In thousands, except per share data)
Year ended June 30, 1999
                                  --------------------------------------------
                                     Historical             Pro forma
                                  ------------------  ------------------------
                                  Phone.com   APiON   Adjustments    Combined
                                  ---------  -------  -----------    ---------
Revenues:
  License.......................  $  5,229   $    --   $             $   5,229
  Maintenance and support
   services.....................     5,921        --                     5,921
  Consulting services...........     2,292        --                     2,292
                                  --------   -------   --------      ---------
    Total revenues..............    13,442        --         --         13,442
                                  --------   -------   --------      ---------
Cost of revenues:
  License.......................       371        --                       371
  Maintenance and support
   services.....................     3,022        --                     3,022
  Consulting services...........     1,146        --                     1,146
                                  --------   -------   --------      ---------
    Total cost of revenues......     4,539        --         --          4,539
                                  --------   -------   --------      ---------
    Gross profit................     8,903        --         --          8,903
                                  --------   -------   --------      ---------
Operating expenses:
  Research and development......    13,082       432                    13,514
  Sales and marketing...........    10,840       227                    11,067
  General and administrative....     4,432       425                     4,857
  Stock-based compensation......     1,011        --      3,821 (c)      4,832
  Amortization of goodwill and
   other intangible assets......        --        --     81,512 (d)     81,512
                                  --------   -------   --------      ---------
    Total costs and expenses....    29,365     1,084     85,333        115,782
                                  --------   -------   --------      ---------
    Operating loss..............   (20,462)   (1,084)   (85,333)      (106,879)
Interest income, net............     1,803        --                     1,803
                                  --------   -------   --------      ---------
    Loss before taxes...........   (18,659)   (1,084)   (85,333)      (105,076)
Income taxes....................     2,104       147                     2,251
                                  --------   -------   --------      ---------
    Net loss....................  $(20,763)  $(1,231)  $(85,333)     $(107,327)
                                  ========   =======   ========      =========
Basic and diluted net loss per
 share..........................  $  (2.98)                          $  (13.15)
                                  ========                           =========
Shares used to compute basic and
 diluted net loss per share.....     6,966                1,196 (e)      8,162
                                  ========                           =========
See accompanying notes to unaudited pro forma combined condensed financial
                                   statements

                                      F-28
PHONE.COM, INC.

      NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

(1) Unaudited Pro Forma Combined Condensed Balance Sheet

   On October 26, 1999, Phone.com acquired all of the outstanding capital stock
of APiON in exchange for 1,196,513 shares of common stock of Phone.com. In
addition, the Company agreed to issue cash and common stock to current and
former employees of APiON. Former employees of APiON will receive consideration
totaling up to approximately $6.5 million of which one third is payable in cash
(approximately $2.2 million) upon the closing of this offering and two thirds
is payable in common stock of the Company on the one year anniversary of the
closing of the acquisition of APiON and is subject to forfeiture upon the
occurrence of certain events. Current employees of APiON will receive
consideration totaling up to approximately $7.6 million of which one third is
payable in cash upon the closing of this offering and one third is payable in
common stock of the Company on each of the first two anniversaries of the
closing of the acquisition of APiON contingent upon continued employment. The
actual number of Phone.com shares to be issued to current and former employees
of APiON will depend upon the fair value of Phone.com common stock on the
distribution date.

  Common stock issued to former shareholders and cash paid to current and
former employees of APiON at the closing of the acquisition is included in the
purchase price. Contingent common stock issuable in the future to former
employees of APiON will be treated as contingent consideration. The then fair
value of the common stock that is issued to the former employees of APiON upon
the satisfaction of certain future events will be added to goodwill and
amortized over the remaining useful life. Common stock issuable in the future
to current employees of APiON is recorded as deferred stock-based compensation.

   The pro forma combined condensed balance sheet as of June 30, 1999 gives
effect to the merger as if it had occurred on June 30, 1999.

   The following adjustment has been reflected in the unaudited pro forma
combined condensed balance sheet:

     (a) To record deferred stock compensation related to common stock of the
  Company to be issued to current employees of APiON as follows (in
  thousands):
Total consideration................................................. $ 7,642
   Less: cash payable at closing.......................................  (2,547)
                                                                        -------
     Deferred stock-based compensation................................. $ 5,095
                                                                        =======
The common stock payable to current employees of APiON is payable in
  equal installments on each of the first two anniversaries of the closing,
  contingent upon continued employment.

     (b) To record common stock issued to stockholders of APiON and record
  applicable purchase accounting entries.

     Under purchase accounting, the total purchase price will be allocated to
  APiON's assets and liabilities based on their relative fair values.
  Allocations are subject to valuations as of the date of the consummation of
  the acquisition. The amounts and components of the estimated purchase price
  along with the preliminary allocation of the estimated purchase price to
  assets purchased are as follows (in thousands):
Cash (including $2,547 payable to current employees of APiON)..... $  4,711
   Common stock......................................................  235,964
   Estimated transaction costs.......................................    7,000
                                                                      --------
     Total purchase price............................................ $247,675
                                                                      ========

   Cash and cash equivalents......................................... $  1,414
   Other current assets..............................................    3,242
   Property and equipment............................................      321
   Liabilities assumed...............................................   (1,839)
                                                                      --------
     Book value of net tangible assets of APiON......................    3,138
   Goodwill and other intangible assets..............................  244,537
                                                                      --------
     Net assets acquired............................................. $247,675
                                                                      ========
F-29
PHONE.COM, INC.

                NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
                       FINANCIAL STATEMENTS--(Continued)

     The actual allocation of the purchase price will depend upon the
  composition of APiON's net assets on the closing date and Phone.com's
  evaluation of the fair value of the net assets as of the date indicated.
  Consequently, the actual allocation of the purchase price could differ from
  that presented above.

(2) Unaudited Pro Forma Combined Condensed Statements of Operations

   The pro forma combined condensed statements of operations give effect to the
acquisition as if it had occurred at the beginning of the period presented.

   The following adjustments have been reflected in the unaudited pro forma
combined condensed statement of operations:

     (c) To reflect the accelerated amortization of deferred stock-based
  compensation associated with common stock of the Company to be issued to
  current employees of APiON in a manner consistent with Financial Accounting
  Standards Board Interpretation No. 28. The accelerated amortization results
  in 75% of the deferred stock-based compensation being amortized in the
  first year after the closing of the acquisition of APiON.

     (d) Adjustment to record the amortization of goodwill and intangible
  assets resulting from the preliminary allocation of the APiON purchase
  price. The pro forma adjustment assumes goodwill and other intangible
  assets will be amortized on a straight-line basis over an estimated life of
  three years resulting in one-third of the total goodwill and intangible
  assets of $244.5 million being amortized in the first year after the
  closing of the acquisition of APiON. The ultimate lives assigned will be
  determined at the date of acquisition based on the facts and circumstances
  existing at that date.

     (e) To reflect the shares to be issued as consideration for the
  acquisition.

                                      F-30
[Logo]
PART II

                    INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

   The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of common stock being registered. All amounts are estimates
except the SEC registration fee and the NASD filing fee and the Nasdaq
National Market listing fee.
Amount
                                                                      to be Paid
                                                                      ----------
SEC registration fee.................................................  $219,675
NASD filing fee......................................................    30,500
Nasdaq National Market listing fee...................................    17,500
Printing and engraving expenses......................................     *
Legal fees and expenses..............................................     *
Accounting fees and expenses.........................................     *
Blue Sky qualification fees and expenses.............................     5,000
Transfer Agent and Registrar fees....................................    10,000
Miscellaneous fees and expenses......................................     *
                                                                       --------
  Total..............................................................     *
                                                                       ========
--------
*  To be filed by amendment.

Item 14. Indemnification of Directors and Officers

   Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities, including reimbursement for expenses
incurred, arising under the Securities Act of 1933, as amended. Our amended
and restated certificate of incorporation provides for indemnification of our
directors and officers to the maximum extent permitted by the Delaware General
Corporation Law, and our bylaws provide for indemnification of our directors,
officers, employees and other agents to the maximum extent permitted by the
Delaware General Corporation Law. In addition, we have entered into
indemnification agreements with our directors and officers containing
provisions which are in some respects broader than the specific
indemnification provisions contained in the Delaware General Corporation Law.
The indemnification agreements may require us, among other things, to
indemnify our directors against certain liabilities that may arise by reason
of their status or service as directors, other than liabilities arising from
willful misconduct of culpable nature, to advance their expenses incurred as a
result of any proceeding against them as to which they could be indemnified,
and to obtain directors' insurance if available on reasonable terms. Reference
is also made to Section 7 of the underwriting agreement contained in Exhibit
1.1 hereto, indemnifying our officers and directors against certain
liabilities.

Item 15. Recent Sales of Unregistered Securities

   (a) Since June 30, 1996, we have issued and sold, without payment of any
selling commission to any person, except as noted below, the following
unregistered securities:

    (1) Prior to completion of our initial public offering, we effected a
        two-for-three reverse stock split of our outstanding convertible
        preferred and common stock in which each three outstanding shares
        of convertible preferred stock was split into two shares of
        convertible preferred stock and each three outstanding shares of
        common stock was split into two shares of common stock.

    (2) In October 1996, we issued and sold shares of Series C preferred
        stock convertible into an aggregate of 2,538,766 shares of common
        stock to six venture capital funds and three strategic partners for
        an aggregate purchase price of $9,674,983.

                                     II-1
(3) In January and February 1998, we issued and sold shares of Series D
        preferred stock convertible into an aggregate of 6,444,877 shares
        of common stock to 19 venture capital funds, five strategic
        partners and two individuals for an aggregate purchase price of
        $32,748,354. Deutsche Morgan Grenfell acted as placement agent in
        connection with this sale, for which it received usual and
        customary placement agent fees.

    (4) In March 1999, we issued and sold shares of Series E preferred
        stock convertible into an aggregate of 2,458,543 shares of common
        stock to a total of one venture capital fund, five strategic
        partners and one individual investor for an aggregate purchase
        price of $17,799,114. Credit Suisse First Boston Corporation acted
        as placement agent in connection with this sale, for which it
        received usual and customary placement agent fees.

    (5) As of June 30, 1999, 1,725,872 shares of common stock had been
        issued to our employees and consultants upon exercise of options or
        pursuant to restricted stock purchase agreements and 4,751,189
        shares of common stock were issuable upon exercise of outstanding
        options under our 1995 and 1996 stock plans.

    (6)  In October 1999 we issued an aggregate of 1,196,513 shares of
         common stock to 13 former shareholders of APiON Telecoms Ltd. in
         connection with our acquisition of the outstanding share capital
         of APiON.

   (b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).

   The issuance described in Item 15(a)(1) was exempt from registration under
Section 2(3) of the Securities Act on the basis that such transaction did not
involve a "sale" of securities. The issuances described in Items 15(a)(2)
through 15(a)(4) and 15(a)(6) to be exempt from registration under the
Securities Act in reliance upon Section 4(2) thereof as transactions by an
issuer not involving any public offering. The issuances described in Items
15(a)(5) were deemed to be exempt from registration under the Securities Act in
reliance upon Rule 701 promulgated thereunder in that they were offered and
sold either pursuant to written compensatory benefit plans or pursuant to a
written contract relating to compensation, as provided by Rule 701. In
addition, such issuances were deemed to be exempt from registration under
Section 4(2) of the Securities Act as transactions by an issuer not involving
any public offering. The recipients of securities in each such transaction
represented their intentions to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends where affixed to the securities issued in such
transactions. All recipients had adequate access, through their relationships
with us, to information about Phone.com.

Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
1.1+++  Form of Underwriting Agreement.
  3.3*    Amended and Restated Bylaws of the Registrant.
  3.5*    Amended and Restated Certificate of Incorporation of Registrant.
  4.1*    Form of the Registrant's Common Stock Certificate.
  5.1+++  Opinion of Venture Law Group, a Professional Corporation.
 10.1*    Form of Indemnification Agreement.
 10.2*    1995 Stock Plan, as amended, and form of stock option agreement and
          restricted stock purchase agreement.
 10.3*    1996 Stock Plan and form of stock option agreement and restricted
          stock purchase agreement.
 10.4*    1999 Employee Stock Purchase Plan and form of subscription agree-
          ment.
 10.5*    1999 Directors' Stock Option Plan and form of stock option agree-
          ment.
 10.6*    Fourth Amended and Restated Investor Rights Agreement dated March
          12, 1999.
 10.7*    Voting Agreement dated January 23, 1998 and amendment thereto.
 10.8*    Lease Agreement dated March 10, 1998 for offices at 800 Chesapeake
          by and between Registrant and Seaport Centre Associates, LLC.
II-2
10.9*     Form of Change of Control Severance Agreement between the Regis-
           trant and the Registrant's Named Executive Officers.
 10.10*   Relocation Agreement dated December 23, 1996 between the Registrant
          and Charles Parrish.
 10.11*    Warrant Agreements to Purchase Series C Preferred Stock dated May
           29, 1997 and July 17, 1997 by and between the Registrant and
           Comdisco, Inc.
 10.12*    Letter Agreement dated August 18, 1997 with Malcolm Bird.
 10.13*    Incentive Compensation Plan for Malcolm Bird dated January 27,
           1999.
 10.14*+   OEM Master License Agreement with RSA Data Security dated December
           2, 1996.
 10.15*    Incentive Compensation Plan for Maurice Jeffery dated March 19,
           1999.
 10.16*+   Software License and Support Agreement dated as of May 1, 1996,
           with AT&T Wireless Services, Inc., as amended.
 10.17*+   Client License Agreement dated as of January 1, 1999, with
           Matsushita Communication Industrial Co., Ltd.
 10.18++   First Amendment to Lease Agreement dated June 17, 1999, by and be-
           tween Registrant and Seaport Centre Associates, LLC.
 10.19+++  Agreement by and between Registrant and the former shareholders of
           APiON Telecoms Ltd. dated as of October 11, 1999.
 10.20+++  Registration Rights Agreement by and between Registrant and the
           former shareholders of APiON Telecoms Ltd. dated as of October 26,
           1999.
 21        Subsidiaries of the Registrant.
 23.1      Consent of KPMG LLP, Independent Accountants.
 23.2      Consent of PricewaterhouseCoopers.
 23.3+++   Consent of Counsel (included in Exhibit 5.1).
 24.1      Power of Attorney (see page II-5).
 27.1++    Financial Data Schedule.
--------
*  Incorporated herein by reference to the exhibit filed with the Company's
   Registration Statement on Form S-1 (Commission File No. 333-75219).
+  Confidential treatment has been granted by the Securities and Exchange
   Commission with respect to certain information in these exhibits.
++  Incorporated herein by reference to the exhibit filed with the Company's
    Annual Report on Form 10-K for the fiscal year ended June 30, 1999.
+++  To be filed by amendment.

(b) Financial Statement Schedules

   Financial statement schedules are omitted because the information called
for is not required or is shown either in the consolidated financial
statements or the notes thereto.

Item 17. Undertakings

   The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

   Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.

                                     II-3
The undersigned Registrant hereby undertakes that:

   (1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1), or (4), or
497(h) under the Act shall be deemed to be a part of this Registration
Statement as of the time it was declared effective.

   (2) For the purpose of determining any liability under the Act, each post-
effective amendment that contains a form of prospectus shall be deemed to be a
new registration statement relating to the securities offered therein, and
this offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

                                     II-4
SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Registration Statement on Form S-1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Redwood City, State of California, on October 28, 1999.

                                          Phone.Com, Inc.

                                                      /s/ Alan Black
                                          By: _________________________________
                                                         Alan Black
                                                Vice President, Finance and
                                                       Administration,
                                                Chief Financial Officer and
                                                          Treasurer

                               POWER OF ATTORNEY

   KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Alain Rossmann and Alan Black, and each
one of them, his attorneys-in-fact, each with the power of substitution, for
him in any and all capacities, to sign any and all amendments to this
Registration Statement (including post-effective amendments) and any
registration statement for the same offering pursuant to Rule 462(b) under the
Securities Act, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said attorneys-
in-fact, or his substitute or substitutes, may do or cause to be done by
virtue hereof. This Power of Attorney may be signed in several counterparts.

   Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-1 has been signed by the following persons in
the capacities and on the dates indicated:
Signature                           Title                    Date
             ---------                           -----                    ----
/s/ Alain Rossmann               Chairman and Chief Executive   October 28, 1999
____________________________________  Officer (Principal
   Alain Rossmann                     Executive Officer)
      /s/ Alan Black                 Vice President, Finance and    October 28, 1999
____________________________________  Administration, Chief
   Alan Black                         Financial Officer and
                                      Treasurer (Principal
                                      Financial and Accounting
                                      Officer)
    /s/ Roger Evans                  Director                       October 28, 1999
____________________________________
   Roger Evans
    /s/ Charles Parrish              Executive Vice President and   October 28, 1999
____________________________________  Director
   Charles Parrish
      /s/ Reed Hundt                 Director                       October 28, 1999
____________________________________
   Reed Hundt
     /s/ David Kronfeld              Director                       October 28, 1999
____________________________________
   David Kronfeld
    /s/ Andrew Verhalen              Director                       October 28, 1999
____________________________________
   Andrew Verhalen
II-5
Exhibit Index
Exhibit
  Number                               Description
 -------  --------------------------------------------------------------------
1.1+++   Form of Underwriting Agreement.
3.3*     Amended and Restated Bylaws of the Registrant.
  3.5*     Amended and Restated Certificate of Incorporation of Registrant.
  4.1*     Form of the Registrant's Common Stock Certificate.
  5.1+++   Opinion of Venture Law Group, a Professional Corporation.
 10.1*     Form of Indemnification Agreement.
 10.2*     1995 Stock Plan, as amended, and form of stock option agreement and
           restricted stock purchase agreement.
 10.3*     1996 Stock Plan and form of stock option agreement and restricted
           stock purchase agreement.
 10.4*     1999 Employee Stock Purchase Plan and form of subscription agree-
           ment.
 10.5*     1999 Directors' Stock Option Plan and form of stock option agree-
           ment.
 10.6*     Fourth Amended and Restated Investor Rights Agreement dated March
           12, 1999.
 10.7*     Voting Agreement dated January 23, 1998 and amendment thereto.
 10.8*     Lease Agreement dated March 10, 1998 for offices at 800 Chesapeake
           by and between Registrant and Seaport Centre Associates, LLC.
 10.9*     Form of Change of Control Severance Agreement between the Regis-
           trant and the Registrant's Named Executive Officers.
 10.10*   Relocation Agreement dated December 23, 1996 between the Registrant
          and Charles Parrish.
 10.11*    Warrant Agreements to Purchase Series C Preferred Stock dated May
           29, 1997 and July 17, 1997 by and between the Registrant and
           Comdisco, Inc.
 10.12*    Letter Agreement dated August 18, 1997 with Malcolm Bird.
 10.13*    Incentive Compensation Plan for Malcolm Bird dated January 27,
           1999.
 10.14*+   OEM Master License Agreement with RSA Data Security dated December
           2, 1996.
 10.15*    Incentive Compensation Plan for Maurice Jeffery dated March 19,
           1999.
 10.16*+   Software License and Support Agreement dated as of May 1, 1996,
           with AT&T Wireless Services, Inc., as amended.
 10.17*+   Client License Agreement dated as of January 1, 1999,
           with Matsushita Communication Industrial Co., Ltd.
 10.18++   First Amendment to Lease Agreement dated June 17, 1999, by and be-
           tween Registrant and Seaport Centre Associates, LLC.
 10.19+++  Agreement by and between Registrant and the former shareholders of
           APiON Telecoms Ltd. dated as of October 11, 1999.
 10.20+++  Registration Rights Agreement by and between Registrant and the
           former shareholders of APiON Telecoms Ltd. dated as of October 26,
           1999.
 21        Subsidiaries of the Registrant.
 23.1      Consent of KPMG LLP, Independent Accountants.
 23.2      Consent of PricewaterhouseCoopers.
 23.3+++   Consent of Counsel (included in Exhibit 5.1).
 24.1      Power of Attorney (see page II-5).
 27.1++    Financial Data Schedule.
--------
*  Incorporated herein by reference to the exhibit filed with the Company's
   Registration Statement on Form S-1 (Commission File No. 333-75219).
+  Confidential treatment has been granted by the Securities and Exchange
   Commission with respect to certain information in these exhibits.
++  Incorporated herein by reference to the exhibit filed with the Company's
    Annual Report on Form 10-K for the fiscal year ended June 30, 1999.
+++  To be filed by amendment.