In order to use MODE button recovery of image, the PC that is running the TFTP server needs to be on the same subnet as the access point - i.e. it cannot have IP address 192.168.1.3
The AP should assign itself a default IP address of 10.0.0.1 so manual configured the PC to have IP address 10.0.0.2
Suggest connecting the AP directly to PC using a crossover cable.
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Troubleshooting Autonomous Access Points
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Default IP Address Behavior When you connect a 1200 series access point running Cisco IOS Release
12.3(2)JA or later software with a default configuration to your LAN, the access point requests an IP address from your DHCP server and, if it does not receive an IP address, continues to send requests indefinitely.
When you connect a 1200 series access point running Cisco IOS Release
12.2(15)JA or earlier software with a default configuration to your LAN, the access point requests an IP address from your DHCP server and, if it does not receive an IP address, the access point assigns a default IP address of 10.0.0.1
Reloading the Access Point Image
Using the MODE button
You can use the MODE button on the access point to reload the access point image file from an active Trivial File Transfer Protocol (TFTP) server on your network or on a PC connected to the access point Ethernet port.
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Note If your access point experiences a firmware failure or a corrupt firmware image,
indicated by three red LEDs, you must reload the image from a connected TFTP server.
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Note This process resets all configuration settings to factory defaults, including passwords, WEP keys, the access point IP address, and SSIDs.
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Follow the steps below to reload the access point image file:
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Step 1 The PC you intend to use must be configured with a static IP address in the same subnet as the access point.
Step 2 Place a copy of the access point image file (such as c1200-k9w7- tar.123-8.JA.tar) into the TFTP server folder on your PC. For additional information, refer to the "Obtaining the Access Point Image File" and "Obtaining the TFTP Server Software" sections.
Step 3 Rename the access point image file in the TFTP server folder to c1200-k9w7-tar.default.
Step 4 Activate the TFTP server.
Step 5 Connect the PC to the access point power injector using a Category 5 (CAT5) Ethernet cable.
Step 6 Disconnect power (the power jack for external power or the Ethernet cable for in-line power) from the access point.
Step 7 Press and hold the MODE button while you reconnect power to the access point.
Step 8 Hold the MODE button until the status LED turns red (approximately 20 to 30 seconds), and release the MODE button.
Step 9 Wait until the access point reboots as indicated by all LEDs turning green followed by the status LED blinking green.
Step 10 After the access point reboots, you must reconfigure the access point by using the Web interface, the Telnet interface, or Cisco IOS commands.