<SUBMISSION>
<ACCESSION-NUMBER>0000950134-04-007273
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>5
<PERIOD>20040402
<FILING-DATE>20040512
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>HARMONIC INC
<CIK>0000851310
<ASSIGNED-SIC>3663
<IRS-NUMBER>770201147
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>000-25826
<FILM-NUMBER>04797584
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>549 BALTIC WAY
<CITY>SUNNYVALE
<STATE>CA
<ZIP>94089
<PHONE>4085422500
</BUSINESS-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>HARMONIC LIGHTWAVES INC
<DATE-CHANGED>19950404
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>f98831e10vq.htm
<DESCRIPTION>FORM 10-Q
<TEXT>
<HTML>
<HEAD>
<TITLE>e10vq</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<HR size="4" noshade color="#000000" style="margin-top: -5px">
<HR size="1" noshade color="#000000" style="margin-top: -10px">





<P align="center" style="font-size: 14pt"><B>UNITED STATES</B>

<P align="center" style="font-size: 14pt"><B>SECURITIES AND EXCHANGE COMMISSION<BR><BR></B>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>


<P align="center" style="font-size: 10pt"><HR size="1" noshade width="20%" align="center">


<P align="center" style="font-size: 18pt"><B>Form&nbsp;10-Q</B>


<P align="center" style="font-size: 10pt"><HR size="1" noshade width="20%" align="center">



<P align="left" style="font-size: 10pt">(Mark one)



<P>
<TABLE width="100%" border="0" cellpadding="2" cellspacing="0" style="font-size: 12pt; background: transparent; color: #000000">
<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>
<TR valign="top">
    <TD nowrap>&#091;X&#093;&nbsp;</TD>
    <TD>Quarterly report pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934.</TD>
</TR>

<TR valign="top">
    <TD nowrap>&nbsp;</TD>
    <TD><FONT style="font-size: 10pt">For the quarterly period ended
April&nbsp;2, 2004.</FONT></TD>
</TR>

</TABLE>





<P>
<TABLE width="100%" border="0" cellpadding="2" cellspacing="0" style="font-size: 12pt; background: transparent; color: #000000">
<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>
<TR valign="top">
    <TD nowrap>&#091;&nbsp;&nbsp; &#093;&nbsp;</TD>
    <TD>Transition report pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934</TD>
</TR>

<TR valign="top">
    <TD nowrap>&nbsp;</TD>
    <TD><FONT style="font-size: 10pt">For the transition period from
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
to
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
..</FONT></TD>
</TR>

</TABLE>





<P align="center" style="font-size: 10pt"><B>Commission File No.&nbsp;0-25826</B>



<P align="center" style="font-size: 10pt"><HR size="1" noshade width="20%" align="center">


<P align="center" style="font-size: 24pt"><B>HARMONIC INC.</B>


<P align="center" style="font-size: 10pt"><HR size="1" noshade width="20%" align="center">



<P align="center" style="font-size: 10pt"><B>(Exact name of Registrant as specified in its charter)</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Delaware</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>77-0201147</B></TD>
</TR>

<TR style="font-size: 1px">
    <TD align="center" valign="top"><HR size="1" noshade>&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><HR size="1" noshade>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>(State or other jurisdiction of<BR>
incorporation or organization)</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>(I.R.S. Employer<BR>
Identification Number)</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><B>549 Baltic Way<BR>
Sunnyvale, CA 94089<BR>
(408)&nbsp;542-2500</B>



<P align="center" style="font-size: 10pt"><B>(Address, including zip code, of principal executive offices,<BR>
telephone number, including area code, of agent for service)</B>


<P align="left" style="font-size: 10pt">Indicate by check mark whether the Registrant: (1)&nbsp;has filed all reports required to be filed by
Section&nbsp;13 or 15 (d)&nbsp;of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or for
shorter period that the Registrant was required to file such reports), and (2)&nbsp;has been subject to
such filing requirements for the past 90&nbsp;days.



<P align="center" style="font-size: 10pt"><B>Yes &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#091;X&#093; </B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <B>No &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#091;</B>&nbsp;&nbsp; <B>&#093;</B>


<P align="left" style="font-size: 10pt">Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule&nbsp;12b-2 of
the Exchange Act).



<P align="center" style="font-size: 10pt"><B>Yes &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#091;X&#093; </B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <B>No &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#091;</B>&nbsp;&nbsp; <B>&#093;</B>


<P align="left" style="font-size: 10pt">As of April&nbsp;2, 2004, there were 71,811,027 shares of the Registrant&#146;s Common Stock outstanding.



<P>
<HR size="1" noshade color="#000000" style="margin-top: -2px">
<HR size="4" noshade color="#000000" style="margin-top: -10px">






<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">









<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>HARMONIC INC.</B>



<P align="center" style="font-size: 10pt"><B>INDEX</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="83%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Page</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="5" valign="top" align="left"><A href="#101">PART I - FINANCIAL INFORMATION</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#102">Item&nbsp;1.
</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#102">Condensed
Consolidated Financial Statements (Unaudited):</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#103">Condensed Consolidated Balance Sheets at April&nbsp;2, 2004 and
December&nbsp;31, 2003
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#104">Condensed Consolidated Statements of Operations for the Three
Months Ended April&nbsp;2, 2004 and March&nbsp;28, 2003
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#105">Condensed Consolidated Statements of Cash Flows for the Three
Months Ended April&nbsp;2, 2004 and March&nbsp;28, 2003
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#106">Notes to Unaudited Condensed Consolidated Financial Statements
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#107">Item&nbsp;2.
</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#107">Management&#146;s Discussion and Analysis of Financial Condition
and Results of Operations
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#108">Item&nbsp;3.
</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#108">Quantitative and Qualitative Disclosures About Market Risk
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">33</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#109">Item&nbsp;4.
</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#109">Controls and Procedures
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">33</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD colspan="5" valign="top" align="left"><A href="#110">PART II - OTHER INFORMATION</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#111">Item&nbsp;1.
</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#111">Legal Proceedings
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">34</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#112">Item&nbsp;6.
</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#112">Exhibits and Reports on Form&nbsp;8-K
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">35</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD colspan="5" valign="top" align="left"><A href="#113">SIGNATURE</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">36</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD colspan="5" valign="top" align="left"><A href="#114">INDEX TO EXHIBITS</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">37</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>

<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="f98831exv31w1.txt">EXHIBIT 31.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="f98831exv31w2.txt">EXHIBIT 31.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="f98831exv32w1.txt">EXHIBIT 32.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="f98831exv32w2.txt">EXHIBIT 32.2</A></FONT></TD></TR>
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">2
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<!-- /TOC -->
</DIV>
<DIV align="left">
<A name="101"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>PART I</B>



<P align="left" style="font-size: 10pt"><B>FINANCIAL INFORMATION</B>


<DIV align="left">
<A name="102"></A>
</DIV>

<P align="left" style="font-size: 10pt"><B>ITEM 1. CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)</B>



<P align="center" style="font-size: 10pt"><B>HARMONIC INC.</B>


<DIV align="left">
<A name="103"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>CONDENSED CONSOLIDATED BALANCE SHEETS</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>(UNAUDITED)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>(In thousands, except par value amounts)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>April 2, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31, 2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">36,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">41,877</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,720</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accounts receivable, net of allowances of
$5,431 and $5,318, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,528</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,425</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Prepaid expenses and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,196</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179,746</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Property and equipment, net of accumulated
depreciation of $96,472 and $94,065,
respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,458</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Intangibles and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,037</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,522</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">215,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">224,726</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">LIABILITIES AND STOCKHOLDERS&#146; EQUITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Current liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Current portion of long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,027</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,863</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,935</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Deferred revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,986</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,712</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,820</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,357</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Long-term debt, less current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">629</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accrued excess facilities costs, long-term</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,603</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,627</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other non-current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,231</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,952</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118,565</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Commitments and contingencies (Notes 12 and 13)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">

<TD><DIV style="margin-left:10px; text-indent:-10px">Stockholders&#146;
equity:<BR>
Preferred Stock, $.001 par value, 5,000
shares authorized; no shares issued or
outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Common Stock, $.001 par value, 150,000
shares authorized; 71,811 and 71,240 shares
issued and outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Capital in excess of par value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,038,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,036,522</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accumulated deficit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,933,135</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,930,558</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accumulated other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">106,161</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total Liabilities and Stockholders&#146; Equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">215,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">224,726</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">The accompanying notes are an integral part of these condensed consolidated financial statements.



<P align="center" style="font-size: 10pt">3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>HARMONIC INC.</B>


<DIV align="left">
<A name="104"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>(IN THOUSANDS, EXCEPT
PER SHARE DATA)<BR>
(UNAUDITED)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>April 2, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 28, 2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">55,106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">37,041</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,294</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,887</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,747</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,503</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Selling, general and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,063</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Amortization of intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,933</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,499</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loss from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,890</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11,752</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest and other income, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">185</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loss before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,477</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11,567</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2,577</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(11,667</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss per share
Basic and Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.04</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.19</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Weighted average shares
Basic and Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,713</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,456</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">The accompanying notes are an integral part of these condensed consolidated financial statements.



<P align="center" style="font-size: 10pt">4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>HARMONIC INC.</B>


<DIV align="left">
<A name="105"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>(IN THOUSANDS)<BR>
(UNAUDITED)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>April 2, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 28, 2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash flows from operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2,577</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(11,667</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Adjustments to reconcile net loss to cash used in
operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Amortization of intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,473</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,473</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,317</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Stock option charge</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Benefit from excess and obsolete inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(667</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,058</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Loss on disposal of fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Changes in assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,919</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,200</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,300</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Prepaid expenses and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">879</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,132</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Deferred revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,726</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">264</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Income taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(26</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Accrued excess facilities costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,164</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,361</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Accrued and other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,782</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,872</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net cash used in operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,425</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,501</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash flows from investing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Purchases of investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(22,561</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,735</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Proceeds from sale of investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,898</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Acquisition of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,647</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(613</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net cash provided by (used in) investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,428</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,550</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash flows from financing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Borrowings under bank line and term loan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Repayments under bank line and term loan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(421</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(434</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Proceeds from issuance of common stock, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">863</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net cash provided by financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,765</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">560</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Effect of exchange rate changes on cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(76</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net increase (decrease)&nbsp;in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,051</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,533</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and cash equivalents at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,542</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and cash equivalents at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">36,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">27,075</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Supplemental disclosure of cash flow information:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest paid during the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income tax payments, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">The accompanying notes are an integral part of these condensed consolidated financial statements.



<P align="center" style="font-size: 10pt">5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>HARMONIC INC.</B>


<DIV align="left">
<A name="106"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</B>



<P align="left" style="font-size: 10pt">NOTE 1 &#151; BASIS OF PRESENTATION


<P align="left" style="font-size: 10pt">The accompanying unaudited condensed consolidated financial statements include
all adjustments (consisting only of normal recurring adjustments) which
Harmonic Inc. (the &#147;Company&#148;) considers necessary for a fair presentation of
the results of operations for the unaudited interim periods covered and the
consolidated financial condition of the Company at the date of the balance
sheets. The quarterly financial information is unaudited. This Quarterly Report
on Form 10-Q should be read in conjunction with the Company&#146;s audited
consolidated financial statements contained in the Company&#146;s Annual Report on
Form 10-K, which was filed with the Securities and Exchange Commission on March
9, 2004. The interim results presented herein are not necessarily indicative of
the results of operations that may be expected for the full fiscal year ending
December&nbsp;31, 2004, or any other future period. The Company&#146;s fiscal quarters
end on the Friday nearest the calendar quarter end, except for the fourth
quarter which ends on December&nbsp;31.


<P align="left" style="font-size: 10pt">NOTE 2 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



<P align="left" style="font-size: 10pt"><I>Employee Stock Plans</I>


<P align="left" style="font-size: 10pt">Harmonic accounts for employee stock option plans in accordance with Accounting
Principles Board No.&nbsp;25 (&#147;APB 25&#148;), &#147;Accounting
for Stock Issued to Employees,&#148;
and has adopted the disclosure requirements under SFAS No.&nbsp;148, &#147;Accounting for
Stock-Based Compensation &#151; Transition and Disclosure.&#148; If charges for
Harmonic&#146;s stock plans had been determined based on the fair value method at
the grant dates, as prescribed in SFAS No.&nbsp;123, &#147;Accounting for Stock-Based
Compensation&#148;, the Company&#146;s net loss and net loss per share would have been as
follows:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>In thousands, except per share data (Unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>April 2, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 28, 2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2,577</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(11,667</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Add: Total stock compensation expense
determined under fair value based method for
all awards, net of related tax effects</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,603</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,840</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Pro forma net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(5,180</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(14,507</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Basic and Diluted net loss per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.04</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.19</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.07</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.24</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">These pro forma amounts may not be representative of the effects for future
years as options vest over several years and additional awards are generally
made each year.


<P align="left" style="font-size: 10pt">In accordance with SFAS No.&nbsp;123, stock options granted to non-employees are
valued using the Black-Scholes option-pricing model and stock expense is
recognized as earned. Stock expense is recognized on an accelerated basis using
the multiple option method presented in Financial Accounting Standards Board
Interpretation No.&nbsp;28 (&#147;FIN 28&#148;), &#147;Accounting for Stock Appreciation Rights and
Other Variable Stock Option or Award Plans&#148;. For the three month period ended
April&nbsp;2, 2004, Harmonic recorded $8 thousand of non-employee stock expenses.
For the three month period ended March&nbsp;28, 2003, Harmonic recorded $17 thousand
of non-employee stock expenses.


<P align="left" style="font-size: 10pt">NOTE 3 &#151; CASH, CASH EQUIVALENTS AND INVESTMENTS


<P align="left" style="font-size: 10pt">Cash equivalents are comprised of highly liquid investment-grade investments
with original maturities of three months or less at the date of purchase.
Harmonic&#146;s short-term investments are stated at fair value, which



<P align="center" style="font-size: 10pt">6
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">approximate the cost of investments and are principally comprised of government
and corporate debt securities. The Company classifies its investments as
available for sale in accordance with SFAS No.&nbsp;115, &#147;Accounting for Certain
Investments in Debt and Equity Securities,&#148; and states its investments at
estimated fair value, with unrealized gains and losses reported in other
comprehensive income. The specific identification method is used to determine
the cost of securities disposed of, with realized gains and losses reflected in
other income and expense. Investments are anticipated to be used for current
operations and are therefore classified as current assets, even though
maturities may extend beyond one year. At April&nbsp;2, 2004 and December&nbsp;31, 2003,
cash, cash equivalents and short-term investments are summarized as follows:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>April 2, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31, 2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>In Thousands</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(Unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">36,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">41,877</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Short-term investments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Less than one year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,031</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Due in 1-2&nbsp;years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,689</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,720</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total cash, cash equivalents and short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">108,366</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">112,597</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">Harmonic&#146;s short-term investments are stated at fair value, which approximates
the cost of investments and are comprised of principally government and
corporate debt securities.


<P align="left" style="font-size: 10pt">NOTE 4 &#151; INVENTORIES


<P align="left" style="font-size: 10pt">Inventories consist of:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>April 2, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31, 2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>In Thousands</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(Unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Raw materials</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,594</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Work-in-process</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,135</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Finished goods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,408</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,696</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">28,323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22,425</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">NOTE 5 &#151; GOODWILL AND IDENTIFIED INTANGIBLES


<P align="left" style="font-size: 10pt">Harmonic accounts for goodwill and other intangibles in accordance with SFAS
No.&nbsp;142, &#147;Goodwill and Other Intangible Assets&#148;, which requires, among other
things, that goodwill and intangible assets with indefinite useful lives no
longer be amortized and the testing of existing goodwill and other intangibles
for impairment at least annually. Management believes that the operating segments,
Convergent Systems, or CS, for digital headend systems, and Broadband Access
Networks, or BAN, for fiber optic systems, represent the Company&#146;s reporting
units, and CS is the only reporting unit with goodwill and intangible assets.
For the three months ended April&nbsp;2, 2004 and March&nbsp;28, 2003, the Company
recorded a total of $3.5&nbsp;million of amortization expense in each period for
identified intangibles of which $1.5&nbsp;million was included in cost of sales in
each period. Estimated future amortization expense of identified intangibles is
$10.4&nbsp;million for the remaining nine months of 2004, and $4.6&nbsp;million for the
fiscal year 2005. Future amortization expense to be included in cost of sales
is estimated to be $4.6&nbsp;million for the remainder of 2004, and $2.1&nbsp;million for
the fiscal year 2005.


<P align="left" style="font-size: 10pt">The following is a summary of goodwill and intangible assets as of April&nbsp;2,
2004 and December&nbsp;31, 2003:



<P align="center" style="font-size: 10pt">7
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>April 2, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>December 31, 2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="3"><B>(Unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Carrying</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Carrying</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Carrying</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Carrying</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>In Thousands</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amortization</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amortization</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Identified intangibles:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Developed core technology</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29,059</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(23,082</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,977</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29,059</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(21,703</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,356</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Customer base</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,295</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(25,834</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,295</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(24,112</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,183</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Trademark and tradename</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,076</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,160</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">916</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,076</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,949</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,127</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Supply agreement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,409</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,248</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">859</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total of identified intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,537</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(54,485</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,537</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(51,012</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,525</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,780</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total goodwill and other
intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">71,317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(54,485</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">16,832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">71,317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(51,012</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20,305</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">NOTE 6 &#151; CREDIT FACILITIES AND LONG-TERM DEBT


<P align="left" style="font-size: 10pt">Harmonic has a bank line of credit facility with Silicon Valley Bank, which
provides for borrowings up to $13.5&nbsp;million, including $3.5&nbsp;million for
equipment under a secured term loan. This facility, which was amended and
restated in December&nbsp;2003 and expires in December&nbsp;2004, contains financial and
other covenants, including the requirement for Harmonic to maintain cash, cash
equivalents and short-term investments, net of credit extensions, of not less
than $65.0&nbsp;million. If Harmonic is unable to maintain this cash, cash
equivalents and short-term investments balance or satisfy the additional
affirmative covenant requirements, Harmonic would be in noncompliance with the
facility. In the event of noncompliance by Harmonic with the covenants under
the facility, Silicon Valley Bank would be entitled to exercise its remedies
under the facility which include declaring all obligations immediately due and
payable and disposing of the collateral if obligations were not repaid. At
April&nbsp;2, 2004, Harmonic was in compliance with the covenants under this line of
credit facility. Future borrowings pursuant to the line bear interest at the
bank&#146;s prime rate or prime rate plus 1.0% (prime rate plus 0.5%-1.5% for
equipment borrowings) depending upon the Company&#146;s total cash position and
previous six months&#146; revenue. Borrowings are payable monthly and are
collateralized by all of Harmonic&#146;s assets. As of April&nbsp;2, 2004, $1.5&nbsp;million
was outstanding under the equipment term loan portion of this
facility, of which
$0.2&nbsp;million was borrowed during 2004. The term loan is payable monthly,
including principal and interest at 4.5% per annum on outstanding borrowings as
of April&nbsp;2, 2004 and matures at various dates through March&nbsp;2007. Other than
standby letters of credit and guarantees (Note 12), there were no other
outstanding borrowings or commitments under the line of credit facility as of
April&nbsp;2, 2004.


<P align="left" style="font-size: 10pt">NOTE 7 &#151; NET LOSS PER SHARE


<P align="left" style="font-size: 10pt">The basic net loss per share is computed by dividing the net loss attributable
to common stockholders for the period by the weighted average number of common
shares outstanding during the period. The diluted net loss per share is the
same as the basic net loss per share for the three month periods ended April&nbsp;2,
2004 and March&nbsp;28, 2003 because common shares issuable upon the exercise of
stock options are only considered when their effect would be dilutive. During
the three month periods ended April&nbsp;2, 2004 and March&nbsp;28, 2003, 5.6&nbsp;million and
6.9&nbsp;million, respectively, of weighted average antidilutive options were
excluded from the net loss per share computations because their effect was
antidilutive.


<P align="left" style="font-size: 10pt">NOTE 8 &#151; COMPREHENSIVE LOSS


<P align="left" style="font-size: 10pt">The Company&#146;s total comprehensive loss was as follows:



<P align="center" style="font-size: 10pt">8
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>In Thousands (Unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>April 2, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 28, 2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2,577</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(11,667</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Change in unrealized gain on investments, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(154</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">106</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total comprehensive loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2,707</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(11,561</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">NOTE 9 &#151; RESTRUCTURING AND EXCESS FACILITIES


<P align="left" style="font-size: 10pt">As a result of uncertain market conditions and lower sales during the second
half of 2002, the Company implemented workforce reductions of approximately 120
full-time employees and changed its estimates related to accrued excess
facilities with regard to the expected timing and amount of sublease income due
to the substantial surplus of vacant commercial space in the San Francisco Bay
Area. In connection with these actions, Harmonic recorded $1.5&nbsp;million and paid
$1.1&nbsp;million for severance and other costs and recorded an additional excess
facilities charge of $22.5&nbsp;million, net of sublease income, to selling, general
and administrative expenses during the second half of 2002.


<P align="left" style="font-size: 10pt">During the three months ended April&nbsp;2, 2004, Harmonic paid $34 thousand of
severance and other costs, and no liability remains. As of April&nbsp;2, 2004,
accrued excess facilities cost totaled $33.5&nbsp;million of which $5.9&nbsp;million was
included in current accrued liabilities and $27.6&nbsp;million in other non-current
liabilities. The Company incurred cash outlays of $1.2&nbsp;million during the first
three months of 2004, principally for lease payments, property taxes, insurance
and other maintenance fees related to vacated facilities. Harmonic expects to
pay approximately $4.9&nbsp;million of excess facilities lease costs, net of
estimated sublease income, for the remainder of 2004 and to pay the remaining
$28.6&nbsp;million, net of estimated sublease income, over the remaining lease terms
through September&nbsp;2010. Harmonic reassesses this liability quarterly and
adjusts as necessary based on changes in the timing and amounts of expected
sublease rental income or changes in other assumptions due to changes in market
conditions. In the event the Company is unable to achieve expected levels of
sublease rental income, Harmonic will need to revise its estimate of the
liability, which could materially impact the Company&#146;s financial position,
liquidity, cash flows or results of operations.


<P align="left" style="font-size: 10pt">The following table summarizes restructuring activities:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="56%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>In Thousands (Unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Workforce Reduction</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Excess Facilities</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance at December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">34,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">34,701</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(34</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,165</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,199</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance at April&nbsp;2, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">33,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">33,503</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">NOTE 10 &#151; SEGMENT REPORTING


<P align="left" style="font-size: 10pt">Operating segments are defined as components of an enterprise that engage in
business activities for which separate financial information is available and
evaluated by the chief operating decision maker. Harmonic is organized as two
operating segments, Convergent Systems, or CS, for digital headend systems, and
Broadband Access Networks, or BAN, for fiber optic systems. Each segment has
its own management team directing its product development, marketing strategies
and its customer service requirements. A separate sales force generally
supports both divisions with appropriate product and market specialization as
required.


<P align="left" style="font-size: 10pt">The results of the reportable segments are derived directly from Harmonic&#146;s
management reporting system. These results reported below are based on
Harmonic&#146;s method of internal reporting and are not necessarily presented in
conformity with generally accepted accounting principles. Management measures
performance of each segment based on several metrics, including revenue, and
income or loss from segment operations. These results are used, in



<P align="center" style="font-size: 10pt">9
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">part, to evaluate the performance of, and allocate resources to each of the
segments. Income (loss)&nbsp;from segment operations excludes intangible
amortization expense, corporate expenses, eliminations, and interest and other
income. Corporate expenses and eliminations include human resources, legal,
finance and other corporate departments and intercompany eliminations. Net
income or loss, and assets and liabilities are not internally reported by
business segment.


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>In Thousands (Unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>April 2, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 28, 2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net sales:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Convergent Systems</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">35,796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23,980</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Broadband Access Networks</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,061</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">55,106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">37,041</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income (loss)&nbsp;from segment operations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Convergent Systems</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(3,491</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Broadband Access Networks</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,427</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income (loss)&nbsp;from segment operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,918</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Amortization of intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,473</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,473</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest and other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">185</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Corporate expenses and eliminations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,317</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,361</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loss before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2,477</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(11,567</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">NOTE 11 &#151; RELATED PARTY


<P align="left" style="font-size: 10pt">A director of Harmonic is also a director of Terayon Communications, with whom
the Company has a reseller agreement for certain products. Product purchases
from Terayon were approximately $1.0&nbsp;million and $0.3&nbsp;million for the three
month periods ended April&nbsp;2, 2004 and March&nbsp;28, 2003, respectively. As of April
2, 2004 and December&nbsp;31, 2003, Harmonic had liabilities to Terayon of $0.2
million and $0.3&nbsp;million, respectively, for inventory purchases.


<P align="left" style="font-size: 10pt">NOTE 12 &#151; GUARANTEES AND INDEMNIFICATIONS


<P align="left" style="font-size: 10pt"><I>Warranties. </I>The Company accrues for estimated warranty costs at the time of
product shipment. Management periodically reviews the estimated fair value of
its warranty liability and adjusts based on the terms of warranties provided to
customers, historical and anticipated warranty claims experience, and estimates
of the timing and cost of specified warranty claims. Activity for the Company&#146;s
warranty accrual, which is included in accrued liabilities, is summarized below:


<P align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">
<!-- Begin Table Head -->
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>In Thousands (Unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>April 2, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 28, 2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance at
the beginning of the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">4,886</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">5,866</TD>
    <TD nowrap>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accrual for warranties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1,254</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">837</TD>
    <TD nowrap>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Warranty costs incurred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,352</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,539</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance at
the end of the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">4,788</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">5,164</TD>
    <TD nowrap>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>



<P align="left" style="font-size: 10pt"><I>Standby Letters of Credit. </I>As of April&nbsp;2, 2004 the Company&#146;s financial
guarantees consisted of standby letters of credit outstanding, which were
related principally to a litigation settlement, customs bond requirements and
corporate purchase cards. The maximum amount of potential future payments under
these arrangements was $2.8&nbsp;million.



<P align="center" style="font-size: 10pt">10
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt"><I>Guarantees. </I>As of April&nbsp;2, 2004, Harmonic had no outstanding guarantees.


<P align="left" style="font-size: 10pt"><I>Indemnifications. </I>Harmonic indemnifies the members of its Board of Directors
and its officers pursuant to the requirements of its bylaws and pursuant to
indemnification agreements entered into with such persons, and some of its
suppliers and customers for specified intellectual property rights pursuant to
certain parameters and restrictions. The scope of these indemnities varies, but
in some instances, includes indemnification for damages and expenses (including
reasonable attorneys&#146; fees). No amounts have been accrued in respect of the
indemnifications provisions at April&nbsp;2, 2004.


<P align="left" style="font-size: 10pt">NOTE 13 &#151; LEGAL PROCEEDINGS


<P align="left" style="font-size: 10pt">Between June&nbsp;28 and August&nbsp;25, 2000, several actions alleging violations of the
federal securities laws by Harmonic and certain of its officers and directors
(some of whom are no longer with Harmonic) were filed in or removed to the
United States District Court for the Northern District of California. The
actions subsequently were consolidated.


<P align="left" style="font-size: 10pt">A consolidated complaint, filed on December&nbsp;7, 2000, was brought on behalf of a
purported class of persons who purchased Harmonic&#146;s publicly traded securities
between January&nbsp;19 and June&nbsp;26, 2000. The complaint also alleged claims on
behalf of a purported subclass of persons who purchased C-Cube securities
between January&nbsp;19 and May&nbsp;3, 2000. In addition to Harmonic and certain of its
officers and directors, the complaint also named C-Cube Microsystems Inc. and
several of its officers and directors as defendants. The complaint alleged
that, by making false or misleading statements regarding Harmonic&#146;s prospects
and customers and its acquisition of C-Cube, certain defendants violated
sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The complaint
also alleged that certain defendants violated section 14(a) of the Exchange Act
and sections 11, 12(a)(2), and 15 of the Securities Act of 1933 by filing a
false or misleading registration statement, prospectus, and joint proxy in
connection with the C-Cube acquisition.


<P align="left" style="font-size: 10pt">On July&nbsp;3, 2001, the Court dismissed the consolidated complaint with leave to
amend. An amended complaint alleging the same claims against the same
defendants was filed on August&nbsp;13, 2001. Defendants moved to dismiss the
amended complaint on September&nbsp;24, 2001. On November&nbsp;13, 2002, the Court issued
an opinion granting the motions to dismiss the amended complaint without leave
to amend. Judgment for defendants was entered on December&nbsp;2, 2002. On December
12, 2002, plaintiffs filed a motion to amend the judgment and for leave to file
an amended complaint pursuant to Rules 59(e) and 15(a) of the Federal Rules of
Civil Procedure. On June&nbsp;6, 2003, the Court denied plaintiffs&#146; motion to amend
the judgment and for leave to file an amended complaint. Plaintiffs filed a
notice of appeal on July&nbsp;1, 2003. Plaintiffs filed their opening brief on
December&nbsp;3, 2003. Defendants filed their answering briefs on March&nbsp;2, 2004.
Plaintiffs&#146; reply brief was filed on April&nbsp;16, 2004. No hearing has been
scheduled yet.


<P align="left" style="font-size: 10pt">A derivative action purporting to be on behalf of Harmonic was filed against
its then-current directors in the Superior Court for the County of Santa Clara
on September&nbsp;5, 2000. Harmonic also was named as a nominal defendant. The
complaint is based on allegations similar to those found in the securities
class action and claims that the defendants breached their fiduciary duties by,
among other things, causing Harmonic to violate federal securities laws. The
derivative action was removed to the United States District Court for the
Northern District of California on September&nbsp;20, 2000. All deadlines in this
action were stayed pending resolution of the motions to dismiss the securities
class action. On July&nbsp;29, 2003, the Court approved the parties&#146; stipulation to
dismiss this derivative action without prejudice and to toll the applicable
limitations period. The limitations period is tolled until fourteen days after
(1)&nbsp;defendants provide plaintiff with a copy of the mandate issued by the Ninth
Court in the securities action or (2)&nbsp;either party provides written notice of
termination of the tolling period, whichever is first.


<P align="left" style="font-size: 10pt">A second derivative action purporting to be on behalf of Harmonic was filed in
the Superior Court for the County of Santa Clara on May&nbsp;15, 2003. It alleges
facts similar to those previously alleged in the securities class action and
the federal derivative action. The complaint names as defendants former and
current Harmonic officers and directors, along with former officers and
directors of C-Cube Microsystems, Inc., who were named in the securities class
action. The complaint also names Harmonic as a nominal defendant. The complaint
alleges claims for abuse of control, gross mismanagement, and waste of
corporate assets against the Harmonic defendants, and claims for breach of
fiduciary duty, unjust enrichment, and negligent misrepresentation against all
defendants. On July&nbsp;22, 2003, the Court approved the parties&#146; stipulation to
stay the case pending resolution of the appeal in the securities



<P align="center" style="font-size: 10pt">11
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">class action. Although the parties initially agreed in principle to a dismissal
without prejudice on similar terms as in the federal derivative action, after
further discussion, the parties decided that the stay currently in place
suffices to protect their respective interests.


<P align="left" style="font-size: 10pt">Based on its review of the complaints filed in the securities class action,
Harmonic believes that it has meritorious defenses and intends to defend itself
vigorously. There can be no assurance, however, that Harmonic will prevail. No
estimate can be made of the possible range of loss associated with the
resolution of this contingency and accordingly, Harmonic has not recorded a
liability. An unfavorable outcome of this litigation could have a material
adverse effect on Harmonic&#146;s business, operating results, financial position or
cash flows.


<P align="left" style="font-size: 10pt">On July&nbsp;3, 2003, Stanford University and Litton Systems filed a complaint in
U.S. District Court for the Central District of California alleging that
optical fiber amplifiers incorporated into certain of Harmonic&#146;s products
infringe U.S. Patent No.&nbsp;4,859,016. This patent expired in September&nbsp;2003. The
complaint seeks injunctive relief, royalties and damages. Harmonic has not been
served in the case. Harmonic is currently evaluating its position with respect
to this patent and has engaged in discussions with the plaintiff regarding
potential settlement of the matter. At this time, we are unable to determine
whether we will be able to settle this litigation on reasonable terms or at
all, nor can we predict the impact of an adverse outcome of this litigation if
we elect to defend against it. No estimate can be made of the possible range of
loss associated with the resolution of this contingency and accordingly, we
have not recorded a liability associated with the outcome of a negotiated
settlement or an unfavorable verdict in litigation. An unfavorable outcome of
this matter could have a material adverse effect on Harmonic&#146;s business,
operating results, financial position or cash flows.


<DIV align="left">
<A name="107"></A>
</DIV>

<P align="left" style="font-size: 10pt"><B>ITEM 2. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS</B>


<P align="left" style="font-size: 10pt">This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section&nbsp;27A of the Securities Act of 1933 and Section&nbsp;21E of the
Securities Exchange Act of 1934, including statements regarding our
expectations of continued customer concentration; increasing competition
between cable and satellite operators to offer more channels of digital video
and new services; our expectations that international sales will continue to
account for a significant portion of our net sales for the
foreseeable future; our expectations regarding the amount of
amortization of intangible operating expense we will incur during the
remainder of 2004; and our belief that our existing liquidity sources
will satisfy our cash requirements for at least the next 12 months. These statements involve risks and
uncertainties as well as assumptions that, if they were to never materialize or
prove incorrect, could cause actual results to differ materially from those
projected, expressed or implied in the forward-looking statements. These risks
and uncertainties include those set forth under &#147;Factors That May Affect Future
Results of Operations&#148; below and elsewhere in this Quarter
Report on Form 10-Q and that are
otherwise described from time to time in Harmonic&#146;s filings with the Securities
and Exchange Commission.



<P align="left" style="font-size: 10pt"><B>Overview</B>


<P align="left" style="font-size: 10pt">Harmonic designs, manufactures and sells digital video systems and fiber optic
systems that enable network operators to provide a range of interactive and
advanced digital services that include digital video, video-on-demand, or VOD,
high definition (HD)&nbsp;television, high-speed Internet access and telephony.
Historically, most of our sales have been derived from sales of digital headend
products and fiber optic transmission systems to cable television and satellite
operators. We offer digital headend products to enable delivery of digital
video, voice and data over satellite and wireless networks and cable systems.
We also derive a portion of our revenue, directly or indirectly, from sales of
fiber optic transmission systems to cable television operators and from
telephone companies that offer video services to their customers.


<P align="left" style="font-size: 10pt">Harmonic has been organized into two operating divisions, Convergent Systems,
or CS, for digital video systems, and Broadband Access Networks, or BAN, for
fiber optic systems. In the first quarter of 2004, sales of CS products
accounted for approximately 65% of net sales, while BAN products accounted for
approximately 35% of net sales.


<P align="left" style="font-size: 10pt">Historically, a majority of our net sales have been to relatively few
customers, and due in part to the consolidation of ownership of cable
television and direct broadcast satellite systems, we expect this customer
concentration to continue for the foreseeable future. In the first quarter of
2004, sales to Comcast Cable, Echostar Satellite Corp. and Cox Communications
accounted for 14%, 14% and 13% of net sales, respectively. In the first quarter
of 2003, sales



<P align="center" style="font-size: 10pt">12
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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">to Comcast Cable, DIRECTV, and Echostar Satellite Corp. accounted for 21%, 18%
and 14% of net sales, respectively.


<P align="left" style="font-size: 10pt">Industry capital spending has been and continues to be generally weak compared
to levels seen in 1999 and early 2000. However, we believe that our sequential
quarterly sales increases in 2003 and the increase in net sales in the first
quarter of 2004 compared to the first quarter of 2003 reflected a firmer
industry capital spending environment worldwide which favorably impacted
Harmonic. We believe that the improved environment was reflected by an increase
of 49% in Harmonic&#146;s net sales in the first quarter of 2004 as compared with
the first quarter of 2003. We believe that this improvement in the industry
capital spending environment was, in part, a result of the intensifying
competition between cable and satellite operators to offer more channels of
digital video and new services, such as VOD and HD television, and
an overall improvement in the cable industry capital market. For example,
Adelphia Communications, which had declared bankruptcy in June&nbsp;2002, has
obtained debtor-in-possession financing of $1.5&nbsp;billion, allowing it to resume
certain capital expenditure programs. Other customers, such as NTL, have
already emerged from bankruptcy.


<P align="left" style="font-size: 10pt">Sales to customers outside of the United States in the first quarter of 2004
represented 33% of our total net sales. A significant portion of international
sales are made to distributors and system integrators, which are generally
responsible for importing the products and providing installation and technical
support and service to customers within their territory. We expect
international sales to continue to account for a significant portion of our net
sales for the foreseeable future.



<P align="left" style="font-size: 10pt"><B>Results of Operations</B>


<P align="left" style="font-size: 10pt">Harmonic&#146;s historical consolidated statements of operations data for the first
quarter of 2004 and 2003 as a percentage of net sales, are as follows:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>April 2, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 28, 2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Selling, general and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Amortization of intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loss from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(32</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest and other income, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loss before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(31</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Provision for (benefit from) income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(31</TD>
    <TD nowrap>)%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt"><I>Net Sales</I>


<P align="left" style="font-size: 10pt">Harmonic&#146;s consolidated, segment and international net sales in the first
quarter of 2004 as compared with the corresponding prior period is presented in
the table below. Also presented is the related dollar and percentage increase
(decrease)&nbsp;in consolidated, segment and international net sales in the first
quarter of 2004 as compared with the first quarter of 2003 (in
thousands, except percentages).




<P align="center" style="font-size: 10pt">13
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><B>Segmental Sales Data:</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="74%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>April 2, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 28, 2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Convergent Systems</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">35,796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23,980</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Broadband Access Networks</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,061</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">55,106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">37,041</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Convergent Systems Increase (decrease)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,816</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Broadband Access Networks Increase (decrease)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total Increase (decrease)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">18,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Convergent Systems Percent change</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">49.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Broadband Access Networks Percent change</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">47.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total Percent change</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">48.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">Net sales increased in the CS division in the first quarter of 2004 compared to
the first quarter of 2003, principally due to stronger spending by domestic and
international customers. The CS sales
in the first quarter of 2004 compared to the first quarter of 2003 benefited
from significantly higher sales of the Narrowcast Services Gateway, or NSG, as
a result of continued VOD deployments. The increase in the
BAN division net sales in the first quarter of 2004 compared to the first
quarter of 2003 was due to stronger spending in the U.S. by select cable
operators and to a smaller degree by increased spending by international cable
operators. BAN sales in the first quarter of 2004 compared to the first quarter
of 2003 benefited from increased sales of transmitters and nodes for major
network upgrades as well as continuing network improvements, such as node
segmentation.



<P align="left" style="font-size: 10pt"><B>Geographic Sales Data:</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>April 2, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 28, 2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">U.S</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">36,768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">27,129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,338</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,912</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">55,106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">37,041</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">U.S. Increase (decrease)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">International Increase (decrease)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,426</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total Increase (decrease)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">18,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">U.S. Percent change</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">35.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">International Percent change</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">85.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Percent change</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">48.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">Net sales in the U.S. and international markets increased in the first quarter
of 2004 compared to the first quarter of 2003 in both the CS and BAN divisions.
The higher CS division sales in the first quarter of 2004 compared to the first
quarter of 2003 was due to stronger spending by domestic customers primarily
for the roll-out of new services, such as VOD and HD television programming. The
international sales increase in CS division sales in the first quarter of 2004
compared to the first quarter of 2003 reflects the stronger capital spending in
most markets, and was strongest in Europe, Asia and the Caribbean. The BAN
division sales increase in the first quarter of 2004 compared to the first
quarter of 2003 was due to increased capital spending by select cable operators
in both the domestic and international markets.



<P align="left" style="font-size: 10pt"><I>Gross Profit</I>


<P align="left" style="font-size: 10pt">Harmonic&#146;s gross profit and gross profit as a percentage of consolidated net
sales in the first quarter of 2004 as compared with the corresponding prior
year period are presented in the table below. Also presented is the related
dollar and percentage increase (decrease)&nbsp;in gross profit in the first quarter
of 2004 as compared with the first quarter of 2003 (in thousands,
except percentages).



<P align="center" style="font-size: 10pt">14
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="56%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>April 2, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 28, 2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">21,887</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10,747</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">As a % of net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">39.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">29.0</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Increase (decrease)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Percent change</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">103.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">The increase in gross profit in the first quarter of 2004 compared to the first
quarter of 2003 was primarily due to higher sales, product mix and improvement
in factory efficiencies. The increased gross margin percentage in the first
quarter of 2004 compared to the first quarter of 2003 was primarily
attributable to lower manufacturing costs due to higher sales volume and lower
third party manufacturing costs. In addition, gross profit for the first
quarter of 2004 included a benefit of $0.7&nbsp;million related to products sold for
which the cost basis had been written down in prior years, as
compared to $1.1&nbsp;million in the first quarter of 2003.



<P align="left" style="font-size: 10pt"><I>Research and Development</I>


<P align="left" style="font-size: 10pt">Harmonic&#146;s research and development expense and the expense as a percentage of
consolidated net sales in the first quarter of 2004 as compared with the
corresponding prior year period are presented in the table below. Also
presented is the related dollar and percentage increase (decrease)&nbsp;in research
and development expense in the first quarter of 2004 as compared with the first
quarter of 2003 (in thousands, except percentages).


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>April 2, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 28, 2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,503</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">As a % of net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">16.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">23.0</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Increase (decrease)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Percent change</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">The increase in research and development expense in the first quarter of 2004
compared to the first quarter of 2003 was primarily due to increased
compensation costs of $0.4&nbsp;million, outside services of $0.2&nbsp;million
for the development and qualification of fiber-to-the-premises, or
FTTP,
products, partially offset by lower depreciation of $0.2&nbsp;million.



<P align="left" style="font-size: 10pt"><I>Selling, General and Administrative</I>


<P align="left" style="font-size: 10pt">Harmonic&#146;s selling, general and administrative expense and the expense as a
percentage of consolidated net sales in the first quarter of 2004 as compared
with the corresponding prior year period are presented in the table below. Also
presented is the related dollar and percentage increase (decrease)&nbsp;in selling,
general and administrative expense in the first quarter of 2004 as compared
with the first quarter of 2003 (in thousands, except percentages).


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="59%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>Three Months Ended</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>April 2, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 28, 2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Selling, general and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12,063</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">As a % of net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">25.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">32.6</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Increase (decrease)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD nowrap>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Percent change</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">16.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD nowrap>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">The increase in selling, general and administrative expense in the first
quarter of 2004 compared to the first quarter of 2003 was due to an increase in
selling costs of $0.9&nbsp;million primarily in the CS division and increased
general and administrative expenses of $1.0&nbsp;million. The higher selling costs
involved increased sales commissions and incentive compensation programs and
travel expenses associated with increased sales, increased headcount and
overall expense increases. The general and administrative expense increase was
primarily due to increased corporate




<P align="center" style="font-size: 10pt">15
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">governance costs of $0.4&nbsp;million, higher compensation expenses of $0.2&nbsp;million
and a mediation settlement of $0.1&nbsp;million. In addition, bad debt expenses in
the first quarter of 2003 included a credit of approximately $0.5&nbsp;million from the
reversal of provisions recorded in 2002 arising from concerns about the financial
condition of certain cable operators that subsequently were resolved.



<P align="left" style="font-size: 10pt"><I>Amortization of Intangibles</I>


<P align="left" style="font-size: 10pt">Harmonic&#146;s amortization of intangibles expense and the expense as a percentage
of consolidated net sales in the first quarter of 2004 as compared with the
corresponding prior year period, are presented in the table below (in thousands, except percentages).


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="68%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>April 2, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 28, 2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Amortization of intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,933</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">As a % of net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.2</TD>
    <TD nowrap>%</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">There was no change in amortization of intangibles between the first quarter of
2004 and 2003. Harmonic expects to record approximately $7.7&nbsp;million in
amortization of intangibles in operating expenses in 2004. In the
first quarter of 2004 and 2003, approximately $1.5&nbsp;million of amortization of
intangibles was included in cost of sales.



<P align="left" style="font-size: 10pt"><I>Interest and Other Income, Net</I>


<P align="left" style="font-size: 10pt">Harmonic&#146;s interest and other income, net, and interest and other income, net
as a percentage of consolidated net sales in the first quarter of 2004 as
compared with the corresponding prior year period are presented in the table
below. Also presented is the related dollar and percentage increase (decrease)
in interest and other income, net in the first quarter of 2004 as compared with
the first quarter of 2003 (in thousands, except percentages).


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="57%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>Three Months Ended</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>April 2, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 28, 2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest and other income, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">185</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">As a % of net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Increase (decrease)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Percent change</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">123.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD nowrap>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">The increase in the first quarter of 2004 compared to the first quarter of 2003
was due primarily to higher interest income of $0.3&nbsp;million as a result of a
higher cash, cash equivalents and investments balance in the first quarter of
2004 partially offset by lower foreign exchange gains of $0.2&nbsp;million in the
first quarter of 2004 compared to the first quarter of 2003 as a result of a
stronger British pound against the U.S. dollar in the first quarter
of 2004.



<P align="left" style="font-size: 10pt"><I>Income Taxes</I>


<P align="left" style="font-size: 10pt">Harmonic&#146;s provision for income taxes, and provision for income taxes as a
percentage of consolidated net sales in the first quarter of 2004 as compared
with the corresponding prior year period are presented in the table
below (in thousands, except percentages).


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="82%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>April 2, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 28, 2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">As a % of net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD nowrap>%</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">There was no change in the provision for income taxes in the first quarter of
2004 compared to the first quarter of 2003 due to foreign income taxes
remaining the same.


<P align="center" style="font-size: 10pt">16
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><I>Segments</I>


<P align="left" style="font-size: 10pt">Harmonic&#146;s management uses income or loss from segment operations as its
measure of segment profitability. Income or loss from segment operations
excludes intangible amortization expense, corporate expenses, including excess
facilities charges, and interest and other income, net. See Note 10 of Notes to
Condensed Consolidated Financial Statements.


<P align="left" style="font-size: 10pt">Fluctuations in net sales by operating segment are discussed more extensively
in the section above entitled, <I>Net Sales</I>.


<P align="left" style="font-size: 10pt">Harmonic&#146;s income (loss)&nbsp;from segment operations and the income (loss)&nbsp;as a
percentage of consolidated net sales in the first quarter as compared with the
prior year, for each of the first quarter&#146;s results are
presented in the tables
below. Also presented is the related dollar and percentage increase (decrease)
in segment operations results in the first quarter of 2004 as
compared with the first quarter of 2003 (in thousands, except percentages).



<P align="left" style="font-size: 10pt"><B>Convergent Systems (CS)</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="61%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>Three Months Ended</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>April 2, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 28, 2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income (loss)&nbsp;from segment operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(3,491</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">As a % of segment net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14.6</TD>
    <TD nowrap>%)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Increase (decrease)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,421</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD nowrap>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Percent change</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">183.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD nowrap>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">The increase in CS income from segment operations in the first quarter of 2004
compared to a loss in the first quarter of 2003 was primarily due to increased
sales. Gross profit in the first quarter of 2004 increased primarily due to
increased sales and lower product costs from third party manufacturers, and
operating expenses increased compared to the first quarter of 2003 due to
higher selling expenses and slightly higher research and development expenses.



<P align="left" style="font-size: 10pt"><B>Broadband Access Networks (BAN)</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="72%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>April 2, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 28, 2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income or (loss)&nbsp;from segment operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,427</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">As a % of segment net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">10.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10.9</TD>
    <TD nowrap>%)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Increase (decrease)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Percent change</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">238.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">The increase in BAN income from segment operations in the first quarter of 2004
compared to a loss in the first quarter of 2003 was primarily due to increased
sales. Gross profit in the first quarter of 2004 increased primarily due to
increased sales and manufacturing efficiencies and operating expenses increased
slightly compared to the first quarter of 2003. BAN results for the first
quarter of 2004 include a benefit of $0.6&nbsp;million related to products sold for
which the cost basis had been written down in prior years.



<P align="left" style="font-size: 10pt"><B>Liquidity and Capital Resources</B>


<P align="left" style="font-size: 10pt">As of April&nbsp;2, 2004, cash and cash equivalents, and short-term investments
totaled $108.4&nbsp;million compared to $112.6&nbsp;million as of December&nbsp;31, 2003. Cash
used in operations was $4.4&nbsp;million in the first three months of 2004, compared
to $5.5&nbsp;million in the first three months of 2003. The decreased use of cash in
operations in the first three months of 2004 was primarily due to the lower net
loss of $2.6&nbsp;million and decreased accounts receivable of $6.3&nbsp;million which
was partially offset by higher inventory of $5.2&nbsp;million and lower deferred
revenue of $4.7&nbsp;million. The decreased accounts receivable was primarily due to
increased linearity of shipments throughout the first quarter of 2004. The higher inventory was primarily due to higher
inventory purchases in order to meet anticipated demand and increased
demonstration systems at customer locations.




<P align="center" style="font-size: 10pt">17
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">On November&nbsp;3, 2003, Harmonic completed a public offering of 9.0&nbsp;million shares
of its common stock at a price of $7.40 per share. The net proceeds were
approximately $62.0&nbsp;million, which is net of underwriters&#146; fees of $3.7
million, and related legal, accounting, printing and other expenses totaling
approximately $0.9&nbsp;million. In connection with this offering, the underwriters
exercised their option to purchase 1.35&nbsp;million additional shares of common
stock at $7.40 per share on November&nbsp;12, 2003 to cover over-allotments which
resulted in additional net proceeds of approximately $9.4&nbsp;million. The net
proceeds from the offering are being used for general corporate purposes,
including payment of existing liabilities, research and development, the
development or acquisition of new products or technologies, equipment
acquisitions, general working capital and operating expenses.


<P align="left" style="font-size: 10pt">Under the terms of the merger agreement with C-Cube, Harmonic is generally
liable for C-Cube&#146;s pre-merger tax liabilities. Approximately $20.6&nbsp;million of
pre-merger tax liabilities remained outstanding at April&nbsp;2, 2004 and are
included in accrued liabilities. These liabilities represent estimates of
C-Cube&#146;s pre-merger tax obligations to various tax authorities in 13 countries.
We are
working with LSI Logic, which acquired the spun-off semiconductor business in
June&nbsp;2001 and assumed its obligations, to settle these
obligations, a process which has been underway since the merger in 2000.
Harmonic paid approximately $4.8&nbsp;million of these tax obligations in April
2004, but is unable to predict when the remaining tax obligations will be paid,
or in what amount. The full amount of the estimated obligation has been
classified as a current liability. To the extent that these obligations are
finally settled for less than the amounts provided, Harmonic is required, under
the terms of the merger agreement, to refund the difference to LSI Logic.
Conversely, if the settlements are more than the $20.6&nbsp;million pre-merger tax
liability, LSI is obligated to reimburse Harmonic.


<P align="left" style="font-size: 10pt">Additions to property, plant and equipment were $1.6&nbsp;million and $0.6&nbsp;million
in the first three months of 2004 and 2003, respectively. Harmonic currently
expects capital expenditures to be less than $5&nbsp;million during 2004.


<P align="left" style="font-size: 10pt">Harmonic has a bank line of credit facility with Silicon Valley Bank, which
provides for borrowings up to $13.5&nbsp;million, including $3.5&nbsp;million for
equipment under a secured term loan. This facility, which was amended and
restated in December&nbsp;2003 and expires in December&nbsp;2004, contains financial and
other covenants, including the requirement for Harmonic to maintain cash, cash equivalents and short-term investments, net of credit extensions, of
not less than $65.0&nbsp;million. If Harmonic is unable to maintain this cash, cash
equivalents and short-term investments balance or satisfy the additional
affirmative covenant requirements, Harmonic would be in noncompliance with the
facility. In the event of noncompliance by Harmonic with the covenants under
the facility, Silicon Valley Bank would be entitled to exercise its remedies
under the facility which include declaring all obligations immediately due and
payable and disposing of the collateral if obligations were not repaid. At
April&nbsp;2, 2004, Harmonic was in compliance with the covenants under this line of
credit facility. Future borrowings pursuant to the line bear interest at the
bank&#146;s prime rate or prime rate plus 1.0% (prime rate plus 0.5%-1.5% for
equipment borrowings) depending upon the Company&#146;s total cash position and
previous six months&#146; revenue. Borrowings are payable monthly and are
collateralized by all of Harmonic&#146;s assets. As of April&nbsp;2, 2004, $1.5&nbsp;million
was outstanding under the equipment term loan portion of this
facility, of which
$0.2&nbsp;million was borrowed during the first quarter of 2004. The term loan is
payable monthly, including principal and interest at 4.5% per annum on
outstanding borrowings as of April&nbsp;2, 2004 and matures at various dates through
March&nbsp;2007. Other than standby letters of credit and guarantees described in
Note 12 of the unaudited condensed consolidated financial statements, there were no other
outstanding borrowings or commitments under the line of credit facility as of
April&nbsp;2, 2004.


<P align="left" style="font-size: 10pt">We currently believe that our existing liquidity sources, including the
proceeds from the stock offering, and our bank line of credit will satisfy our
cash requirements for at least the next twelve months, including the final
settlement and payment of C-Cube&#146;s pre-merger tax liabilities. However, we may
need to raise additional funds if our expectations or estimates change or prove
inaccurate, or to take advantage of unanticipated opportunities or to
strengthen our financial position. The completed stock offering in November
2003 related to a registration statement on Form S-3 that was declared
effective by the SEC in April&nbsp;2002. The registration statement will continue to
allow Harmonic to issue various types of securities, including common stock,
preferred stock, debt securities, and warrants to purchase common stock from
time to time, up to an aggregate of approximately $73&nbsp;million, subject to
market conditions and our capital needs.


<P align="left" style="font-size: 10pt">In addition, from time to time, we review potential acquisitions that would
complement our existing product offerings, enhance our technical capabilities
or expand our marketing and sales presence. Any future transaction of



<P align="center" style="font-size: 10pt">18
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">this nature could require potentially significant amounts of capital to finance
the acquisition and related expenses as well as to integrate operations
following a transaction, and could require us to issue our stock and dilute
existing stockholders. If adequate funds are not available, or are not
available on acceptable terms, we may not be able to take advantage of market
opportunities, to develop new products or to otherwise respond to competitive
pressures.


<P align="left" style="font-size: 10pt"><B>FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS</B>


<P align="left" style="font-size: 10pt"><I>We Depend On Cable And Satellite Industry Capital Spending For A Substantial
Portion Of Our Revenue And Any Decrease Or Delay In Capital Spending In These
Industries Would Negatively Impact Our Resources, Operating Results And
Financial Condition and Cash Flows.</I>


<P align="left" style="font-size: 10pt">Almost all of Harmonic&#146;s
sales have been derived from sales to cable
television and satellite operators and we expect these sales to constitute a significant
portion of net sales for the foreseeable future. Demand for our products will
depend on the magnitude and timing of capital spending by cable television
operators, satellite operators, broadcasters and telephone companies for
constructing and upgrading of their systems.


<P align="left" style="font-size: 10pt">These capital spending patterns are dependent on a variety of factors,
including:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>access to financing;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>annual budget cycles;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the impact of industry consolidation;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the status of federal, local and foreign government regulation of telecommunications and
television broadcasting;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>overall demand for communication services and the acceptance of new video, voice and data services;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>evolving industry standards and network architectures;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>competitive pressures, including pricing pressures;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>discretionary customer spending patterns; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>general economic conditions.</TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">In the past, specific factors contributing to reduced capital spending have included:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>uncertainty related to development of digital video and cable modem industry standards;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>delays associated with the evaluation of new services and system architectures by many cable
television operators;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>emphasis on generating revenue from existing customers by cable television operators instead of
new construction or network upgrades;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>proposed business combinations by our customers and regulatory review thereof;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>economic and financial conditions in domestic and international markets; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>bankruptcies and financial restructuring of major customers.</TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">The prolonged economic recession, the financial difficulties of certain of our
customers and changes in our customers&#146; deployment plans adversely affected our
business in the latter part of 2001, throughout 2002 and in the



<P align="center" style="font-size: 10pt">19
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">first half of 2003. Two of our major domestic customers, Adelphia
Communications and Winfirst, declared bankruptcy during the first half of 2002,
while NTL, a major international customer, emerged from bankruptcy in
2003.
Furthermore, we believe that our net sales to satellite customers were
adversely affected by the uncertainty related to the prolonged regulatory
review of the proposed acquisition of DIRECTV by EchoStar in 2002. These
events, coupled with uncertain and volatile capital markets, also pressured the
market values of domestic cable operators and restricted their access to
capital. This reduced access to funding for new and existing customers caused
delays in the timing and scale of deployments of our equipment and also
resulted in the postponement or cancellation of certain projects by our
customers. Several customers also canceled new projects or delayed new orders
to allow them to reduce inventory levels that were in excess of their
deployment requirements. We believe that these factors contributed to decreased
net sales in both our CS division and our BAN division during the second half
of 2002 and the first half of 2003 compared to the first half of 2002.


<P align="left" style="font-size: 10pt">We believe that the financial condition of many of our customers has stabilized
or improved, and our net sales increased sequentially in the second, third and
fourth quarters of 2003 and increased in the first quarter of 2004 compared to
the first quarter of 2003. However, another economic downturn or weakness in
capital markets could cause additional financial difficulties among our
customers, and customers whose financial condition has stabilized may not
purchase new equipment at levels we have seen in the past. Continued financial
difficulties among our customers would adversely affect our operating results
and financial condition. Also, The News Corporation Ltd. recently acquired an
indirect controlling interest in Hughes Electronics, the parent company of
DIRECTV. We cannot currently predict the impact of The News Corporation Ltd.&#146;s
control of DIRECTV on our future sales. As a result, we cannot assure you that
our net sales growth will continue.


<P align="left" style="font-size: 10pt">Major US cable operators have indicated that the imminent completion of major
network upgrades, which involve significant labor and construction costs, will
lead to lower capital expenditures in the future. If our product portfolio and
product development plans do not position us well to capture an increased
portion of the expected reduced capital spending of US cable operators, our
revenue may decline and our operating results would be adversely affected.


<P align="left" style="font-size: 10pt"><I>Our Customer Base Is Concentrated And The Loss Of One Or More Of Our Key
Customers Would Harm Our Business. The Loss Of Any Key Customer Would Have A
Negative Effect On Our Business.</I>


<P align="left" style="font-size: 10pt">Historically, a majority of our sales have been to relatively few customers,
due in part to the consolidation of ownership of cable television and
direct broadcast satellite systems, and we expect this customer concentration to
continue in the foreseeable future. Sales to our ten largest customers in the
first quarter of 2004, and the years 2003 and 2002, accounted for approximately
61%, 65% and 61% of net sales, respectively. Although we are attempting to
broaden our customer base by penetrating new markets such as the
telecommunications and broadcast markets and expand internationally, we expect
to see continuing industry consolidation and customer concentration due in part
to the significant capital costs of constructing broadband networks. For
example, Comcast acquired AT&#038;T Broadband in November&nbsp;2002, thereby creating the
largest U.S. cable operator, reaching approximately 22&nbsp;million subscribers. In
the DBS segment, The News Corporation Ltd. recently acquired an indirect
controlling interest in Hughes Electronics, the parent company of DIRECTV. In
addition, financial restructurings or mergers of companies such as Adelphia
Communications and several European operators may lead to further industry
consolidation. In the first quarter of 2004, sales to Comcast Cable, Echostar
Satellite Corp. and Cox Communications accounted for 14%, 14% and 13% of net
sales, respectively. In 2003, sales to Comcast accounted for 32% of net sales.
In 2002, sales to Charter Communications and Comcast accounted for 18% and 10%
of net sales. If Comcast and AT&#038;T Broadband had been combined for all of 2002,
total revenues would have been 17% of net sales. The loss of any significant
customer or any reduction in orders by any significant customer, or our failure
to qualify our products with a significant customer could adversely affect our
business, operating results and liquidity. In this regard, sales to Charter
Communications were significantly lower in 2003 than in 2002, both in absolute
dollars and as a percentage of revenue, as they have significantly reduced
capital spending. The loss of, or any reduction in orders from, a significant
customer would harm our business.



<P align="center" style="font-size: 10pt">20
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt"><I>Our Operating Results Are Likely To Fluctuate Significantly And May Fail To
Meet Or Exceed The Expectations Of Securities Analysts Or Investors, Causing
Our Stock Price To Decline.</I>


<P align="left" style="font-size: 10pt">Our operating results have fluctuated in the past and are likely to continue to
fluctuate in the future, on an annual and a quarterly basis, as a result of
several factors, many of which are outside of our control. Some of the factors
that may cause these fluctuations include:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the level and timing of capital spending of our customers, both in the U.S. and in foreign markets;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in market demand;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the timing and amount of orders, especially from significant customers;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the timing of revenue from systems contracts which may span several quarters;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>competitive market conditions, including pricing actions by our competitors;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>seasonality, with fewer construction and upgrade projects typically occurring in winter months and otherwise being affected
by inclement weather;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our unpredictable sales cycles;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>new product introductions by our competitors or by us;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in domestic and international regulatory environments;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>market acceptance of new or existing products;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the cost and availability of components, subassemblies and modules;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the mix of our customer base and sales channels;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the mix of our products sold;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our development of custom products and software;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the level of international sales; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>economic and financial conditions specific to the cable and satellite industries, and general economic conditions.</TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">For example, the timing of deployment of our equipment can be subject to a
number of other risks, including the availability of skilled engineering and
technical personnel, the availability of other equipment such as digital set
top boxes, and the need for local franchise and licensing approvals.


<P align="left" style="font-size: 10pt">In addition, we often recognize a substantial portion of our revenues in the
last month of the quarter. We establish our expenditure levels for product
development and other operating expenses based on projected sales levels, and
expenses are relatively fixed in the short term. Accordingly, variations in
timing of sales can cause significant fluctuations in operating results. As a
result of all these factors, our operating results in one or more future
periods may fail to meet or exceed the expectations of securities analysts or
investors. In that event, the trading price of our common stock would likely
decline. In this regard, due to lower than expected sales in several quarters
during 2000 and 2001, and during the third quarter of 2002 and the first
quarter of 2003, we failed to meet our internal expectations, as well as the
expectations of securities analysts and investors, and the price of our common
stock declined, in some cases significantly.



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<P align="left" style="font-size: 10pt"><I>Our Future Growth Depends on Market Acceptance of Several Emerging Broadband
Services, on the Adoption of New Broadband Technologies and on Several Other
Broadband Industry Trends.</I>


<P align="left" style="font-size: 10pt">Future demand for our products will depend significantly on the growing market
acceptance of several emerging broadband services, including digital video;
video-on-demand (VOD); high definition (HD)&nbsp;television; very high-speed data
services and voice-over-IP (VoIP) telephony. The effective delivery of these
services will depend in part on a variety of new network architectures, such as
fiber-to-the premises (FTTP)&nbsp;networks; new video compression standards such
as MPEG-4 and Microsoft&#146;s Windows Media 9; the greater use of
protocols such as IP; and the introduction of new consumer devices, such as
advanced set-top boxes and personal video recorders (PVRs). If adoption of
these emerging services and/or technologies is not as widespread or as rapid as
we expect, our net sales growth will be materially and adversely affected.


<P align="left" style="font-size: 10pt">Furthermore, other technological, industry and regulatory trends will affect
the growth of our business. These trends include the following:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>convergence, or the desire of certain network operators to
deliver a package of video, voice and data services to consumers, also known as the &#147;triple
play&#148;;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the use of digital video by businesses, governments and educators;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the privatization of state-owned telcos around the world;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>efforts by regulators and governments in the United States and abroad
to encourage the adoption of broadband and digital technologies; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the extent and nature of regulatory attitudes towards such issues as
competition between operators, access by third parties to networks of
other operators, and new services such as VoIP.</TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">If, for instance, operators do not pursue the triple play as aggressively as we
expect, our net sales growth would be materially and adversely affected.
Similar, if our expectations regarding these and other trends are not met, our
net sales may be materially and adversely affected.


<P align="left" style="font-size: 10pt"><I>If Sales Forecasted For A Particular Period Are Not Realized In That Period Due
To The Unpredictable Sales Cycles Of Our Products, Our Operating Results For
That Period Will Be Harmed.</I>


<P align="left" style="font-size: 10pt">The sales cycles of many of our products, particularly our newer products and
products sold internationally, are typically unpredictable and usually involve:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a significant technical evaluation;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a commitment of capital and other resources by cable, satellite, and other network operators;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>time required to engineer the deployment of new technologies or new broadband services;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>testing and acceptance of new technologies that affect key operations; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>test marketing of new services with subscribers.</TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">For these and other reasons, our sales cycles generally last three to six
months, but can last up to 12&nbsp;months. If orders forecasted for a specific
customer for a particular quarter do not occur in that quarter, our operating
results for that quarter could be substantially lower than anticipated.


<P align="left" style="font-size: 10pt">A significant portion of our revenue is derived from solution contracts that
include a combination of product sales as well as design, installation and
integration services. Revenue forecasts for solution contracts are based on the
estimated timing of the design, installation and integration of projects.
Because the solution contracts generally span several quarters and revenue
recognition is based on progress under the contract, the timing of revenue is
difficult to predict and could result in lower than expected revenue in any
particular quarter. In addition, new products may include elements,
such as a
more significant software component than our existing products, which may
impact the recognition of revenue and result in the deferral of revenue until
all elements of the arrangement are satisfied.



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<P align="left" style="font-size: 10pt"><I>We Depend On Our International Sales And Are Subject To The Risks Associated
With International Operations, Which May Negatively Affect Our Operating
Results.</I>


<P align="left" style="font-size: 10pt">Sales to customers outside of the United States in the first quarter of 2004,
and the years 2003 and 2002 represented 33%, 29% and 29%, of net sales,
respectively, and we expect that international sales will continue to represent
a meaningful portion of our net sales for the foreseeable future. Furthermore,
a substantial portion of our contract manufacturing occurs overseas. Our
international operations, the international operations of our contract
manufacturers, and our efforts to increase sales in international markets, are
subject to a number of risks, including:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in foreign government regulations and telecommunications standards;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>import and export license requirements, tariffs, taxes and other trade barriers;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>fluctuations in currency exchange rates;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>difficulty in collecting accounts receivable;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the burden of complying with a wide variety of foreign laws, treaties and technical standards;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>difficulty in staffing and managing foreign operations;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>political and economic instability; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in economic policies by foreign governments.</TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">Certain of our international customers have accumulated significant levels of
debt and have announced during the past three years reorganizations and
financial restructurings, including bankruptcy filings. Even if these
restructurings are completed, we cannot assure you that these customers will be
in a position to purchase new equipment at levels we have seen in the past.


<P align="left" style="font-size: 10pt">While our international sales and operating expenses have typically been
denominated in U.S. dollars, fluctuations in currency exchange rates could
cause our products to become relatively more expensive to customers in a
particular country, leading to a reduction in sales or profitability in that
country.


<P align="left" style="font-size: 10pt">Following implementation of the Euro in January&nbsp;2002, a higher portion of our
European business is denominated in Euros, which may subject us to increased
foreign currency risk. Gains and losses on the conversion to U.S. dollars of
accounts receivable, accounts payable and other monetary assets and liabilities
arising from international operations may contribute to fluctuations in
operating results. Furthermore, payment cycles for international customers are
typically longer than those for customers in the United States. Unpredictable
sales cycles could cause us to fail to meet or exceed the expectations of
security analysts and investors for any given period. In addition, foreign
markets may not develop in the future.


<P align="left" style="font-size: 10pt"><I>If Demand For Our Products Increases More Quickly Than We Expect, We May Be
Unable To Meet Our Customers&#146; Requirements.</I>


<P align="left" style="font-size: 10pt">Our net sales increased sequentially in the second, third and fourth quarters
of 2003 and increased in the first quarter of 2004 compared to the first
quarter of 2003. If demand for our products continues to increase, the
difficulty of accurately forecasting our customers&#146; requirements and meeting
these requirements will increase. Forecasting to meet customers&#146; needs is
particularly difficult in connection with newer products. Our ability to meet
customer demand depends significantly on the availability of components and
other materials as well as the ability of our contract manufacturers to scale
their production. From time to time, we assess our relationship with our
contract manufacturers. Changes in these relationships, including our recent
agreement with Plexus, or reallocating manufacturing to new or existing
contract manufacturers, could adversely affect our ability to meet our
customers&#146; requirements in a timely manner, if at all, and could create
operating inefficiencies. Furthermore, we purchase several key components,
subassemblies and modules used in the manufacture or integration of our
products from sole or limited sources and any disruption in our
relationship with these providers or in the ability of such
providers to satisfy our requirements could adversely affect our
ability to deliver our products to customers.



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<P align="left" style="font-size: 10pt">Also, in recent
years, in response to lower net sales and the prolonged economic recession, we
significantly reduced our headcount and other expenses. As a result, we may be
unable to respond to customer demand that increases more quickly than we
expect. If we fail to meet customers&#146; supply expectations, our net sales would
be adversely affected and we may lose business.


<P align="left" style="font-size: 10pt"><I>Competition For Qualified Personnel, Particularly Management Personnel, Can Be
Intense. In Order To Manage Our Growth, We Must Be Successful In Addressing
Management Succession Issues And Attracting And Retaining Qualified Personnel.</I>


<P align="left" style="font-size: 10pt">Our future success will depend, to a significant extent, on the ability of our
management to operate effectively, both individually and as a group. We must
successfully manage transition and replacement issues that may result from the
departure or retirement of members of our senior management. We are dependent
on our ability to retain and motivate high caliber personnel, in addition to
attracting new personnel. Competition for qualified management, technical and
other personnel can be intense, and we may not be successful in attracting and
retaining such personnel. Competitors and others have in the past and may in
the future attempt to recruit our employees. While our employees are required
to sign standard agreements concerning confidentiality and ownership of
inventions, we generally do not have employment contracts or non-competition
agreements with any of our personnel. The loss of the services of any of our
key personnel, the inability to attract or retain qualified personnel in the
future or delays in hiring required personnel, particularly senior management
and engineers and other technical personnel, could negatively affect our
business.


<P align="left" style="font-size: 10pt"><I>We Face Risks Associated With Having Important Facilities And Resources Located
In Israel.</I>


<P align="left" style="font-size: 10pt">Harmonic maintains a facility in Caesarea in the State of Israel with a total
of approximately 60 employees as of April&nbsp;2, 2004, or approximately 11% of our
workforce. The employees at this facility consist principally of research and
development personnel involved in development of certain products for the CS
division. In addition, we have pilot production capabilities at this facility
consisting of procurement of subassemblies and modules from Israeli
subcontractors and final assembly and test operations. Accordingly, we are
directly influenced by the political, economic and military conditions
affecting Israel, and any major hostilities involving Israel or the
interruption or curtailment of trade between Israel and its trading partners
could significantly harm our business. The September&nbsp;2001 terrorist attacks,
the ongoing U.S. war on terrorism and the escalation of terrorist attacks and
hostilities within Israel have heightened these risks. We cannot assure you
that the protraction or escalation of current tensions in the Middle East will
not adversely affect our business and results of operations.


<P align="left" style="font-size: 10pt">In addition, most of our employees in Israel are currently obligated to perform
annual reserve duty in the Israel Defense Forces and several have been called
for active military duty recently. We cannot predict the effect of these
obligations on Harmonic in the future.


<P align="left" style="font-size: 10pt"><I>Financial, Regulatory and
Other Issues Among
Our Customers Could Adversely Affect Our Business.</I>


<P align="left" style="font-size: 10pt">The telecommunications industry has been particularly impacted by the prolonged
economic recession, adverse conditions in capital markets and financial
difficulties in both the service and equipment sectors, including bankruptcies.
Although large telecommunications service providers such as WorldCom (now MCI)
and troubled data and voice-oriented start-ups have not been traditional
customers of Harmonic, the cable, satellite and broadcast sectors have
experienced significant financial problems. Many of our domestic and
international customers have accumulated significant levels of debt and have
announced reorganizations and financial restructurings during the
past three
years, including bankruptcy filings. In particular, Adelphia Communications, a
major domestic cable operator, declared bankruptcy in June&nbsp;2002. The stock
prices of other domestic cable companies came under pressure following the
Adelphia bankruptcy due to concerns about debt levels and capital expenditure
requirements for new and expanded services, thereby making the raising of
capital more difficult and expensive. New operators, such as RCN and WinFirst,
also had difficulty in accessing capital markets. WinFirst subsequently filed
for bankruptcy and RCN has entered into forbearance agreements with
certain of its lenders. In Europe, rapid consolidation of the cable industry through
acquisition also led to significant levels of debt at the major MSOs, and
companies such as NTL and UPC commenced bankruptcy proceedings. European
digital broadcasters, such as ITV Digital, Kirsch and Quiero, have also filed
for protection from creditors.



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<P align="left" style="font-size: 10pt">While the capital market concerns about the domestic cable industry have eased
since the summer of 2002, market conditions remain difficult and capital
spending plans are generally constrained. It is likely that further industry
restructuring will take place via mergers or spin-offs, such as the completed
Comcast/AT&#038;T Broadband transaction, the proposed spin-off of Time-Warner Cable
from Time-Warner and the proposed sale of Adelphia Communications requested by
its creditors. Also, The News Corporation Ltd., in December&nbsp;2003, acquired an
indirect controlling interest in Hughes Electronics, the parent company of
DIRECTV. This transaction followed regulatory opposition to the proposed
acquisition of DIRECTV by EchoStar. We cannot currently predict the impact of
The News Corporation Ltd. control of DIRECTV on our future sales. We believe
that uncertainty during 2002 regarding the proposed DIRECTV and EchoStar merger
adversely affected capital spending by both of these parties as well as other
customers. In addition, further business combinations may occur in the
satellite industry, and these further combinations could adversely affect our
business. Regulatory issues, financial concerns and business combinations among
our customers are likely to significantly affect the industry, its capital
spending plans, and our levels of business for the foreseeable future.


<P align="left" style="font-size: 10pt"><I>We Must Be Able To Manage Expenses And Inventory Risks Associated With Meeting
The Demand Of Our Customers.</I>


<P align="left" style="font-size: 10pt">If actual orders are materially lower than the indications we receive from our
customers, our ability to manage inventory and expenses may be affected. If we
enter into purchase commitments to acquire materials, or expend resources to
manufacture products, and such products are not purchased by our customers, our
business and operating results could suffer. In this regard, our gross margins
and operating results for the fourth quarter of 2000 and in 2001 were adversely
affected by provisions for excess and obsolete inventories of approximately $49
million.


<P align="left" style="font-size: 10pt"><I>The Markets In Which We Operate Are Intensely Competitive And Many Of Our
Competitors Are Larger And More Established.</I>


<P align="left" style="font-size: 10pt">The markets for cable television fiber optics systems and digital video
broadcasting systems are extremely competitive and have been characterized by
rapid technological change and declining average selling prices. Pressure on
average selling prices has been particularly severe during the recent economic
downturn as equipment suppliers compete aggressively for customers&#146; reduced
capital spending. Harmonic&#146;s competitors in the cable television fiber optics
systems business include corporations such as C-Cor.net, Motorola, and
Scientific-Atlanta. In the digital and video broadcasting systems business, we
compete broadly with vertically integrated system suppliers including Motorola,
Scientific-Atlanta, Tandberg Television and Thomson Multimedia, and in certain
product lines with Cisco and a number of smaller companies.


<P align="left" style="font-size: 10pt">Many of our competitors are substantially larger and have greater financial,
technical, marketing and other resources than Harmonic. Many of these large
organizations are in a better position to withstand any significant reduction
in capital spending by customers in these markets. They often have broader
product lines and market focus and may not be as susceptible to downturns in a
particular market. In addition, many of our competitors have been in operation
longer than we have and therefore have more long standing and established
relationships with domestic and foreign customers. We may not be able to
compete successfully in the future, which may harm our business.


<P align="left" style="font-size: 10pt">If any of our competitors&#146; products or technologies were to become the industry
standard, our business could be seriously harmed. For example, U.S. cable
operators have to date mostly purchased proprietary digital systems from
Motorola and Scientific-Atlanta. While certain operators have made limited
purchases of the &#147;open&#148; systems provided by Harmonic, we cannot assure you that
our digital products will find broad market acceptance with U.S. cable
operators. In addition, companies that have historically not had a large
presence in the broadband communications equipment market have begun recently
to expand their market share through mergers and acquisitions. The continued
consolidation of our competitors could have a significant negative impact on
us. Further, our competitors, particularly competitors of our digital and video
broadcasting systems business, may bundle their products or incorporate
functionality into existing products in a manner that discourages users from
purchasing our products or which may require us to lower our selling prices
resulting in lower gross margins.



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<P align="left" style="font-size: 10pt"><I>Broadband Communications Markets Are Characterized By Rapid Technological
Change.</I>


<P align="left" style="font-size: 10pt">Broadband communications markets are relatively immature, making it difficult
to accurately predict the markets&#146; future growth rates, sizes or technological
directions. In view of the evolving nature of these markets, it is possible
that cable television operators, telephone companies or other suppliers of
broadband wireless and satellite services will decide to adopt alternative
architectures or technologies that are incompatible with our current or future
products. If we are unable to design, develop, manufacture and sell products
that incorporate or are compatible with these new architectures or
technologies, our business will suffer. Also, decisions by customers to adopt
new technologies or products are often delayed by extensive evaluation and
qualifications processes and can result in delays of current products.


<P align="left" style="font-size: 10pt"><I>We Need To Develop And Introduce New And Enhanced Products In A Timely Manner
To Remain Competitive.</I>


<P align="left" style="font-size: 10pt">Broadband communications markets are characterized by continuing technological
advancement, changes in customer requirements and evolving industry standards.
To compete successfully, we must design, develop, manufacture and sell new or
enhanced products that provide increasingly higher levels of performance and
reliability. However, we may not be able to successfully develop or introduce
these products if our products:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>are not cost effective;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>are not brought to market in a timely manner;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>are not in accordance with evolving industry standards and architectures; or</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>fail to achieve market acceptance, or are ahead of the market.</TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">Also, to successfully develop and market certain of our planned products for
digital applications, we may be required to enter into technology development
or licensing agreements with third parties. We cannot assure you that we will
be able to enter into any necessary technology development or licensing
agreement on terms acceptable to us, or at all. The failure to enter into
technology development or licensing agreements when necessary could limit our
ability to develop and market new products and, accordingly, could materially
and adversely affect our business and operating results.


<P align="left" style="font-size: 10pt">Our BAN division is currently
marketing products for FTTP networks which major telcos have
announced that they intend to build. Although we believe that a number of our
existing products can be deployed successfully in these networks, we may need
to devote considerable resources to negotiating contracts, qualifying our products,
hiring knowledgeable personnel, and may make significant financial commitments.
There can be no assurance that these efforts will be successful in the near
future, or at all.


<P align="left" style="font-size: 10pt"><I>We Purchase Several Key Components, Subassemblies And Modules Used In The
Manufacture Or Integration Of Our Products From Sole Or Limited Sources, And We
Are Increasingly Dependent On Contract Manufacturers.</I>


<P align="left" style="font-size: 10pt">Many components, subassemblies and modules necessary for the manufacture or
integration of our products are obtained from a sole supplier or a limited
group of suppliers. Our reliance on sole or limited suppliers, particularly
foreign suppliers, and our increased reliance on subcontractors since the
merger with C-Cube involves several risks, including a potential inability to
obtain an adequate supply of required components, subassemblies or modules and
reduced control over pricing, quality and timely delivery of components,
subassemblies or modules. In particular, certain optical components have in the
past been in short supply and are available only from a small number of
suppliers, including sole source suppliers. While we expend resources to
qualify additional optical component sources, consolidation of suppliers in the
industry and the small number of viable alternatives have limited the results
of these efforts. We do not generally maintain long-term agreements with any of
our suppliers. Managing our supplier and contractor relationships is
particularly difficult during time periods in which we introduce new products
and during time periods in which demand for our products is increasing,
especially if demand increases more quickly than we expect. Furthermore, from
time to time we assess our relationship with our contract manufacturers. In
late 2003, we entered into a three-year agreement with Plexus Services Corp. as
our primary contract



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<P align="left" style="font-size: 10pt">manufacturer. The transition of our manufacturing requirements from certain
current contract manufacturers to Plexus is in progress. We plan to complete
the transition during the second quarter of 2004. Difficulties in managing
relationships with current contract manufacturers, or problems encountered by
Plexus or Harmonic in completing the transition, could impede our ability to
meet our customers&#146; requirements and adversely affect our operating results. An
inability to obtain adequate deliveries or any other circumstance that would
require us to seek alternative sources of supply could affect our ability to
ship our products on a timely basis, which could damage relationships with
current and prospective customers and harm our business. We attempt to limit
this risk by maintaining safety stocks of certain components, subassemblies and
modules. As a result of this investment in inventories, we have in the past and
in the future may be subject to risk of excess and obsolete inventories, which
could harm our business, operating results, financial position and liquidity.
In this regard, our gross margins and operating results from the fourth quarter
of 2000 through the third quarter of 2001 were adversely affected by excess and
obsolete inventory charges of approximately $49&nbsp;million.


<P align="left" style="font-size: 10pt"><I>We May Need Additional Capital In The Future And May Not Be Able To Secure
Adequate Funds On Terms Acceptable To Us.</I>


<P align="left" style="font-size: 10pt">We have generated substantial operating losses since we began operations in
June&nbsp;1988. The extent of our future losses and the timing of potential
profitability are highly uncertain, and we may never achieve sustained
profitable operations. We have been engaged in the design, manufacture and sale
of a variety of broadband products since inception, which has required, and
will continue to require, significant research and development expenditures. As
of April&nbsp;2, 2004 we had an accumulated deficit of $1.9&nbsp;billion. These losses, among other things, have had and may have an
adverse effect on our stockholders&#146; equity and working capital.


<P align="left" style="font-size: 10pt">We believe that the proceeds of the stock offering we completed in November
2003, together with our existing liquidity sources, will satisfy our cash requirements
for at least the next twelve months, including the final settlement and payment
of C-Cube&#146;s pre-merger tax liabilities. However, we may need to raise
additional funds if our expectations are incorrect, to fund our operations, to
take advantage of unanticipated opportunities or to strengthen our financial
position. The stock offering we completed in November&nbsp;2003 related to a
registration statement on Form S-3 declared effective by the SEC in April&nbsp;2002.
This registration statement will continue to allow Harmonic to issue various
types of securities, including common stock, preferred stock, debt securities
and warrants to purchase common stock from time to time, up to an aggregate of
approximately $73&nbsp;million, subject to market conditions and our capital needs.
Our ability to raise funds may be adversely affected by a number of factors
relating to Harmonic, as well as factors beyond our control, including
conditions in capital markets and the cable, telecom and satellite industries.
There can be no assurance that such financing will be available on terms
acceptable to us, if at all.


<P align="left" style="font-size: 10pt">In addition, from time to time, we review potential acquisitions that would
complement our existing product offerings, enhance our technical capabilities
or expand our marketing and sales presence. Any future transaction of this
nature could require potentially significant amounts of capital to finance the
acquisition and related expenses as well as to integrate operations following a
transaction, and could require us to issue our stock and dilute existing
stockholders. If adequate funds are not available, or are not available on
acceptable terms, we may not be able to take advantage of market opportunities,
to develop new products or to otherwise respond to competitive pressures.


<P align="left" style="font-size: 10pt">We may raise additional financing through public or private equity offerings,
debt financings or additional corporate collaboration and licensing
arrangements. To the extent we raise additional capital by issuing equity
securities, our stockholders may experience dilution. To the extent that we
raise additional funds through collaboration and licensing arrangements, it may
be necessary to relinquish some rights to our technologies or products, or
grant licenses on terms that are not favorable to us. If adequate funds are not
available, we will not be able to continue developing our products.


<P align="left" style="font-size: 10pt"><I>We Need To Effectively Manage Our Operations And The Cyclical Nature Of Our
Business.</I>


<P align="left" style="font-size: 10pt">The cyclical nature of our business has placed, and is expected to continue to
place, a significant strain on our personnel, management and other resources.
This strain has been exacerbated by the acquisition of DiviCom and the
subsequent loss of numerous employees, including senior management. In
addition, we reduced our work force by approximately 44% between December&nbsp;31,
2000 and December&nbsp;31, 2003 due to reduced industry spending and



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<P align="left" style="font-size: 10pt">demand for our products. If demand for products increases significantly, we may
need to increase our headcount. Our ability to manage our business effectively
in the future, including any future growth, will require us to train, motivate
and manage our employees successfully, to attract and integrate new employees
into our overall operations, to retain key employees and to continue to improve
our operational, financial and management systems.


<P align="left" style="font-size: 10pt"><I>We Are Incurring Additional Costs And Devoting More Management Resources To
Comply With Increasing Regulation&nbsp;Of Corporate Governance And Disclosure.</I>


<P align="left" style="font-size: 10pt">We are spending an increased amount of management time and external resources
to understand and comply with changing laws, regulations and standards relating
to corporate governance and public disclosure, including the Sarbanes-Oxley Act
of 2002, new SEC regulations and Nasdaq Stock Market rules. Devoting the
necessary resources to comply with evolving corporate governance and public
disclosure standards has resulted in increased general and administrative
expenses and a diversion of management time and attention to compliance
activities. Moreover, we may not be able to comply with these new rules and
regulations on a timely basis.


<P align="left" style="font-size: 10pt"><I>Recent And Proposed Regulations Related To Equity Compensation Could Adversely
Affect Earnings, Affect Our Ability To Raise Capital And Affect Our Ability To
Attract And Retain Key Personnel.</I>


<P align="left" style="font-size: 10pt">Since our inception, we have used stock options as a fundamental component of
our employee compensation packages. We believe that our stock option plans are
an essential tool to link the long-term interests of stockholders and
employees, especially executive management, and serve to motivate management to
make decisions that will, in the long run, give the best returns to
stockholders. The Financial Accounting Standards Board (FASB)&nbsp;has proposed
changes to the United States generally accepted accounting principles, or US
GAAP, that, if implemented, would require us to record a charge to earnings for
employee stock option grants, as well as other equity-based awards. This
proposed accounting pronouncement would negatively impact our earnings and could affect our
ability to raise capital on acceptable terms. In addition, new regulations
implemented by The Nasdaq National Market requiring stockholder approval for
all stock option plans could make it more difficult for us to grant options to
employees in the future. To the extent that new regulations make it more
difficult or expensive to grant options to employees, we may incur increased
compensation costs, change our equity compensation strategy or find it
difficult to attract, retain and motivate employees, each of which could
materially and adversely affect our business.


<P align="left" style="font-size: 10pt"><I>We Are Liable For C-Cube&#146;s Pre-Merger Tax Liabilities, Including Tax
Liabilities Resulting From The Spin-Off Of Its Semiconductor Business.</I>


<P align="left" style="font-size: 10pt">Under the terms of the merger agreement with C-Cube, Harmonic is generally
liable for C-Cube&#146;s pre-merger tax liabilities. Approximately $20.6&nbsp;million of
pre-merger tax liabilities remained outstanding at April&nbsp;2, 2004 and are
included in accrued liabilities. We are working with LSI Logic, which acquired
C-Cube&#146;s spun-off semiconductor business in June&nbsp;2001 and assumed its
obligations, to settle these obligations, a process
which has been underway since the merger in 2000. These liabilities represent
estimates of C-Cube&#146;s pre-merger tax obligations to various tax authorities in
13 countries. Harmonic paid approximately $4.8&nbsp;million of these tax obligations in
April&nbsp;2004, but is unable to predict when the remaining tax obligations will be
paid, or in what amount. The full amount of the estimated obligation has been
classified as a current liability. To the extent that these obligations are
finally settled for less than the amounts provided, Harmonic is required, under
the terms of the merger agreement, to refund the difference to LSI Logic.
Conversely, if the settlements are more than the $20.6&nbsp;million pre-merger tax
liability, LSI Logic is obligated to reimburse Harmonic.


<P align="left" style="font-size: 10pt">The merger agreement stipulates that Harmonic will be indemnified by the
spun-off semiconductor business if the cash reserves are not sufficient to
satisfy all of C-Cube&#146;s tax liabilities for periods prior to the merger. If for
any reason, the spun-off semiconductor business does not have sufficient cash
to pay such taxes, or if there are additional taxes due with respect to the
non-semiconductor business and Harmonic cannot be indemnified by LSI Logic,
Harmonic generally will remain liable, and such liability could have a material
adverse effect on our financial condition, results of operations or cash flows.



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<P align="left" style="font-size: 10pt"><I>We May Be Subject To Risks Associated With Other Acquisitions.</I>


<P align="left" style="font-size: 10pt">We have made, continue to consider making and may make investments in
complementary companies, products or technologies. If we enter into acquisition
transactions, we could have difficulty assimilating or retaining the acquired
companies&#146; key personnel and operations or integrating the acquired technology
or products into ours. We also may face challenges in achieving the strategic
objectives, cost savings or other benefits from a proposed acquisition and
difficulties in expanding our management information systems to accommodate the
acquired business. These difficulties could disrupt our ongoing business,
distract our management and employees and significantly increase our expenses.
Moreover, our operating results may suffer because of acquisition-related
expenses, amortization of intangible assets and impairment of acquired goodwill
or intangible assets. Furthermore, we may have to incur debt or issue equity
securities to pay for any future acquisitions, or to provide for additional
working capital requirements, the issuance of which could be dilutive to our
existing shareholders. If we are unable to successfully address any of these
risks, our business, financial condition and operating results could be harmed.


<P align="left" style="font-size: 10pt"><I>Cessation Of The Development And Production Of Video Encoding Chips By C-Cube&#146;s
Spun-off Semiconductor Business May Adversely Impact Us.</I>


<P align="left" style="font-size: 10pt">The DiviCom business and C-Cube semiconductor business collaborated on the
production and development of two video encoding microelectronic chips prior to
the merger. In connection with the merger, Harmonic and the spun-off
semiconductor business entered into a contractual relationship under which
Harmonic will have access to certain of the spun-off semiconductor business
technologies and products which the DiviCom business previously depended for
its product and service offerings. This agreement expires in
October&nbsp;2004. The spun-off semiconductor business is the
sole supplier of these chips to Harmonic. Several of these products continue to
be important to our business, and we have incorporated these chips into
additional products that we have developed.


<P align="left" style="font-size: 10pt">However, under the contractual relationships between Harmonic and the spun-off
semiconductor business, which was acquired by LSI Logic in June&nbsp;2001, the
semiconductor business does not have a firm commitment to continue the
development of video encoding microelectronic chips. As a result, the
semiconductor business may choose not to continue future development of the
chips for any reason. The semiconductor business may also encounter in the
future technological difficulties in the production and development of the
chips. If the spun-off semiconductor business is not able to or does not
sustain its development and production efforts in this area our business,
financial condition, results of operations or cash flow could be harmed.


<P align="left" style="font-size: 10pt"><I>Our Failure To Adequately Protect Our Proprietary Rights May Adversely Affect
Us.</I>


<P align="left" style="font-size: 10pt">We currently hold 39 issued United States patents and 12 issued foreign
patents, and have a number of patent applications pending. Although we attempt
to protect our intellectual property rights through patents, trademarks,
copyrights, licensing arrangements, maintaining certain technology as trade
secrets and other measures, we cannot assure you that any patent, trademark,
copyright or other intellectual property rights owned by us will not be
invalidated, circumvented or challenged, that such intellectual property rights
will provide competitive advantages to us or that any of our pending or future
patent applications will be issued with the scope of the claims sought by us,
if at all. We cannot assure you that others will not develop technologies that
are similar or superior to our technology, duplicate our technology or design
around the patents that we own. In addition, effective patent, copyright and
trade secret protection may be unavailable or limited in certain foreign
countries in which we do business or may do business in the future.


<P align="left" style="font-size: 10pt">We believe that patents and patent applications are not currently significant
to our business, and investors therefore should not rely on our patent
portfolio to give us a competitive advantage over others in our industry. We
believe that the future success of our business will depend on our ability to
translate the technological expertise and innovation of our personnel into new
and enhanced products. We generally enter into confidentiality or license
agreements with our employees, consultants, vendors and customers as needed,
and generally limit access to and distribution of our proprietary information.
Nevertheless, we cannot assure you that the steps taken by us will prevent
misappropriation of our technology. In addition, we have taken in the past, and
may take in the future, legal action to enforce our patents and other
intellectual property rights, to protect our trade secrets, to determine the
validity and scope of the proprietary rights of others, or to defend against
claims of infringement or invalidity. Such



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<P align="left" style="font-size: 10pt">litigation could result in substantial costs and diversion of resources and
could negatively affect our business, operating results, financial position or
cash flows.


<P align="left" style="font-size: 10pt">In order to successfully develop and market certain of our planned products for
digital applications, we may be required to enter into technology development
or licensing agreements with third parties. Although many companies are often
willing to enter into technology development or licensing agreements, we cannot
assure you that such agreements will be negotiated on terms acceptable to us,
or at all. The failure to enter into technology development or licensing
agreements, when necessary, could limit our ability to develop and market new
products and could cause our business to suffer.


<P align="left" style="font-size: 10pt"><I>We Or Our Customers May Face Intellectual Property Infringement Claims From
Third Parties.</I>


<P align="left" style="font-size: 10pt">Harmonic&#146;s industry is characterized by the existence of a large number of
patents and frequent claims and related litigation regarding patent and other
intellectual property rights. In particular, leading companies in the
telecommunications industry have extensive patent portfolios. From time to
time, third parties, including these leading companies, have asserted and may
assert exclusive patent, copyright, trademark and other intellectual property
rights against us or our customers. Indeed, a number of third parties,
including leading companies, have asserted patent rights to technologies that
are important to us.


<P align="left" style="font-size: 10pt">Our suppliers and customers may receive similar claims. We have agreed to
indemnify some of our suppliers and customers for alleged patent infringement.
The scope of this indemnity varies, but, in some instances, includes
indemnification for damages and expenses (including reasonable attorney&#146;s
fees). In this regard, since December&nbsp;2000, we have been in communication with
several of Harmonic&#146;s customers who have been contacted by one of these leading
companies that believes certain of our products require a license under a
number of their patents. We currently are reviewing the identified patents to
examine whether we consider a license necessary. While it is our understanding
that the third party is willing to grant our customers a non-exclusive license
under the identified patents, there can be no assurance that the terms of any
offered license would be acceptable to our customers or that failure to obtain
a license or the costs associated with any license would not cause our
operating results to be materially adversely affected.


<P align="left" style="font-size: 10pt">On July&nbsp;3, 2003, Stanford University and Litton Systems filed a complaint in
U.S. District Court for the Central District of California alleging that
optical fiber amplifiers incorporated into certain of Harmonic&#146;s products
infringe U.S. Patent No.&nbsp;4,859,016. This patent expired in September&nbsp;2003. The
complaint seeks injunctive relief, royalties and damages. Harmonic has not been
served in the case. Harmonic is currently evaluating its position with respect
to this patent and has engaged in discussions with the plaintiff regarding
potential settlement of the matter. At this time, Harmonic is unable to
determine whether Harmonic will be able to settle this matter on reasonable
terms or at all, nor can Harmonic predict the impact of an adverse outcome of
this litigation if Harmonic elects to defend against it. Consequently, Harmonic
has made no provision in its financial statements for the outcome of a
negotiated settlement or an unfavorable verdict in litigation. An unfavorable
outcome of this matter could have a material adverse effect on Harmonic&#146;s
business, operating results, financial position or cash flows.


<P align="left" style="font-size: 10pt"><I>We Are The Subject Of Securities Class&nbsp;Action Claims And Other Litigation
Which, If Adversely Determined, Could Harm Our Business And Operating Results.</I>


<P align="left" style="font-size: 10pt">Between June&nbsp;28 and August&nbsp;25, 2000, several actions alleging violations of the
federal securities laws by Harmonic and certain of its officers and directors
(some of whom are no longer with Harmonic) were filed in or removed to the
United States District Court for the Northern District of California. The
actions subsequently were consolidated.
A consolidated complaint, filed on December&nbsp;7, 2000, was brought on behalf of a
purported class of persons who purchased Harmonic&#146;s publicly traded securities
between January&nbsp;19 and June&nbsp;26, 2000. The complaint also alleged claims on
behalf of a purported subclass of persons who purchased C-Cube securities
between January&nbsp;19 and May&nbsp;3, 2000. In addition to Harmonic and certain of its
officers and directors, the complaint also named C-Cube Microsystems Inc. and
several of its officers and directors as defendants. The complaint alleged
that, by making false or misleading statements regarding Harmonic&#146;s prospects
and customers and its acquisition of C-Cube, certain defendants violated
sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The complaint
also alleged that certain defendants violated section 14(a) of the Exchange Act
and sections 11, 12(a)(2), and 15 of the Securities Act



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<P align="left" style="font-size: 10pt">of 1933 by filing a false or misleading registration statement, prospectus, and
joint proxy in connection with the C-Cube acquisition.


<P align="left" style="font-size: 10pt">On July&nbsp;3, 2001, the Court dismissed the consolidated complaint with leave to
amend. An amended complaint alleging the same claims against the same
defendants was filed on August&nbsp;13, 2001. Defendants moved to dismiss the
amended complaint on September&nbsp;24, 2001. On November&nbsp;13, 2002, the Court issued
an opinion granting the motions to dismiss the amended complaint without leave
to amend. Judgment for defendants was entered on December&nbsp;2, 2002. On December
12, 2002, plaintiffs filed a motion to amend the judgment and for leave to file
an amended complaint pursuant to Rules 59(e) and 15(a) of the Federal Rules of
Civil Procedure. On June&nbsp;6, 2003, the Court denied plaintiffs&#146; motion to amend
the judgment and for leave to file an amended complaint. Plaintiffs filed a
notice of appeal on July&nbsp;1, 2003. Plaintiffs filed their opening brief on
December&nbsp;3, 2003. Defendants filed their answering briefs on March&nbsp;2, 2004.
Plaintiffs&#146; reply brief was filed on April&nbsp;16, 2004. No hearing has been
scheduled yet.


<P align="left" style="font-size: 10pt">A derivative action purporting to be on behalf of Harmonic was filed against
its then-current directors in the Superior Court for the County of Santa Clara
on September&nbsp;5, 2000. Harmonic also was named as a nominal defendant. The
complaint is based on allegations similar to those found in the securities
class action and claims that the defendants breached their fiduciary duties by,
among other things, causing Harmonic to violate federal securities laws. The
derivative action was removed to the United States District Court for the
Northern District of California on September&nbsp;20, 2000. All deadlines in this
action were stayed pending resolution of the motions to dismiss the securities
class action. On July&nbsp;29, 2003, the Court approved the parties&#146; stipulation to
dismiss this derivative action without prejudice and to toll the applicable
limitations period. The limitations period is tolled until fourteen days after
(1)&nbsp;defendants provide plaintiff with a copy of the mandate issued by the Ninth
Court in the securities action or (2)&nbsp;either party provides written notice of
termination of the tolling period, whichever is first.


<P align="left" style="font-size: 10pt">A second derivative action purporting to be on behalf of Harmonic was filed in
the Superior Court for the County of Santa Clara on May&nbsp;15, 2003. It alleges
facts similar to those previously alleged in the securities class action and
the federal derivative action. The complaint names as defendants former and
current Harmonic officers and directors, along with former officers and
directors of C-Cube Microsystems, Inc., who were named in the securities class
action. The complaint also names Harmonic as a nominal defendant. The complaint
alleges claims for abuse of control, gross mismanagement, and waste of
corporate assets against the Harmonic defendants, and claims for breach of
fiduciary duty, unjust enrichment, and negligent misrepresentation against all
defendants. On July&nbsp;22, 2003, the Court approved the parties&#146; stipulation to
stay the case pending resolution of the appeal in the securities class action.
Although the parties initially agreed in principle to a dismissal without
prejudice on similar terms as in the federal derivative action, after further
discussion, the parties decided that the stay currently in place suffices to
protect their respective interests.


<P align="left" style="font-size: 10pt">Based on its review of the complaints filed in the securities class action,
Harmonic believes that it has meritorious defenses and intends to defend itself
vigorously. There can be no assurance, however, that Harmonic will prevail. No
estimate can be made of the possible range of loss associated with the
resolution of this contingency and accordingly, Harmonic has not recorded a
liability. An unfavorable outcome of this litigation could have a material
adverse effect on Harmonic&#146;s business, operating results, financial position or
cash flows.


<P align="left" style="font-size: 10pt"><I>The Terrorist Attacks Of 2001 And The Ongoing Threat Of Terrorism Have Created
Great Uncertainty And May Continue To Harm Our Business.</I>


<P align="left" style="font-size: 10pt">Current conditions in the U.S. and global economies are uncertain. The
terrorist attacks in 2001 created many economic and political uncertainties
that have severely impacted the global economy. We experienced a further
decline in demand for our products after the attacks. The long-term effects of
the attacks, the situation in Iraq and the ongoing war on terrorism on our
business and on the global economy remain unknown. Moreover, the potential for
future terrorist attacks has created additional uncertainty and makes it
difficult to estimate how quickly the U.S. and other economies will recover and
our business will improve.



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<P align="left" style="font-size: 10pt"><I>Our Stock Price May Be Volatile.</I>


<P align="left" style="font-size: 10pt">The market price of our common stock has fluctuated significantly in the past,
particularly in recent years, and is likely to fluctuate in the future. In
addition, the securities markets have experienced significant price and volume
fluctuations and the market prices of the securities of technology companies
have been especially volatile. Investors may be unable to resell their shares
of our common stock at or above their purchase price. In the past, companies
that have experienced volatility in the market price of their stock have been
the object of securities class action litigation.


<P align="left" style="font-size: 10pt"><I>We Rely On A Continuous Power Supply To Conduct Our Operations, And Any
Electrical And Natural Gas Crisis Could Disrupt Our Operations And Increase Our
Expenses.</I>


<P align="left" style="font-size: 10pt">We rely on a continuous power supply for manufacturing and to conduct our
business operations. Interruptions in electrical power supplies in California
in the early part of 2001 could recur in the future. In addition, the cost of
electricity and natural gas has risen significantly. Power outages could
disrupt our manufacturing and business operations and those of many of our
suppliers, and could cause us to fail to meet production schedules and
commitments to customers and other third parties. Any disruption to our
operations or those of our suppliers could result in damage to our current and
prospective business relationships and could result in lost revenue and
additional expenses, thereby harming our business and operating results.


<P align="left" style="font-size: 10pt"><I>Some Anti-Takeover Provisions Contained In Our Certificate Of Incorporation,
Bylaws And Stockholder Rights Plan, As Well As Provisions Of Delaware Law,
Could Impair A Takeover Attempt.</I>


<P align="left" style="font-size: 10pt">Harmonic has provisions in its certificate of incorporation and bylaws, each of
which could have the effect of rendering more difficult or discouraging an
acquisition deemed undesirable by the Harmonic Board of Directors. These
include provisions:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior
to Harmonic common stock;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>limiting the liability of, and providing indemnification to, directors and officers;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>limiting the ability of Harmonic stockholders to call and bring business before special meetings;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>requiring advance notice of stockholder proposals for business to be conducted at meetings of Harmonic stockholders and for
nominations of candidates for election to the Harmonic Board of Directors;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>controlling the procedures for conduct and scheduling of Board and stockholder meetings; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>providing the board of directors with the express power to postpone previously scheduled annual meetings and to cancel
previously scheduled special meetings.</TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">These provisions, alone or together, could delay hostile takeovers and changes
in control or management of Harmonic.


<P align="left" style="font-size: 10pt">In addition, Harmonic has adopted a stockholder rights plan. The rights are not
intended to prevent a takeover of Harmonic, and we believe these rights will
help Harmonic&#146;s negotiations with any potential acquirers. However, if the
Board of Directors believes that a particular acquisition is undesirable, the
rights may have the effect of rendering more difficult or discouraging that
acquisition. The rights would cause substantial dilution to a person or group
that attempts to acquire Harmonic on terms or in a manner not approved by the
Harmonic Board of Directors, except pursuant to an offer conditioned upon
redemption of the rights.


<P align="left" style="font-size: 10pt">As a Delaware corporation, Harmonic also is subject to provisions of Delaware
law, including Section&nbsp;203 of the Delaware General Corporation law, which
prevents some stockholders holding more than 15% of our outstanding common
stock from engaging in certain business combinations without approval of the
holders of substantially all of our outstanding common stock.



<P align="center" style="font-size: 10pt">32
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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">Any provision of our certificate of incorporation or bylaws, our stockholder
rights plan or Delaware law that has the effect of delaying or deterring a
change in control could limit the opportunity for Harmonic stockholders to
receive a premium for their shares of Harmonic common stock, and could also
affect the price that some investors are willing to pay for Harmonic common
stock.


<P align="left" style="font-size: 10pt"><I>We Have Broad Discretion In How We Use The Net Proceeds Of Our Recent Offering,
And We May Not Use These Proceeds In A Manner Desired By Our Stockholders.</I>


<P align="left" style="font-size: 10pt">Our management has broad discretion with respect to the use of the net proceeds
from our recent offering and investors will be relying on the judgment of our
management regarding the application of these proceeds. Our management could
spend most of the net proceeds from this offering in ways that our stockholders
may not desire or that do not yield a favorable return. Investors will not have
the opportunity, as part of your investment in our common stock, to influence
the manner in which the net proceeds of this offering are used. The
net proceeds from the offering are being used for general corporate
purposes, including payment of existing liabilities, research and
development, the development or acquisition of new products or
technologies, equipment acquisitions, general working capital and
operating expenses. Our financial
performance may differ form our current expectations or our business needs may
change as our business and the industry we address evolve. As a result, the
proceeds we received in this offering may be used in a manner significantly
different from our current expectations.


<DIV align="left">
<A name="108"></A>
</DIV>

<P align="left" style="font-size: 10pt"><B>ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</B>


<P align="left" style="font-size: 10pt">Market risk represents the risk of loss that may impact the operating results,
financial position or liquidity of Harmonic due to adverse changes in market
prices and rates. Harmonic is exposed to market risk because of changes in
interest rates and foreign currency exchange rates as measured against the U.S.
Dollar and currencies of Harmonic&#146;s subsidiaries.


<P align="left" style="font-size: 10pt"><I>Foreign Currency Exchange Risk</I>


<P align="left" style="font-size: 10pt">Harmonic has a number of international subsidiaries each of whose sales and
results of operations are generally denominated in U.S. dollars. Sales
denominated in foreign currencies were approximately 7% and 4% of total net
sales in the first quarter of 2004 and the full year of 2003, respectively. In
addition, the Company has various international branch offices, which provide
sales support and systems integration services. While Harmonic does not
anticipate that near-term changes in exchange rates will have a material impact
on future operating results, financial position and cash flows, Harmonic cannot
assure you that a sudden and significant change in the value of local
currencies would not harm Harmonic&#146;s operating results, financial position or
cash flows.


<P align="left" style="font-size: 10pt"><I>Interest Rate Risk</I>


<P align="left" style="font-size: 10pt">Exposure to market risk for changes in interest rates relate primarily to
Harmonic&#146;s investment portfolio of marketable debt securities of various
issuers, types and maturities, and to Harmonic&#146;s borrowings under its bank line
of credit facility. Harmonic does not use derivative instruments in its
investment portfolio, and its investment portfolio only includes highly liquid
instruments with an original maturity of less than two years. These investments
are classified as available for sale and are carried at estimated fair value,
with material unrealized gains and losses reported in other comprehensive
income. There is risk that losses could be incurred if the Company were to sell
any of its securities prior to stated maturity. A 10% change in interest rates
would not have a material impact on financial conditions, results of operations
or cash flows.


<DIV align="left">
<A name="109"></A>
</DIV>

<P align="left" style="font-size: 10pt"><B>ITEM 4. CONTROLS AND PROCEDURES</B>


<P align="left" style="font-size: 10pt"><I>Evaluation of disclosure controls and procedures.</I>


<P align="left" style="font-size: 10pt">Our chief executive officer and our chief financial officer participated in the
evaluation of the effectiveness of the Company&#146;s &#147;disclosure controls and
procedures&#148; (as defined in the Securities Exchange Act of 1934, as amended (the
&#147;Exchange Act&#148;), Rules&nbsp;13a-15(e) or 15d-15(e)) as of the end of the period
covered by this quarterly report, and



<P align="center" style="font-size: 10pt">33
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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">have concluded that our disclosure controls and procedures are effective based
on their evaluation of these controls and procedures required by paragraph (b)
of Exchange Act Rules&nbsp;13a-15 or 15d-15.


<P align="left" style="font-size: 10pt"><I>Changes in internal controls.</I>


<P align="left" style="font-size: 10pt">There were no changes in our internal control over financial reporting
identified in connection with the evaluation required by paragraph (d)&nbsp;of
Exchange Act Rules&nbsp;13a-15 or 15d-15 that occurred during our last fiscal
quarter that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.


<DIV align="left">
<A name="110"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>PART II</B>


<P align="left" style="font-size: 10pt"><B>OTHER INFORMATION</B>


<DIV align="left">
<A name="111"></A>
</DIV>

<P align="left" style="font-size: 10pt"><B>ITEM 1. LEGAL PROCEEDINGS</B>


<P align="left" style="font-size: 10pt"><I>Shareholder Litigation</I>


<P align="left" style="font-size: 10pt">Between June&nbsp;28 and August&nbsp;25, 2000, several actions alleging violations of the
federal securities laws by Harmonic and certain of its officers and directors
(some of whom are no longer with Harmonic) were filed in or removed to the
United States District Court for the Northern District of California. The
actions subsequently were consolidated.


<P align="left" style="font-size: 10pt">A consolidated complaint, filed on December&nbsp;7, 2000, was brought on behalf of a
purported class of persons who purchased Harmonic&#146;s publicly traded securities
between January&nbsp;19 and June&nbsp;26, 2000. The complaint also alleged claims on
behalf of a purported subclass of persons who purchased C-Cube securities
between January&nbsp;19 and May&nbsp;3, 2000. In addition to Harmonic and certain of its
officers and directors, the complaint also named C-Cube Microsystems Inc. and
several of its officers and directors as defendants. The complaint alleged
that, by making false or misleading statements regarding Harmonic&#146;s prospects
and customers and its acquisition of C-Cube, certain defendants violated
sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The complaint
also alleged that certain defendants violated section 14(a) of the Exchange Act
and sections 11, 12(a)(2), and 15 of the Securities Act of 1933 by filing a
false or misleading registration statement, prospectus, and joint proxy in
connection with the C-Cube acquisition.


<P align="left" style="font-size: 10pt">On July&nbsp;3, 2001, the Court dismissed the consolidated complaint with leave to
amend. An amended complaint alleging the same claims against the same
defendants was filed on August&nbsp;13, 2001. Defendants moved to dismiss the
amended complaint on September&nbsp;24, 2001. On November&nbsp;13, 2002, the Court issued
an opinion granting the motions to dismiss the amended complaint without leave
to amend. Judgment for defendants was entered on December&nbsp;2, 2002. On December
12, 2002, plaintiffs filed a motion to amend the judgment and for leave to file
an amended complaint pursuant to Rules 59(e) and 15(a) of the Federal Rules of
Civil Procedure. On June&nbsp;6, 2003, the Court denied plaintiffs&#146; motion to amend
the judgment and for leave to file an amended complaint. Plaintiffs filed a
notice of appeal on July&nbsp;1, 2003. Plaintiffs filed their opening brief on
December&nbsp;3, 2003. Defendants filed their answering briefs on March&nbsp;2, 2004.
Plaintiffs&#146; reply brief was filed on April&nbsp;16, 2004. No hearing has been
scheduled yet.


<P align="left" style="font-size: 10pt">A derivative action purporting to be on behalf of Harmonic was filed against
its then-current directors in the Superior Court for the County of Santa Clara
on September&nbsp;5, 2000. Harmonic also was named as a nominal defendant. The
complaint is based on allegations similar to those found in the securities
class action and claims that the defendants breached their fiduciary duties by,
among other things, causing Harmonic to violate federal securities laws. The
derivative action was removed to the United States District Court for the
Northern District of California on September&nbsp;20, 2000. All deadlines in this
action were stayed pending resolution of the motions to dismiss the securities
class action. On July&nbsp;29, 2003, the Court approved the parties&#146; stipulation to
dismiss this derivative action without prejudice and to toll the applicable
limitations period. The limitations period is tolled until fourteen days after
(1)&nbsp;defendants provide plaintiff with a copy of the mandate issued by the Ninth
Court in the securities action or (2)&nbsp;either party provides written notice of
termination of the tolling period, whichever is first.



<P align="center" style="font-size: 10pt">34
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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">A second derivative action purporting to be on behalf of Harmonic was filed in
the Superior Court for the County of Santa Clara on May&nbsp;15, 2003. It alleges
facts similar to those previously alleged in the securities class action and
the federal derivative action. The complaint names as defendants former and
current Harmonic officers and directors, along with former officers and
directors of C-Cube Microsystems, Inc., who were named in the securities class
action. The complaint also names Harmonic as a nominal defendant. The complaint
alleges claims for abuse of control, gross mismanagement, and waste of
corporate assets against the Harmonic defendants, and claims for breach of
fiduciary duty, unjust enrichment, and negligent misrepresentation against all
defendants. On July&nbsp;22, 2003, the Court approved the parties&#146; stipulation to
stay the case pending resolution of the appeal in the securities class action.
Although the parties initially agreed in principle to a dismissal without
prejudice on similar terms as in the federal derivative action, after further
discussion, the parties decided that the stay currently in place suffices to
protect their respective interests.


<P align="left" style="font-size: 10pt">Based on its review of the complaints filed in the securities class action,
Harmonic believes that it has meritorious defenses and intends to defend itself
vigorously. There can be no assurance, however, that Harmonic will prevail. No
estimate can be made of the possible range of loss associated with the
resolution of this contingency and accordingly, Harmonic has not recorded a
liability. An unfavorable outcome of this litigation could have a material
adverse effect on Harmonic&#146;s business, operating results, financial position or
cash flows.


<P align="left" style="font-size: 10pt"><I>Other Litigation</I>


<P align="left" style="font-size: 10pt">On July&nbsp;3, 2003, Stanford University and Litton Systems filed a complaint in
U.S. District Court for the Central District of California alleging that
optical fiber amplifiers incorporated into certain of Harmonic&#146;s products
infringe U.S. Patent No.&nbsp;4,859,016. This patent expired in September&nbsp;2003. The
complaint seeks injunctive relief, royalties and damages. Harmonic has not been
served in the case. Harmonic is currently evaluating its position with respect
to this patent and has engaged in discussions with the plaintiff regarding
potential settlement of the matter. At this time, we are unable to determine
whether we will be able to settle this litigation on reasonable terms or at
all, nor can we predict the impact of an adverse outcome of this litigation if
we elect to defend against it. No estimate can be made of the possible range of
loss associated with the resolution of this contingency and accordingly, we
have not recorded a liability associated with the outcome of a negotiated
settlement or an unfavorable verdict in litigation. An unfavorable outcome of
this matter could have a material adverse effect on Harmonic&#146;s business,
operating results, financial position or cash flows.


<DIV align="left">
<A name="112"></A>
</DIV>

<P align="left" style="font-size: 10pt"><B>ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K</B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Exhibits</I>.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">31.1</TD>
    <TD width="3%">&nbsp;</TD>
    <TD>Section&nbsp;302 Certification of Principal Executive Officer</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">31.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Section&nbsp;302 Certification of Principal Financial Officer</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">32.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Section&nbsp;906 Certification of Principal Executive Officer</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">32.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Section&nbsp;906 Certification of Principal Financial Officer</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><I>b.</I></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Reports on </I><I>Form 8-K</I><I>.</I></TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="12%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">January&nbsp;22, 2004
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">On January&nbsp;22, 2004, the Company issued a press release
announcing results for the quarter ended December&nbsp;31,
2003 and furnished its press release on Form&nbsp;8-K.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">35
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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="113"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>SIGNATURE</B>


<P align="left" style="font-size: 10pt">Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top">Dated: May 11, 2004&nbsp;</TD>
    <TD colspan="3">HARMONIC INC.<BR>
(Registrant)<BR>
<BR>
&nbsp;<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000">/s/ Robin N. Dickson
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Robin N. Dickson&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Chief Financial Officer
(Principal Financial and Accounting Officer)&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt">36
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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="114"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>Exhibit&nbsp;Index</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="11%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="84%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Description</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.1<B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;302 Certification of Principal Executive Officer</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.2<B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;302 Certification of Principal Financial Officer</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.1<B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;906 Certification of Principal Executive Officer</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.2<B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;906 Certification of Principal Financial Officer</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>




<P align="center" style="font-size: 10pt">37
</DIV>


</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>2
<FILENAME>f98831exv31w1.txt
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
<PAGE>

                                                                    Exhibit 31.1

                  Certification of Principal Executive Officer
                           Pursuant to Section 302 of
                         The Sarbanes-Oxley Act of 2002

I, Anthony J. Ley, Chairman, President and Chief Executive Officer of Harmonic
Inc., certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Harmonic Inc.:

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer(s) and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a)   Designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the
          registrant, including its consolidated subsidiaries, is made known to
          us by others within those entities, particularly during the period in
          which this report is being prepared;

     b)   Evaluated the effectiveness of the registrant's disclosure controls
          and procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     c)   Disclosed in this report any change in the registrant's internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's fourth fiscal quarter in
          the case of an annual report) that has materially affected, or is
          reasonably likely to materially affect, the registrant's internal
          control over financial reporting; and

5.   The registrant's other certifying officer(s) and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     a)   All significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the registrant's ability to
          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          control over financial reporting.

Date: May 11, 2004           By: /s/Anthony J. Ley
                                 -------------------------------------
                                 Anthony J. Ley
                                 Chairman, President and Chief Executive Officer
                                 (Principal Executive Officer)


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>3
<FILENAME>f98831exv31w2.txt
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
<PAGE>

                                                                    Exhibit 31.2

                  Certification of Principal Financial Officer
                           Pursuant to Section 302 of
                         The Sarbanes-Oxley Act of 2002

I, Robin N. Dickson, Principal Financial Officer of Harmonic Inc., certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Harmonic Inc.:

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer(s) and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a)   Designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the
          registrant, including its consolidated subsidiaries, is made known to
          us by others within those entities, particularly during the period in
          which this report is being prepared;

     b)   Evaluated the effectiveness of the registrant's disclosure controls
          and procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     c)   Disclosed in this report any change in the registrant's internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's fourth fiscal quarter in
          the case of an annual report) that has materially affected, or is
          reasonably likely to materially affect, the registrant's internal
          control over financial reporting; and

5.   The registrant's other certifying officer(s) and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     a)   All significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the registrant's ability to
          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          control over financial reporting.

Date: May 11, 2004                           By: /s/Robin N. Dickson
                                                 -------------------
                                                 Robin N. Dickson
                                                 Chief Financial Officer
                                                 (Principal Financial Officer)


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>4
<FILENAME>f98831exv32w1.txt
<DESCRIPTION>EXHIBIT 32.1
<TEXT>
<PAGE>

                                                                    Exhibit 32.1

                                  Harmonic Inc.
                  Certification of Principal Executive Officer
            Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002

As of the date hereof, I, Anthony J. Ley, Chairman, President and Chief
Executive Officer of Harmonic Inc. (the "Company"), certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that the quarterly report of the Company on Form 10-Q for the
fiscal quarter ended April 2, 2004, as filed with the Securities and Exchange
Commission (the "Report"), fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Act of 1934 and that information contained in the
Report fairly presents, in all material respects, the financial condition and
results of operations of the Company. This written statement is being furnished
to the Securities and Exchange Commission as an exhibit accompanying such Report
and shall not be deemed filed pursuant to the Securities Exchange Act of 1934.

Date: May 11, 2004

                               /s/ Anthony J. Ley
                               ------------------------------------------
                               Anthony J. Ley
                               Chairman, President and Chief Executive Officer
                               (Principal Executive Officer)


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>5
<FILENAME>f98831exv32w2.txt
<DESCRIPTION>EXHIBIT 32.2
<TEXT>
<PAGE>

                                                                    Exhibit 32.2

                                  Harmonic Inc.
                  Certification of Principal Financial Officer
            Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002

As of the date hereof, I, Robin N. Dickson, Chief Financial Officer of Harmonic
Inc. (the "Company"), certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the quarterly
report of the Company on Form 10-Q for the fiscal quarter ended April 2, 2004,
as filed with the Securities and Exchange Commission (the "Report"), fully
complies with the requirements of Section 13(a) or 15(d) of the Securities Act
of 1934 and that information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company. This written statement is being furnished to the Securities and
Exchange Commission as an exhibit accompanying such Report and shall not be
deemed filed pursuant to the Securities Exchange Act of 1934.

Date: May 11, 2004

                                             /s/ Robin N. Dickson
                                             --------------------------------
                                             Robin N. Dickson
                                             Chief Financial Officer
                                             (Principal Financial Officer)

</TEXT>
</DOCUMENT>
</SUBMISSION>
