##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





Form 10-K







|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------



| | For the fiscal year ended January 3, 2010
| | -----------------------------------------

OR



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



| | For the transition period from 
to
| | ----------------------------------

Commission File Number 000-21507





POWERWAVE
TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 11-2723423                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

1801 E. St. Andrew Place,
Santa Ana, CA 92705

(Address of principal executive offices, zip code)

(714) 466-1000

(Registrants telephone number, including area code)





Securities
registered pursuant to Section 12(b) of the Act: Common Stock, Par Value $0.0001 NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None





Indicate by check
mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ̈    No  x

Indicate by check mark if the Registrant is not required to file reports pursuant
to Section 13 or 15(d) of the Exchange Act.    Yes   ̈    No  x

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     ̈

Indicate by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ̈            Accelerated filer  x            Non-accelerated filer   ̈            Smaller reporting company   ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act).    Yes   ̈    No  x

As of June 28, 2009, the aggregate market value of the voting stock of the Registrant held by non-affiliates of the Registrant was
$219,054,824 computed using the closing price of $1.67 per share of Common Stock on June 26, 2009, the last trading day of the second quarter, as reported by NASDAQ, based on the assumption that directors and officers and more than 10%
stockholders are affiliates. As of February 16, 2010 the number of outstanding shares of Common Stock, par value $0.0001 per share, of the Registrant was 132,693,127.





Documents Incorporated by Reference



|                                                                                                                                                                                                                                                                  |  |                               
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------
|Document Description                                                                                                                                                                                                                                              |  | 10-K Part                     
|Portions of the Registrants notice of annual meeting of stockholders and proxy statement to be filed pursuant to Regulation
14A within 120 days after Registrants fiscal year ended January 3, 2010 are incorporated by reference into Part III of this report. |  | III (Items 10, 11, 12, 13, 14)









---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

INDEX





|                                                           |  |          |  |                                                                                                              |  |   
|---------------------------------------------------------- |  | -------- |  | ------------------------------------------------------------------------------------------------------------ |  | --
|CAUTIONARY STATEMENT RELATED TO FORWARD LOOKING STATEMENTS |  | 3       
|                                                           | 
|PART I                                                     |  | 4       
|                                                           |  |          | 
|                                                           |  | ITEM 1.  |  | Business                                                                                                     |  | 4 
|                                                           |  |          | 
|                                                           |  | ITEM 1A. |  | Risk Factors                                                                                                 |  | 12
|                                                           |  |          | 
|                                                           |  | ITEM 1B. |  | Unresolved Staff Comments                                                                                    |  | 24
|                                                           |  |          | 
|                                                           |  | ITEM 2.  |  | Properties                                                                                                   |  | 24
|                                                           |  |          | 
|                                                           |  | ITEM 3.  |  | Legal Proceedings                                                                                            |  | 24
|                                                           |  |          | 
|                                                           |  | ITEM 4.  |  | Submission of Matters to a Vote of Security Holders                                                          |  | 25
|                                                           | 
|PART II                                                    |  | 26      
|                                                           |  |          | 
|                                                           |  | ITEM 5.  |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 26
|                                                           |  |          | 
|                                                           |  | ITEM 6.  |  | Selected Financial Data                                                                                      |  | 28
|                                                           |  |          | 
|                                                           |  | ITEM 7.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 29
|                                                           |  |          | 
|                                                           |  | ITEM 7A. |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 50
|                                                           |  |          | 
|                                                           |  | ITEM 8.  |  | Financial Statements and Supplementary Data                                                                  |  | 52
|                                                           |  |          |  | Report of Independent Registered Public Accounting Firm                                                      |  | 53
|                                                           |  |          |  | Consolidated Balance Sheets                                                                                  |  | 55
|                                                           |  |          |  | Consolidated Statements of Operations                                                                        |  | 56
|                                                           |  |          |  | Consolidated Statements of Comprehensive Operations                                                          |  | 57
|                                                           |  |          |  | Consolidated Statements of Shareholders Equity (Deficit)                                                    |  | 58
|                                                           |  |          |  | Consolidated Statements of Cash Flows                                                                        |  | 59
|                                                           |  |          |  | Notes to Consolidated Financial Statements                                                                   |  | 61
|                                                           |  |          |  | Quarterly Financial Data (Unaudited)                                                                         |  | 88
|                                                           |  |          | 
|                                                           |  | ITEM 9.  |  | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 89
|                                                           |  |          | 
|                                                           |  | ITEM 9A. |  | Controls and Procedures                                                                                      |  | 89
|                                                           |  |          | 
|                                                           |  | ITEM 9B. |  | Other Information                                                                                            |  | 89
|                                                           | 
|PART III                                                   |  | 90      
|                                                           |  |          | 
|                                                           |  | ITEM 10. |  | Directors, Executive Officers and Corporate Governance                                                       |  | 90
|                                                           |  |          | 
|                                                           |  | ITEM 11. |  | Executive Compensation                                                                                       |  | 90
|                                                           |  |          | 
|                                                           |  | ITEM 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 90
|                                                           |  |          | 
|                                                           |  | ITEM 13. |  | Certain Relationships and Related Transactions and Director Independence                                     |  | 90
|                                                           |  |          | 
|                                                           |  | ITEM 14. |  | Principal Accounting Fees and Services                                                                       |  | 90
|                                                           | 
|PART IV                                                    |  | 91      
|                                                           |  |          | 
|                                                           |  | ITEM 15. |  | Exhibits, Financial Statement Schedules                                                                      |  | 91
|                                                           | 
|SIGNATURES                                                 |  | 96      
|                                                           | 
|SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS            |  | 97      





---

##### Table of Contents

CAUTIONARY STATEMENT RELATED TO FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K, contains forward-looking statements, regarding future events and our
future results that are subject to the safe harbors created under the Securities Act of 1933, or the Securities Act, and the Securities Exchange Act of 1934, or the Exchange Act. All statements other than statements of historical facts are
statements that could be deemed forward- looking statements as defined within Section 27A of the Securities Act and Section 21E of the Exchange Act. One generally can identify forward-looking statements by the use of forward-looking
terminology such as believes, may, will, expects, intends, estimates, anticipates, plans, seeks, or continues, or the negative
thereof, or variations thereon, or similar terminology. Forward-looking statements in this Annual Report include, but are not limited to, statements relating to revenue, revenue composition, market and economic conditions, demand and pricing trends,
future expense levels, competition and growth prospects in our industry, trends in average selling prices and gross margins, product and infrastructure development, market demand and acceptance, the timing of and demand for next generation products,
customer relationships, tax rates, employee relations, the timing of cash payments and cost savings from restructuring activities, restructuring charges, and the level of expected future capital and research and development expenditures. Such
statements are generally included in the items captioned: Managements Discussion and Analysis of Financial Condition and Results of Operations, Quantitative and Qualitative Disclosures About Market Risk, Legal
Proceedings, and Risk Factors. These statements are based on current expectations, estimates, forecasts, and projections about the industry in which we operate and the beliefs and assumptions of our management. The forward-looking
statements made in this report, regarding future events and the future performance of Powerwave Technologies, Inc, which we refer to as Powerwave or the Company, involve risks and uncertainties that could cause the Companys actual results to
differ materially and adversely from those results currently anticipated. Such risks and uncertainties may relate to, but are not limited to, our reliance upon a few customers to generate the majority of our revenues, continued economic weakness and
uncertainty resulting from the worldwide economic crisis and tightening of the credit markets, continued reductions in demand for our products; difficulty in obtaining additional capital should we need to do so in the future; significant
fluctuations in our sales and operating results, continuing declines in the sales prices for our products; the future growth of the wireless infrastructure communications market; our reliance on single sources or limited sources for key components
and products; the risks surrounding our internal and contract manufacturing operations in Asia and Europe; operating in a highly-regulated industry; and the competitive nature of the wireless communications industry which is characterized by rapid
technological change. Because the risks and uncertainties discussed in this report and other important unanticipated factors may affect Powerwaves operating results, past performance should not be considered as indicative of future
performance, and investors should not use historical results to anticipate results or trends in future periods. Readers should also carefully review the risk factors described in documents that Powerwave files from time to time with the Securities
and Exchange Commission, including subsequent Current Reports on Form 8-K, Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K, as we undertake no obligation to revise or update any forward-looking statements for any reason.



3



---

##### Table of Contents

PART I



|ITEM 1. | BUSINESS
|------- | --------

General

Powerwave Technologies, Inc. (Powerwave or the Company or our or we)
was incorporated in Delaware in January 1985, under the name Milcom International, Inc., and changed its name to Powerwave Technologies, Inc. in June 1996. We are a global supplier of end-to-end wireless solutions for wireless communications
networks. Our business consists of the design, manufacture, marketing and sale of products to improve coverage, capacity and data speed in wireless communications networks, including antennas, boosters, combiners, cabinets, shelters, filters, radio
frequency power amplifiers, remote radio head transceivers, repeaters, tower-mounted amplifiers and advanced coverage solutions. These products are utilized in major wireless networks throughout the world which support voice and data communications
by use of cell phones and other wireless communication devices. We sell our products to both original equipment manufacturers, who incorporate our products into their proprietary base stations (which they then sell to wireless network operators),
and directly to individual wireless network operators for deployment into their existing networks.

We believe that our future
success depends upon continued growth in demand for wireless services as well as our ability to broaden our customer base. For the fiscal year ended January 3, 2010 (fiscal 2009), our largest customers continued to be original
equipment manufacturers. Nokia Siemens accounted for approximately 34% of our sales. As a result, Nokia Siemens has the ability to significantly impact our financial results by demanding price reductions and threatening to reduce their business with
us, transfer that business to other companies, or take it internal to their operations. The loss of this customer, or a significant loss, reduction or rescheduling of orders from this customer would have a material adverse effect on our business,
financial condition and results of operations. See We rely upon a few customers for the majority of our revenues;andOur success is tied to the growth of the wireless services communications market under Part
I, Item 1A, Risk Factors.

A limited number of large original equipment manufacturers and large global wireless
network operators account for a majority of wireless infrastructure equipment purchases in the wireless equipment market, and our future success is dependent upon our ability to establish and maintain relationships with these types of customers.
While we regularly attempt to expand our customer base, we cannot give any assurance that a major customer will not reduce, delay or eliminate its purchases from us. During fiscal 2009, we experienced significant reductions in demand from both our
original equipment manufacturer customers such as Nokia Siemens and Alcatel-Lucent, and our direct operator customers, which had an adverse effect on our business and results of operations. Any future reductions in demand by any of our major
customers would have a material adverse effect on our business, financial condition and results of operations. See We rely upon a few customers for the majority of our revenues under Part I, Item 1A, Risk
Factors.

We have experienced, and expect to continue to experience, declining average sales prices for our products.
Consolidation among both original equipment manufacturers and wireless service providers has enabled such companies to place continual pricing pressure on wireless infrastructure manufacturers, which has resulted in downward pricing pressure on our
products. In addition, ongoing competitive pressures and consolidation within the wireless infrastructure equipment market have put pressure on us to continually reduce the sales price of our products. Consequently, we believe that our gross margins
may decline over time and that in order to maintain or improve our gross margins, we must reduce manufacturing costs, redesign our products to reduce their cost, reduce our overhead costs as well as our operating expenses, and develop new products
that incorporate advanced features that may generate higher gross margins. We may not be able to achieve the necessary cost and expense reductions. See Our success is tied to the growth of the wireless services communications market;andOur average sales prices have declined under Part I, Item 1A, Risk Factors.

Significant Business Developments in Fiscal 2009

Beginning in the fourth quarter of 2008, global
economic instability driven by the subprime mortgage crisis and the tightening of credit availability impacted all of the markets in which we compete. As the extent of the crisis unfolded, it became apparent that the global economy had entered a
significant recessionary period, which included sharply lower economic activity, inflation and deflation concerns, decreased consumer confidence, reduced corporate profits, reduced or canceled capital spending, liquidity concerns and generally
adverse business conditions. All of these factors combined had a negative impact on the availability of financial capital which we believe contributed to a reduction in demand for infrastructure in the wireless communications market. These
conditions have made it difficult for our customers and vendors to accurately forecast and plan future business activities, causing domestic and foreign businesses to reduce or suspend expenditures on our products and services. We cannot predict how
long this economic recession will last or what the ultimate effects on the economy or the wireless infrastructure industry will be.



4



---

##### Table of Contents

In the first quarter of 2009, we formulated and began to implement a plan to further reduce
manufacturing overhead costs and operating expenses. As part of this plan, we initiated personnel reductions in both our domestic and foreign locations, with primary reductions in the United States, Estonia and Sweden. These reductions were
undertaken in response to current economic conditions and the ongoing global recession that began in the fourth quarter of 2008. The goal of all of these actions was to reduce the Companys operating and manufacturing costs in order to improve
cash flow and increase profitability.

During 2009, we expanded our operations in India. We opened a 40,000-square foot
research and development facility in Hyderabad, India, to facilitate sales and marketing, engineering and technical and customer support functions. We also expanded our operations with a new manufacturing facility in Laem Chabang, Thailand. The
135,000-square foot facility has the capacity to manufacture various products, as well as support our repair activities. This facility was fully-operational in the fourth quarter of 2009.

In the second quarter of 2009, we entered into a $50.0 million Credit Agreement (Credit Agreement) with Wells Fargo Capital
Finance LLC (formerly Wells Fargo Foothill, LLC), as arranger and administrative agent. In connection with entering into the Credit Agreement, we terminated our Revolving Trade Receivables Purchase Agreement with Deutsche Bank AG, New York Branch,
as Administrative Agent.

During 2009, we repurchased $25.4 million par value of our outstanding 1.875% convertible
subordinated notes due November 2024 at various discounts which resulted in a gain of $12.7 million (see Note 5 of the Notes to Consolidated Financial Statements under Part II, Item 8, Financial Statements and Supplementary Data).

In the fourth quarter of 2009, we sold our previously vacated manufacturing facility in Salisbury, Maryland for net proceeds
of approximately $3.9 million.

Industry Segments and Geographic Information

We operate in one reportable business segment: Wireless Communications. All of our revenues are derived from the sale of wireless
communications products and coverage solutions, including antennas, boosters, combiners, cabinets, shelters, filters, radio frequency power amplifiers, remote radio head transceivers, repeaters, tower-mounted amplifiers and advanced coverage
solutions for use in all major frequency bands including cellular, PCS, 3G and 4G wireless communications networks throughout the world. Our products are sold globally and produced in multiple locations (see Note 18 of the Notes to Consolidated
Financial Statements under Part II, Item 8, Financial Statements and Supplementary Data).

Business Strategy

Our strategy is to become the leading supplier of advanced solutions to the wireless communications industry and
includes the following key elements:



| |  |  | provide leading technology to the wireless communications infrastructure equipment industry through research and development that continues to improve
our products technical performance while reducing our costs and establishing new levels of technical performance for the industry;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | utilize our research and development efforts, along with our internal and external manufacturing and supply chain capabilities to raise our
productivity and lower our product costs;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | leverage our position as a leading supplier of wireless communications products and coverage solutions to increase our market share and expand our
relationships with both our existing customers and potential new customers in other markets such as government, public safety, the military and homeland security;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | continue to expand our customer base of wireless network original equipment manufacturers and wireless network operators; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | maintain our focus on the quality, reliability and manufacturability of our wireless communications products and coverage solutions.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------

Our focus on radio frequency technology and the experience we have gained through the implementation of our
products in both analog and digital wireless networks throughout the world has enabled us to develop substantial expertise in wireless infrastructure equipment technology. We intend to continue to research and develop new methods to improve our
product performance, including efforts to support future generation transmission standards. We believe that both our existing products and new products under development will enable us to continue to expand our customer base by offering a broad
range of products at attractive price points to meet the diverse requirements of wireless original equipment manufacturers and network operators. We also intend to leverage our product lines to expand our relationships with our existing customers
and to add new customers. We believe that we are able to respond quickly and cost-effectively to new transmission protocols and



5



---

##### Table of Contents

design specifications by obtaining components from numerous leading technology companies and utilizing various contract manufacturers. We also believe that our focus on the manufacturability of
our product designs helps us to increase our productivity while reducing our product costs. We believe that this ability to offer a broad range of products represents a competitive advantage over other third-party manufacturers of wireless
infrastructure equipment.

If we are unsuccessful in designing new products, improving existing products or reducing the costs
of our products, our inability to meet these objectives would have a negative effect on our gross profit margins, business, financial condition and results of operations. In addition, if our outstanding customer orders were to be significantly
reduced, the resulting loss of purchasing volume would also adversely affect our cost competitive advantage, which would negatively affect our gross profit margins, business, financial condition and results of operations. See Our average
sales prices have declined;and We may fail to develop products that are sufficiently manufacturable under Part I, Item 1A, Risk Factors.

Markets

As a global supplier of end-to-end wireless solutions for wireless communication networks, our business consists of the design, manufacture, marketing and sale of products to improve coverage, capacity and data speed in wireless
communication networks, including antennas, boosters, combiners, cabinets, shelters, filters, radio frequency power amplifiers, remote radio head transceivers, repeaters, tower-mounted amplifiers and advanced coverage solutions. These products are
utilized in major wireless networks throughout the world that support voice and data communications by use of cell phones and other wireless communication devices. We sell such products to both original equipment manufacturers, who incorporate our
products into their proprietary base stations (which they then sell to wireless network operators), and directly to individual wireless network operators for deployment into their existing networks.

Our business depends upon the worldwide demand for wireless communication networks and the corresponding infrastructure spending by wireless
network operators to support this demand. Today, the majority of the wireless network operators offer wireless voice and data services on what are commonly referred to as 2G, 2.5G or 3G networks. These wireless networks utilize common transmission
protocols including Code Division Multiple Access or CDMA and Global System for Mobile or GSM, both of which define different standards for transmitting voice and data within wireless networks. Within these transmission protocols, there are various
improvements available to increase the speed of data transmission or to increase the amount of voice capacity in the network. These types of improvements are generally referred to as 2.5G and include upgrades to GSM such as General Packet Radio
Service or GPRS and Enhanced Data rates for Global Evolution or EDGE. For CDMA networks, various upgrades are referred to as CDMA 1x, CDMA 2000 and CDMA EV/DO.

The latest major generation of wireless voice and data transmission protocols is commonly referred to as 3G. These transmission protocols provide significantly higher data rate transmission, with
significant additional voice capacity and the ability to transmit high capacity information, such as video and internet access. The major 3G transmission protocol is known as Wideband Code Division Multiple Access or WCDMA. This protocol is being
utilized in the next generation of GSM networks, which are referred to as Universal Mobile Telecommunication Systems or UMTS.

There continue to be new generations of wireless voice and data transmission protocols, with some of the latest commonly referred to as 4G. These future protocols have not been widely deployed, and in some cases the full specifications have
yet to be fully agreed upon by the various standard-setting bodies that establish and formalize such protocols. Examples of these types of 4G protocols are Worldwide Interoperability for Microwave Access (or WiMAX) and Long Term Evolution (or LTE).

Principal Product Groups

We divide our wireless communications business into the following product groups:

Antenna Systems

This product group includes base station antennas and tower-mounted amplifiers. We offer an
extensive line of base station antennas which cover all major radio frequency bands including cellular, PCS, 3G and 4G bands. Our products also support all major wireless transmission protocols. Our base station antenna products include single, dual
and triple-band solutions based on proprietary technology in a variety of sizes. We also offer remote-adjustable electrical tilt antennas which provide remote control and monitoring capabilities.

We also manufacture a full line of tower-mounted amplifiers which improve wireless network performance by filtering and amplifying as close
as possible to the receiving antenna, thus significantly reducing signal loss and noise. Our tower-mounted amplifier products cover all major wireless frequency ranges and transmission protocols.



6



---

##### Table of Contents

Base Station Subsystems

This product group includes products that are installed into or around the base station of wireless networks and includes products such as
boosters, combiners, filters, radio frequency power amplifiers, VersaFlex cabinets and radio transceivers.

We offer both
single and multi-carrier radio frequency power amplifiers for use in all major global frequency bands including cellular, PCS, 3G and 4G bands, supporting all major transmission protocols. Typical system applications include CDMA, CDMA 2000, WCDMA,
GSM, EDGE, and UMTS protocols with output power ranging from 10 to 180 Watts.

In addition, we produce filters which can
improve the signal transmission for both up and down link as well as help to reduce out of band performance. Our filters cover all major global frequency bands. Along with filters, we provide radio frequency power combiners which allow for the
connecting of multiple radio frequency power signals.

We also provide a range of integrated radio solutions. These integrated
radio solutions offer new alternative approaches to providing lower-cost base station solutions. One current product offering is the digital remote radio head transceiver, which provides operators the ability to partition the radio transceiver,
power amplifier and duplexer in a remote chassis, which can then be co-located near the antenna to minimize signal loss over the traditional antenna path. The digital remote radio head utilizes base band (I/Q) signals from the output of the modem
via fiber optic cables which offer improved performance over distance versus traditional cables. This next generation technology offers significant potential cost reduction opportunities, and we have been publicly recognized as a leading innovator
in this product segment.

Coverage Solutions

This product group consists primarily of distributed antenna systems, repeaters and advanced coverage solutions. Our distributed antenna
systems solutions provide the equipment to co-locate multiple wireless operators on multiple frequency bands within a single location, while allowing each operator to maintain full control over parameters critical to its networks performance.
These systems are custom designed by us for use in convention centers, airports, transportation centers, dense urban business districts and business campuses. These custom designed antenna systems are designed to be readily connected to base station
equipment, thereby reducing installation costs.

Our repeater systems are utilized in wireless communications networks to
improve signal quality where physical structures or geographic constraints result in low radio frequency signal strength. They can also be utilized as a low-cost alternative to base stations in areas where coverage is more critical than capacity.
These products can be used for both single and multiple-operator applications. Our systems are available in a wide frequency range from 700 MHz to 2600 MHz, support all major transmission protocols, and have features and functions that allow network
operators to remotely monitor and adjust these systems.

Our advanced coverage solutions provide an integrated team of radio
frequency and system engineers to design and implement wireless coverage applications utilizing our coverage solutions products. We provide advanced coverage engineers to design the right solution for any type of wireless coverage issue. Based upon
our design, we will oversee installation and operation of the chosen coverage solution. The types of sites utilizing our services include convention centers, airports, subways, hotels, office buildings, and various locations where traditional
wireless service coverage is not available.

Customers

We sell our products to customers worldwide, including a variety of wireless original equipment manufacturers, such as Alcatel-Lucent,
Ericsson, Huawei, Motorola, Nokia Siemens and Samsung. We also sell our products to operators of wireless networks, such as AT&T, Bouygues, Orange, Sprint, T-Mobile, Verizon Wireless and Vodafone.

For fiscal 2009, our largest customer, Nokia Siemens, accounted for approximately 34% of our sales. No other customer accounted for more
than 10% of our sales for 2009. The loss of this customer, or a significant loss, reduction or rescheduling of orders from any of our customers, would have a material adverse effect on our business, financial condition and results of operations. See
We rely upon a few customers for the majority of our revenues under Part I, Item 1A, Risk Factors.

Marketing and Distribution, International Sales

We sell our
products through a highly technical direct sales force, through independent sales representatives and, in certain countries, through resellers. Direct sales personnel are assigned to geographic territories and, in addition to sales responsibilities,
may manage selected independent sales representatives. We utilize a network of independent sales representatives selected for their familiarity with our potential customers and their knowledge of the wireless infrastructure equipment market. Our
direct



7



---

##### Table of Contents

sales personnel, resellers and independent sales representatives generate product sales, provide product and customer service, and provide customer feedback for product development. In addition,
our sales personnel, resellers and independent sales representatives receive support from our marketing, product support and customer service departments.

Our marketing efforts are focused on establishing and developing long-term relationships with potential customers. The initial sales cycle for many of our products is lengthy, typically ranging from six
to eighteen months. Our customers typically conduct significant technical evaluations of our products before making purchase commitments. In addition, as is customary in the industry, sales are made through standard purchase orders that can be
subject to cancellation, postponement or other types of delays. While certain customers provide us with estimated forecasts of their future requirements, they are not typically bound by these forecasts.

International sales (excluding North American sales) of our products approximated 73%, 70% and 73% of net sales for the fiscal years ended
January 3, 2010, December 28, 2008 and December 30, 2007, respectively. Foreign sales of some of our products may be subject to national security and export regulations and may require us to obtain a permit or license. In recent
years, we have not experienced any significant difficulties in obtaining required permits or licenses. International sales also subject us to risks related to political upheaval and economic downturns in foreign countries and regions. Because a
large percentage of our foreign customers typically pay for our products with U.S. Dollars, a strengthening of the U.S. Dollar as compared to a foreign customers local currency would effectively increase the cost of our products for that
customer, thereby making our products less attractive to these customers. See We conduct a significant portion of our business internationallyunder Part I, Item 1A, Risk Factors.

Service and Warranty

We offer warranties of various lengths which differ by customer and product type and typically cover defects in materials and workmanship. We perform warranty obligations and other maintenance services
for our products in the United States, Estonia, China, Thailand, the United Kingdom, and at our contract manufacturing locations.

Product Development

We invest significant resources in the research and development of new products
within our wireless communications product area. This includes significant resources in the development of new products to support third generation protocols such as WCDMA, HSDPA, TD-SCDMA and CDMA 2000. We also support fourth generation protocols
such as WiMAX and LTE. Our development efforts also seek to reduce the cost and increase the manufacturing efficiency of both new and existing products. Our total research and development staff consisted of 397 employees and 19 contract staff as of
January 3, 2010. Expenditures for research and development approximated $58.9 million in 2009, $77.7 million in 2008 and $85.0 million in 2007. See The wireless communications infrastructure equipment industry is extremely
competitive.;andIf we are unable to hire and retain highly qualified technical and managerial personnelunder Part I, Item 1A, Risk Factors.

Competition

The wireless communications infrastructure equipment industry is extremely competitive and characterized by rapid technological change, new product development, rapid product obsolescence, evolving industry standards and significant price
erosion over the life of a product. Our products compete on the basis of the following key characteristics: performance, functionality, reliability, pricing, quality, designs that can be efficiently manufactured in large volumes, time-to-market
delivery capabilities and compliance with industry standards. While we believe that we compete favorably with respect to these characteristics, there is no assurance that we will be able to continue to do so.

Our current competitors include ADC Telecommunications, Inc., CommScope, Inc., Fujitsu Limited, Hitachi Kokusai Electric Inc., Japan Radio
Co., Ltd., Kathrein-Werke KG, Mitsubishi Electric Corporation and Radio Frequency Systems. We also compete with a number of other foreign and privately-held companies throughout the world, subsidiaries of certain multinational corporations and, more
importantly, the captive design and manufacturing operations within certain leading wireless infrastructure original equipment manufacturers such as Alcatel-Lucent, Ericsson, Huawei, Motorola, Nokia Siemens and Samsung. Some competitors have
significantly greater financial, technical, manufacturing, sales, marketing and other resources than us and have achieved greater name recognition for their products and technologies than we have. We cannot guarantee we will be able to successfully
increase our market penetration or our overall share of the wireless communication infrastructure equipment marketplace. Our business, financial condition and results of operations could be adversely impacted if we are unable to effectively increase
our share of the marketplace.

Our success depends in large part upon the rate at which wireless infrastructure original
equipment manufacturers incorporate our products into their systems. We believe that a substantial portion of the present worldwide production of various infrastructure components is captive within the internal manufacturing operations of a small
number of leading



8



---

##### Table of Contents

original equipment wireless infrastructure manufacturers such as Alcatel-Lucent, Ericsson, Huawei, Motorola, Nokia Siemens and Samsung. In addition, most large wireless infrastructure original
equipment manufacturers maintain internal design capabilities that may compete directly with our products and our own designs. Many of our customers internally design and/or manufacture their own components rather than purchase them from third-party
vendors such as Powerwave. Many of our customers also continuously evaluate whether to manufacture their own components or whether to utilize contract manufacturers to produce their own internal designs. Some of our customers regularly produce or
design products in an attempt to replace products sold by us. We believe that this practice will continue. In the event that a customer manufactures or designs their own products, such customer could reduce or eliminate its purchase of our products,
which would result in reduced revenues and would adversely impact our business, financial condition and results of operations. Wireless infrastructure equipment manufacturers with internal manufacturing capabilities, including many of our customers,
could also sell such products externally to other manufacturers, thereby competing directly with us. One example of this is Alcatel-Lucent, which owns Radio Frequency Systems. If, for any reason, our customers decide to produce their products
internally, increase the percentage of their internal production, require us to participate in joint venture manufacturing with them or compete directly against us, our revenues would decrease which would adversely impact our business, financial
condition and results of operations.

We have experienced significant price competition as well as price erosion and we expect
price competition in the sale of our products to increase. Our competitors may develop new technologies or enhancements to existing products or introduce new products that will offer superior price or performance features. We expect our competitors
to offer new and existing products at prices necessary to gain or retain market share. Certain of our competitors have substantial financial resources which may enable them to withstand sustained price competition or a market downturn better than
us. In addition, many of our customers will continue to demand price reductions. If we cannot reduce the cost of our products or dissuade our customers from requiring price reductions, our business and results of operations may be adversely
impacted. There can be no assurance that we will be able to compete successfully in the pricing of our products in the future.

Backlog

Our twelve-month backlog of orders on January 3, 2010 was estimated at $76.7 million as
compared to approximately $73.9 million on December 28, 2008. In our reported backlog, we only include the accepted product purchase orders with respect to which a delivery schedule has been specified for product shipment within twelve months.
Because the majority of our customers do not place long lead time orders for our products, our backlog does not reflect our expectations of future orders and has not been indicative of our future revenue.

Product orders in our backlog frequently are subject to changes in delivery schedules or to cancellation at the option of the purchaser
without significant penalty. While we regularly review our backlog of orders to ensure that it adequately reflects product orders expected to be shipped within a twelve-month period, we cannot make any guarantee that such orders will actually be
shipped or that such orders will not be delayed or canceled in the future. We make regular adjustments to our backlog as customer delivery schedules change and in response to changes in our production schedule. Accordingly, we stress that backlog as
of any particular date should not be considered a reliable indicator of sales for any future period and our revenues in any given period may depend substantially on orders placed in that period.

Manufacturing and Suppliers

Our manufacturing process involves the assembly of numerous individual components and precise fine-tuning by production technicians. The parts and materials used by us and our contract manufacturers
consist primarily of printed circuit boards, specialized subassemblies, fabricated housings, relays and small electric circuit components, such as integrated circuits, semiconductors, resistors and capacitors.

We operate company-owned manufacturing locations and utilize contract manufacturers for a portion of our finished goods manufacturing
activities. We also rely extensively on contract manufacturers to supply printed circuit boards, which are key components of many of our products. We currently have manufacturing operations in China, Estonia, Thailand and the United States. In
addition, we utilize contract manufacturers to produce products or key components of products in Europe, Asia and the United States. During 2008, we closed our manufacturing facility in Salisbury, Maryland and transferred production activities to
Asia and to our location in Santa Ana, California. Beginning in the fourth quarter of 2008, we began to discontinue manufacturing operations in Finland, transferring the activities to Asia and to our contract manufacturing partners. This was
completed in 2009. During the second half of 2009, we added a new manufacturing facility in Thailand, which was fully operational in the fourth quarter of 2009. The new Thailand facility took over production that was previously done at a contract
manufacturer located in Thailand.



9



---

##### Table of Contents

Because of our reliance on contract manufacturers for product and certain components in the
products, our manufacturing, the cost, quality, performance and availability of our contract manufacturing operations are, and will continue to be, essential to the successful production and sale of our products. Any delays in the ramp-up of our
production lines at contract manufacturers, delays in obtaining production materials or any delays in the qualification by our customers of the contract manufacturer facilities and the products produced there, could cause us to miss customer agreed
product delivery dates. Similarly, the inability of our contract manufacturers to meet production schedules or produce products in accordance with the quality and performance standards established by us or our customers could also cause us to miss
customer agreed product delivery dates. In addition, the cost, quality, performance and availability at our company-operated manufacturing facilities is also essential to the successful production and sale of our products. Any delays in the ramp-up
of production lines at our plants, delays in obtaining production materials or any delays in the qualification by our customers of our facilities and the products produced there, could cause us to miss customer agreed product delivery dates. Any
failure to meet customer agreed delivery dates could result in lost revenues due to customer cancellations, potential financial penalties payable by us to our customers and additional costs to expedite products or production schedules.

Our manufacturing, production and design operations are ISO 9001, ISO 14001, TL-9000 and TickIT-5 certified. ISO refers to the quality
model developed by the International Organization for Standardization. TL refers to the set of quality system requirements that are specific to the telecommunications industry. TickIT refers to the set of quality standards that are specific to the
software industry. Numerous customers and potential customers throughout the world, particularly in Europe, require that their suppliers be ISO certified. In addition, many customers require that their suppliers purchase components only from
subcontractors that are ISO certified. We require that all of our contract manufacturers maintain ISO and/or TL certifications.

A number of the parts used in our products are available from only one, or a limited number of, outside suppliers due to unique component designs, as well as certain quality and performance requirements. To take advantage of volume pricing
discounts, we, along with our contract manufacturers, purchase certain customized components from single or limited sources. We have experienced, and expect to continue to experience, shortages of single-source and limited-source components.
Shortages have compelled us to adjust our product designs and production schedules and have caused us to miss customer requested delivery dates. If single-source or limited-source components are unavailable in sufficient quantities, are discontinued
or are available only on unsatisfactory terms, we would be required to purchase comparable components from other sources and re-tune our products to function with the replacement components. We may also be required to redesign our
products to use other components, either of which could delay production and delivery of our products. If production and delivery of our products are delayed and we are unable to meet the agreed upon delivery dates of our customers, these delays
could result in lost revenues due to customer cancellations, as well as potential financial penalties payable to our customers. Any such loss of revenue or financial penalties would have a material adverse effect on our financial condition and
results of operations.

Our reliance on certain single-source and limited-source components exposes us to quality control
issues if these suppliers experience a failure in their production process or otherwise fail to meet our quality requirements. A failure in single-source or limited-source components or products could force us to repair or replace a product
utilizing replacement components. If we cannot obtain comparable replacements or effectively re-tune or redesign our products, we could lose customer orders or incur additional costs, which could have a material adverse effect on our gross margins
and results of operations.

We believe that the production facilities that we utilize, including those owned by our contract
manufacturers, are in good condition, well maintained and not currently in need of any major investment.

Intellectual
Property

We rely upon trade secrets and patents to protect our intellectual property. We execute confidentiality and
non-disclosure agreements with our employees and suppliers and limit access to, and distribution of, our proprietary information. We have an on-going program to identify and file applications for both U.S. and foreign patents for various aspects of
our technology. We currently own 211 U.S. patents and 457 foreign patents, and we have pending applications for 83 additional U.S. patents and 395 additional foreign patents. All of these efforts, along with the knowledge and experience of our
management and technical personnel, strengthen our ability to market our existing products and to develop new products. The departure of any of our management or technical personnel, the breach of their confidentiality and non-disclosure obligations
to us, or the failure to achieve our intellectual property objectives may have a material adverse effect on our business, financial condition and results of operations.

We believe that our success depends upon the knowledge and experience of our management and technical personnel, our ability to market our existing products and our ability to develop new products. We do
not have non-compete agreements with our employees who generally are employed on an at-will basis. Therefore, employees have left and may continue to leave us and go to work for competitors. While we believe that we have adequately
protected our proprietary technology and



10



---

##### Table of Contents

taken all legal measures to protect it, we will continue to pursue all reasonable means available to protect it and to prohibit the unauthorized use of our proprietary technology. In spite of our
efforts, the use of our processes by a competitor could have a material adverse effect on our business, financial condition and results of operations.

Our ability to compete successfully and achieve future revenue growth will depend, in part, on our ability to protect our proprietary technology and operate without infringing upon the rights of others.
We may not be able to successfully protect our intellectual property, or our intellectual property or proprietary technology may otherwise become known or be independently developed by competitors. In addition, the laws of certain countries in which
our products are or may be sold or manufactured may not protect our products and intellectual property rights to the same extent as the laws of the United States.

The inability to protect our intellectual property and proprietary technology could have a material adverse effect on our business, financial condition and results of operations. We have received third
party claims of infringement in the past and have been able to resolve such claims without having a material impact on our business. As the number of patents, copyrights and other intellectual property rights in our industry increases, and as the
coverage of these rights and the functionality of the products in the market further overlap, we believe that we, along with other companies in our industry, may face more frequent infringement claims. Such litigation or claims of infringement could
result in substantial costs and diversion of resources and could have a material adverse effect on our business, financial condition and results of operations. A third-party claiming infringement may also be able to obtain an injunction or other
equitable relief, which could effectively block our ability or our customers ability to distribute, sell or import allegedly infringing products. If it appears necessary or desirable, we may seek licenses from third parties covering
intellectual property that we are allegedly infringing upon. No assurance can be given that any such licenses could be obtained on terms acceptable to us, if at all. The failure to obtain the necessary licenses or other rights could have a material
adverse effect on our business, financial condition and results of operations.

Employees

As of January 3, 2010, we had 2,256 full and part-time employees, including 1,126 in manufacturing, 258 in quality, 195 in supply chain,
397 in research and development, 110 in sales and marketing and 170 in general and administration. We believe that we have good relations with our employees.

Contract Personnel

We utilize contract personnel hired from
third-party agencies. As of January 3, 2010, we were utilizing approximately 765 contract personnel, primarily in our manufacturing operations.

How to Obtain Powerwave SEC Filings

All reports filed by Powerwave
with the SEC are available free of charge via EDGAR through the SEC website at www.sec.gov. In addition, the public may read and copy materials filed by the Company with the SEC at the SECs public reference room located at 100 F Street, N.E.,
Washington, D.C. 20549. Powerwave also provides copies of its Forms 8-K, 10-K, 10-Q, Proxy Statement and Annual Report at no charge to investors upon request and makes electronic copies of its most recently filed reports available through its
website at www.powerwave.com as soon as reasonably practicable after filing such material with the SEC.



11



---

##### Table of Contents

|ITEM 1A. | RISK FACTORS
|-------- | ------------

Our
business faces significant risks. The risks described below may not be the only risks we face. Additional risks that we do not yet know of or that we currently think are immaterial also may impair our business operations. If any of the events or
circumstances described in the following risks actually occur, our business, financial condition and results of operation could suffer, and the trading price of our Common Stock could decline, and you may lose all or a part of your investment.

Risks Related to the Business

We rely upon a few customers for the majority of our revenues and the loss of any one or more of these customers, or a significant loss, reduction or rescheduling of orders from any of these customers,
would have a material adverse effect on our business, financial condition and results of operations.

We sell most of our
products to a small number of customers, and while we are continually seeking to expand our customer base, we expect this will continue. For the fiscal year ended January 3, 2010, sales to Nokia Siemens accounted for approximately 34% of our
sales. Nokia Siemens accounted for approximately 31% of our revenues in 2008, and Alcatel-Lucent accounted for approximately 17% of our revenues in fiscal 2008. During fiscal 2009, our sales to Alcatel-Lucent declined below 10% of our revenues. Any
decline in business with our original equipment manufacturer customers, including Nokia Siemens and Alcatel-Lucent, will have an adverse impact on our business, financial condition and results of operations. For fiscal 2009, our total sales declined
by 36% compared with fiscal 2008. During this same period, our sales to Nokia Siemens declined approximately 30% which has had a negative impact on our business and results of operations. Our future success is dependent upon the continued purchases
of our products by a small number of customers such as Nokia Siemens, Alcatel-Lucent, other original equipment manufacturers and network operator customers. Any fluctuations in demand from such customers or other customers will negatively impact our
business, financial condition and results of operations. If we are unable to broaden our customer base and expand relationships with major wireless original equipment manufacturers and major operators of wireless networks, our business will continue
to be impacted by unanticipated demand fluctuations due to our dependence on a small number of customers. Unanticipated demand fluctuations can have a negative impact on our revenues and business, and an adverse effect on our business, financial
condition and results of operations. In addition, our dependence on a small number of major customers exposes us to numerous other risks, including:



| |  |  | a slowdown or delay in deployment of wireless networks by any one or more customers could significantly reduce demand for our products;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reductions in a single customers forecasts and demand could result in excess inventories;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | the current economic crisis could negatively affect one or more of our major customers and cause them to significantly reduce operations, or file for
bankruptcy;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | consolidation of customers can reduce demand as well as increase pricing pressure on our products due to increased purchasing leverage;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | each of our customers has significant purchasing leverage over us to require changes in sales terms including pricing, payment terms and product
delivery schedules;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | direct competition should a customer decide to increase its level of internal designing and/or manufacturing of wireless communication network
products; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | concentration of accounts receivable credit risk, which could have a material adverse effect on our liquidity and financial condition if one of our
major customers declared bankruptcy or delayed payment of their receivables.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our operating results have
been adversely impacted by the worldwide economic crisis and credit tightening.

Beginning in the fourth quarter of 2008,
worldwide economic conditions significantly deteriorated due to the credit crisis and other factors, including slower economic activity, recessionary concerns, increased energy costs, decreased consumer confidence, reduced corporate profits, reduced
or canceled capital spending, adverse business conditions and liquidity concerns. Our revenues declined approximately 21% in the fourth quarter of 2009 when compared to the fourth quarter of 2008. All of these factors combined are having a negative
impact on the availability of financial capital which is contributing to a reduction in demand for infrastructure in the wireless communication market. These conditions make it difficult for our customers and vendors to accurately forecast and plan
future business activities, causing domestic and foreign businesses to slow or suspend spending on our products and services. As customers face this challenging economic time, they are finding it difficult to gain sufficient credit in a timely
manner, which has resulted in an impairment of their ability to place orders with us or to make timely payments to us for previous purchases. If this continues to occur, our revenues will be further reduced, thereby having a negative impact on our
business, financial condition and results of



12



---

##### Table of Contents

operations. In addition, we may be forced to increase our allowance for doubtful accounts and our days of sales outstanding may increase significantly, which would have a negative impact on our
cash position, liquidity and financial condition. We cannot predict the magnitude, timing or duration of this economic recession or its impact on the wireless industry.

We have previously experienced significant reductions in demand for our products by certain customers and if this continues, our operating results will be adversely impacted.

We have a history of significant unanticipated reductions in demand that demonstrate the risks related to our customer and industry
concentration levels. While our revenues have increased at times during fiscal years 2005, 2006, 2007 and 2008, a significant portion of this increase was due to our various acquisitions. During fiscal year 2009, the global economic crisis and
related recession continued to have an impact on our customers and their demand for our products. We currently anticipate that our customers may continue to reduce their demand for wireless infrastructure products in the near term, thereby
negatively impacting all companies within our industry. This possible reduction in demand would have a negative impact on our business, financial condition and results of operations.

Also, in the past we have experienced significant unanticipated reductions in wireless network operator demand as well as significant delays
in demand for 3G and 4G, or next generation service based products, due to the high projected capital cost of building such networks and market concerns regarding the inoperability of such network protocols. In combination with these market issues,
a majority of wireless network operators have in the past regularly reduced their capital spending plans in order to improve their overall cash flow. There is a substantial likelihood that the global economic recession will continue throughout 2010
and potentially into 2011, thereby having a negative impact on network operator deployment spending plans. The impact of any future reduction in capital spending by wireless network operators, coupled with any delays in deployment of wireless
networks, will result in reduced demand for our products, which will have a material adverse effect on our business.

We
will need additional capital in the future and such additional financing may not be available on favorable terms or at all.

As of January 3, 2010, we had approximately $63.0 million of cash, with $2.6 million of it restricted. We cannot provide any guarantee that we will generate sufficient cash in the future to maintain or grow our operations over the
long-term. We rely upon our ability to generate positive cash flow from operations to fund our business. If we are not able to generate positive cash flow from operations, we may need to utilize sources of financing such as our Credit Agreement or
other sources of cash. While our Credit Agreement provides us with additional sources of liquidity, we may need to raise additional funds through public or private debt or equity financings in order to fund existing operations or to take advantage
of opportunities, including more rapid international expansion or acquisitions of complementary businesses or technologies. In addition, if our business further deteriorates, we might be unable to maintain compliance with the covenants in our Credit
Agreement which could result in reduced availability under the Credit Agreement or an event of default under the Credit Agreement, or could make the Credit Agreement unavailable to us. If we are not successful in growing our businesses, reducing our
inventories and accounts receivable and managing the worldwide aspects of our Company, our operations may not generate positive cash flow, and we may consume our cash resources faster than we anticipate. Such losses would make it difficult to obtain
new sources of financing. In addition, if we do not generate sufficient cash flow from operations, we may need to raise additional funds to repay our $280.9 million of remaining outstanding convertible subordinated debt that we issued in 2004 and
2007. The holders of this convertible subordinated debt may require us to repurchase $130.9 million in outstanding debt issued in 2004 on November 15, 2011 and $150.0 million in outstanding debt issued in 2007 on October 1, 2014. Our
ability to secure additional financing or sources of funding is dependent upon numerous factors, including the current outlook of our business, our credit rating and the market price of our Common Stock, all of which are directly impacted by our
ability to increase revenues and generate profits. In addition, the availability of new financing is dependent upon functioning debt and equity markets with financing available on reasonable terms. Given the recent credit crisis, there can be no
guarantee that such a market would be available to us. If such a market is not available, we may be unable to raise new financing, which would negatively impact our business and possibly impact our ability to maintain operations as presently
conducted.

Our ability to increase revenues and generate profits is subject to numerous risks and uncertainties including the
likelihood of decreased revenues in the current macroeconomic environment. Any significant decrease in our revenues or profitability could reduce our operating cash flows and erode our existing cash balances. Our ability to reduce our inventories
and accounts receivable and improve our cash flow is dependent on numerous risks and uncertainties, and if we are not able to reduce our inventories, we will not generate the cash required to operate our business. Our ability to secure additional
financing is also dependent upon not only our business profitability, but also the credit markets, which have recently become highly constrained due to credit concerns arising from the subprime mortgage lending market and subsequent worldwide
economic recession. If we are unable to secure additional financing or such financing is not available on acceptable terms, we may not be able to fund our operations, otherwise respond to unanticipated competitive pressures, or repay our convertible
debt.



13



---

##### Table of Contents

We may be adversely affected by the bankruptcy of our customers.

One of our original equipment manufacturer customers, Nortel, filed for bankruptcy protection in the first quarter of 2009, and in the third
quarter of 2009, they received government approval of the sale of their assets. Given the current economic climate, it is possible that one or more of our other customers will suffer significant financial difficulties, including potentially filing
for bankruptcy protection. In such an event, the demand for our products from these customers may decline significantly or cease completely. We cannot guarantee that we will be able to continue to generate new demand to offset any such reductions
from existing customers. If we are unable to continue to generate new demand, our revenues will decrease and our business, financial condition and results of operations will be negatively impacted.

We may not successfully evaluate the creditworthiness of our customers. While we maintain allowances for doubtful accounts for estimated
losses resulting from the inability of our customers to make required payments, greater than anticipated nonpayment and delinquency rates could harm our financial results and liquidity. Given the current global economic recession, there are
potential risks of greater than anticipated customer defaults. If the financial condition of any of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances would be required and would
negatively impact our business, financial condition and results of operations.

We may incur unanticipated costs as we
complete the restructuring of our business.

We have previously encountered difficulties and delays in integrating and
consolidating operations which have had a negative impact on our business, financial condition and results of operations. The failure to successfully integrate these operations could undermine the anticipated benefits and synergies of the
restructuring, which could adversely affect our business, financial condition and results of operations. The anticipated benefits and synergies of our restructurings relate to cost savings associated with operational efficiencies and greater
economies of scale. However, these anticipated benefits and synergies are based on projections and assumptions, not actual experience, and assume a smooth and successful integration of our business.

We may need to undertake restructuring actions in the future.

We have previously recognized restructuring charges in response to slowdowns in demand for our products and in conjunction with cost cutting
measures and measures to improve the efficiency of our operations. As a result of economic conditions, we may need to initiate additional restructuring actions that could result in restructuring charges that could have a material impact on our
business, financial condition and results of operations. Such potential restructuring actions could include cash expenditures that would reduce our available cash balances, which would have a negative impact on our business.

The potential for increased commodity and energy costs may adversely affect our business, financial condition and results of operations.

The world economy has experienced significant fluctuations in the price of oil and energy during 2008 and 2009. Such
fluctuations resulted in significant price increases which translated into higher freight and transportation costs and, in certain cases, higher raw material supply costs. These higher costs negatively impacted our production costs. We were not able
to pass on these higher costs to our customers, and if we insist on raising prices, our customers may curtail their purchases from us. The costs of energy and items directly related to the cost of energy will fluctuate due to factors that may not be
predictable, such as the economy, political conditions and the weather. Further increases in energy prices or the onset of inflationary pressures could negatively impact our business, financial condition and results of operations.

We have experienced, and will continue to experience, significant fluctuations in sales and operating results from quarter to quarter.

Our quarterly results fluctuate due to a number of factors, including:



| |  |  | the lack of obligation by our customers to purchase their forecasted demand for our products;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | costs associated with restructuring activities, including severance, inventory obsolescence and facility closure costs;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | variations in the timing, cancellation, or rescheduling of customer orders and shipments;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | costs associated with consolidating acquisitions;
| | - |  | -------------------------------------------------



| |  |  | high fixed expenses that increase operating expenses, especially during a quarter with a sales shortfall;
| | - |  | ---------------------------------------------------------------------------------------------------------



14



---

##### Table of Contents

| |  |  | product failures and associated warranty and in-field service support costs; and
| | - |  | --------------------------------------------------------------------------------



| |  |  | discounts given to certain customers for large volume purchases.
| | - |  | ----------------------------------------------------------------

We have regularly generated a large percentage of our revenues in the last month of a quarter. Because we attempt to ship products quickly
after we receive orders, we may not always have a significant backlog of unfilled orders at the start of each quarter and we may be required to book a substantial portion of our orders during the quarter in which these orders ship. Our major
customers generally have no obligation to purchase forecasted amounts and may cancel orders, change delivery schedules or change the mix of products ordered with minimal notice and without penalty. As a result, we may not be able to accurately
predict our quarterly sales. Because our expense levels are partially based on our expectations of future sales, our expenses may be disproportionately large relative to our revenues, and we may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall. Any shortfall in sales relative to our quarterly expectations or any delay of customer orders would adversely affect our business, financial condition and results of operations.

Order deferrals and cancellations by our customers, declining average sales prices, changes in the mix of products sold, delays in the
introduction of new products and longer than anticipated sales cycles for our products have adversely affected our business, financial condition and results of operations in the past. Despite these factors, we, along with our contract manufacturers,
maintain significant finished goods, work-in-progress and raw materials inventory to meet estimated order forecasts. If our customers purchase less than their forecasted orders or cancel or delay existing purchase orders, there will be higher levels
of inventory that face a greater risk of obsolescence. If our customers choose to purchase products in excess of the forecasted amounts or in a different product mix, there might be inadequate inventory or manufacturing capacity to fill their
orders.

Due to these and other factors, our past results are not reliable indicators of our future performance. Future
revenues and operating results may not meet the expectations of market analysts or investors. In either case, the price of our Common Stock could be materially adversely affected.

Our average sales prices have declined, and we anticipate that the average sales prices for our products will continue to decline and
negatively impact our gross profit margins.

Wireless service providers are continuing to place pricing pressure on
wireless infrastructure manufacturers, which in turn, has resulted in lower selling prices for our products, with certain competitors aggressively reducing prices in an effort to increase their market share. The consolidation of original equipment
manufacturers such as Alcatel-Lucent and Nokia Siemens is concentrating purchasing power at the surviving entities, placing further pricing pressures on the products we sell to such customers. Moreover, the current economic downturn has caused
wireless service providers to become more aggressive in demanding price reductions as they attempt to reduce costs. As a result, we are forced to further reduce our prices to such customers, which has had a negative impact on our business, financial
condition and results of operations. If we do not agree to lower our prices as some customers request, those customers may stop purchasing our products, which would significantly impact our business. We believe that the average sales prices of our
products will continue to decline for the foreseeable future. The weighted average sales price for our products declined approximately 2% to 11% from fiscal 2008 to fiscal 2009 and we expect that this will continue going forward. Since wireless
infrastructure manufacturers frequently negotiate supply arrangements far in advance of delivery dates, we must often commit to price reductions for our products before we know how, or if, we can obtain such cost reductions. With ongoing
consolidation in our industry, the increased size of many of our customers allows them to exert greater pressure on us to reduce prices. In addition, average sales prices are affected by price discounts negotiated without firm orders for large
volume purchases by certain customers. To offset declining average sales prices, we must reduce manufacturing costs and ultimately develop new products with lower costs or higher average sales prices. If we cannot achieve such cost reductions or
increases in average selling prices, our gross margins will decline.

Our suppliers, contract manufacturers or customers
could become competitors.

Many of our customers, particularly our original equipment manufacturer customers, internally
design and/or manufacture their own wireless communications network products. These customers also continuously evaluate whether to manufacture their own wireless communications network products or utilize contract manufacturers to produce their own
internal designs. Certain of our customers regularly produce or design wireless communications network products in an attempt to replace products manufactured by us. In addition, some customers threaten to undertake such activities if we do not
agree to their requested price reductions. We believe that these practices will continue. In the event that our customers manufacture or design their own wireless communications network products, these customers might reduce or eliminate their
purchases of our products, which would result in reduced revenues and would adversely impact our business, financial condition and results of operations. Wireless infrastructure equipment manufacturers with internal manufacturing capabilities,
including many of our customers, could also sell wireless communications network products externally to other manufacturers, thereby competing directly with us. In addition, our suppliers or contract manufacturers may decide to



15



---

##### Table of Contents

produce competing products directly for our customers and, effectively, compete against us. If, for any reason, our customers produce their wireless communications network products internally,
increase the percentage of their internal production, require us to participate in joint venture manufacturing with them, require us to reduce our prices, engage our suppliers or contract manufacturers to manufacture competing products, or otherwise
compete directly against us, our revenues would decrease, which would adversely impact our business, financial condition and results of operations.

Our success is tied to the growth of the wireless services communications market and our future revenue growth is dependent upon the expected increase in the size of this market.

Our revenues come from the sale of wireless communications network products and coverage solutions. Our future success depends solely upon
the growth and increased availability of wireless communications services. Wireless communications services may not grow at a rate fast enough to create demand for our products, as we have experienced periodically throughout the past six years. Some
of our network operator customers rely on credit to finance the build-out or expansion of their wireless networks. The current credit environment and the worldwide economic recession resulted in lower revenues in fiscal 2009 and will likely result
in a reduction of demand from some of our customers in the near term. Another example of unanticipated reductions was during fiscal 2006 and into fiscal 2007, when a major North American wireless network operator significantly reduced demand for new
products. In addition, during the same period, several major equipment manufacturers began a process of consolidating their operations, which significantly reduced their demand for our products. This reduced spending on wireless networks had a
negative impact on our operating results. If wireless network operators delay or reduce levels of capital spending, our business, financial condition and results of operations would be negatively impacted.

Our reliance on contract manufacturers exposes us to risks of excess inventory or inventory carrying costs.

We use contract manufacturers to produce printed circuit boards for our products, and in certain cases, to manufacture finished products. If
our contract manufacturers are unable to respond in a timely fashion to changes in customer demand, we may be unable to produce enough products to respond to sudden increases in demand, resulting in lost revenues. Alternatively, in the case of order
cancellations or decreases in demand, we may be liable for excess or obsolete inventory or cancellation charges resulting from contractual purchase commitments that we have with our contract manufacturers. We regularly provide rolling forecasts of
our requirements to our contract manufacturers for planning purposes, pursuant to our agreements, a portion of which is binding upon us. Additionally, we are committed to accept delivery on the forecasted terms for a portion of the rolling forecast.
Cancellations of orders or changes to the forecasts provided to any of our contract manufacturers may result in cancellation costs payable by us. In the past, we have been required to take delivery of materials from our suppliers and subcontractors
that were in excess of our requirements, and we have previously recognized charges and expenses related to such excess material. We expect that we will incur such costs in the future.

By using contract manufacturers, our ability to directly control the use of all inventories is reduced since we do not have full operating
control over their operations. If we are unable to accurately forecast demand for our contract manufacturers and manage the costs associated with our contract manufacturers, we may be required to purchase excess inventory and incur additional
inventory carrying costs. If we or our contract manufacturers are unable to utilize such excess inventory in a timely manner, and are unable to sell excess components or products due to their customized nature, our business, financial condition and
results of operations would be negatively impacted.

Future additions to, or consolidations of manufacturing operations may
present risks, and we may be unable to achieve the financial and strategic goals associated with such actions.

We have
previously added new manufacturing locations, as well as consolidated existing manufacturing locations in an attempt to achieve operating cost savings and improved operating results. We continually evaluate these types of opportunities. We may
acquire or invest in new locations, or we may consolidate existing locations into either existing or new locations in order to reduce our manufacturing costs. In the second half of 2009, we established a new manufacturing location in Thailand. Such
activities subject us to numerous risks and uncertainties, including the following:



| |  |  | difficulty integrating the new locations into our existing operations;
| | - |  | ----------------------------------------------------------------------



| |  |  | difficulty consolidating existing locations into one location;
| | - |  | --------------------------------------------------------------



| |  |  | inability to achieve the anticipated financial and strategic benefits of the specific new location or consolidation;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | significant unanticipated additional costs incurred to start up a new manufacturing location;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | inability to attract key technical and managerial personnel to a new location;
| | - |  | ------------------------------------------------------------------------------



| |  |  | inability to retain key technical and managerial personnel due to the consolidation of locations to a new location;
| | - |  | -------------------------------------------------------------------------------------------------------------------



16



---

##### Table of Contents

| |  |  | diversion of our managements attention from other business issues;
| | - |  | -------------------------------------------------------------------



| |  |  | failure of our review and approval process to identify significant issues, including issues related to manpower, raw material supplies, legal and
financial contingencies.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If we are unable to manage these risks effectively as part of any investment in a
new manufacturing location or consolidation of locations, our business would be adversely affected.

Future acquisitions,
or strategic alliances, may present risks, and we may be unable to achieve the financial and strategic goals intended at the time of any acquisition or strategic alliance.

In the past, we have acquired and made investments in other companies, products and technologies and entered into strategic alliances with
other companies. We continually evaluate these types of opportunities. We may acquire or invest in other companies, products or technologies, or we may enter into joint ventures, mergers or strategic alliances with other companies. Such transactions
subject us to numerous risks, including the following:



| |  |  | difficulty integrating the operations, technology and personnel of the acquired company;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | inability to achieve the anticipated financial and strategic benefits of the specific acquisition or strategic alliance;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | significant additional warranty costs due to product failures and or design differences that were not identified during due diligence, which could
result in charges to earnings if they are not recoverable from the seller;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | inability to retain key technical and managerial personnel from the acquired company;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | difficulty in maintaining controls, procedures and policies during the transition and integration process;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | diversion of our managements attention from other business concerns;
| | - |  | ---------------------------------------------------------------------



| |  |  | failure of our due diligence process to identify significant issues, including issues with respect to product quality, product architecture, legal and
financial contingencies, and product development; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | significant exit charges if products acquired in business combinations are unsuccessful.
| | - |  | ----------------------------------------------------------------------------------------

If we are unable to manage these risks effectively as part of any acquisition or joint venture, our business would be adversely affected.

We depend on single sources or limited sources for key components and products, which exposes us to risks related to
product shortages or delays, as well as potential product quality issues, all of which could increase the cost of our products thereby reducing our operating profits.

A number of our products and the parts used in our products are available from only one or a limited number of outside suppliers due to unique component designs, as well as certain quality and performance
requirements. To take advantage of volume pricing discounts, we also purchase certain products, and along with our contract manufacturers, purchase certain customized components from single or limited sources. We have experienced, and expect to
continue to experience, shortages of single-source and limited-source components. Shortages have compelled us to adjust our product designs and production schedules and have caused us to miss customer requested delivery dates. To date, missed
customer delivery dates have not had a material adverse impact on our financial results. If single-source or limited-source components become unavailable in sufficient quantities in the desired time periods, are discontinued or are available only on
unsatisfactory terms, we would be required to purchase comparable components from other sources and may be required to redesign our products to use such components which could delay production and delivery of our products. If production and delivery
of our products are delayed such that we do not meet the agreed upon delivery dates of our customers, such delays could result in lost revenues due to customer cancellations, as well as potential financial penalties payable to our customers. Any
such loss of revenue or financial penalties could have a material adverse effect on our business, financial condition and results of operations.

Our reliance on certain single-source and limited-source components and products also exposes us and our contract manufacturers to quality control risks if these suppliers experience a failure in their
production process or otherwise fail to meet our quality requirements. A failure in a single-source or limited-source component or product could force us to repair or replace a product utilizing replacement components. If we cannot obtain comparable
replacements or redesign our products, we could lose customer orders or incur additional costs, which would have a material adverse effect on our business, financial condition and results of operations.

We may fail to develop products that are sufficiently manufacturable, which could negatively impact our ability to sell our products.

Manufacturing our products is a complex process that requires significant time and expertise to meet customers
specifications. Successful manufacturing is substantially dependent upon the ability to assemble and tune these products to meet specifications in an efficient manner. In this regard, we largely depend on our staff of assembly workers and trained
technicians at our internal manufacturing operations in the United States, Europe and Asia, as well as our contract



17



---

##### Table of Contents

manufacturers staff of assembly workers and trained technicians. If we cannot design our products to minimize the manual assembly and tuning process, or if we or our contract manufacturers
lose a number of trained assembly workers and technicians or are unable to attract additional trained assembly workers or technicians, we may be unable to have our products manufactured in a cost effective manner.

We may fail to develop products that are of adequate quality and reliability, which could negatively impact our ability to sell our
products.

We have had quality problems with our products including those we have acquired in acquisitions. We may have
similar product quality problems in the future. We have replaced components in some products and replaced entire products in accordance with our product warranties. We believe that our customers will demand that our products meet increasingly
stringent performance and reliability standards. If we cannot keep pace with technological developments, evolving industry standards and new communications protocols, if we fail to adequately improve product quality and meet the quality standards of
our customers, or if our contract manufacturers fail to achieve the quality standards of our customers, we risk losing business which would negatively impact our business, financial condition and results of operations. Design problems could also
damage relationships with existing and prospective customers and could limit our ability to market our products to large wireless infrastructure manufacturers, many of which build their own products and have stringent quality control standards. In
addition, we have incurred significant costs addressing quality issues from products that we have acquired in certain of our acquisitions. We are also required to honor certain warranty claims for products that we have acquired in our recent
acquisitions. While we seek recovery of amounts that we have paid, or may pay in the future to resolve warranty claims through indemnification from the original manufacturer, this can be a costly and time consuming process.

If we are unable to hire and retain highly-qualified technical and managerial personnel, we may not be able to sustain or grow our
business.

Competition for personnel, particularly qualified engineers, is intense. The loss of a significant number of
qualified engineers, as well as the failure to recruit and train additional technical personnel in a timely manner, could have a material adverse effect on our business, financial condition and results of operations. The departure of any of our
management and technical personnel, the breach of their confidentiality and non-disclosure obligations to us or the failure to achieve our intellectual property objectives may also have a material adverse effect on our business.

We believe that our success depends upon the knowledge and experience of our management and technical personnel and our ability to market
our existing products and to develop new products. Our employees are generally employed on an at- will basis and do not have non-compete agreements. Therefore, we have had, and may continue to have, employees leave us and go to work for competitors.

There are significant risks related to our internal and contract manufacturing operations in Asia and Europe.

As part of our manufacturing strategy, we utilize contract manufacturers to make finished goods and supply printed
circuit boards in China, Europe, India, Singapore and Thailand. We also maintain our own manufacturing operations in China, Estonia, the United States and our newly established manufacturing facility in Thailand.

The Chinese legal system lacks transparency, which gives the Chinese central and local government authorities a higher degree of control
over our business in China than is customary in the United States which makes the process of obtaining necessary regulatory approval in China inherently unpredictable. In addition, the protection accorded our proprietary technology and know-how
under the Chinese and Thai legal systems is not as strong as in the United States and, as a result, we may lose valuable trade secrets and competitive advantage. Also, manufacturing our products and utilizing contract manufacturers, as well as other
suppliers throughout the Asia region, exposes our business to the risk that our proprietary technology and ownership rights may not be protected or enforced to the extent that they may be in the United States.

Although the Chinese government has been pursuing economic reform and a policy of welcoming foreign investments during the past two decades,
it is possible that the Chinese government will change its current policies in the future, making continued business operations in China difficult or unprofitable.

In September 2006, Thailand experienced a military coup which overturned the existing government. In late 2008, anti-government protests and civilian occupations culminated with a court-ordered ouster of
Thailands prime minister. In 2009, continued unrest has impacted the government of Thailand, and potential civil unrest may continue. To date, this has not had a long-term impact on our operations in Thailand. If there are future coups or some
other type of political unrest, such activity may impact the ability to manufacture products in this region and may prevent shipments from entering or leaving the country. Any such disruptions could have a material negative impact on our business,
financial condition and results of operations.



18



---

##### Table of Contents

We require air or ocean transport to deliver products built in our various manufacturing
locations to our customers. High energy costs have increased our transportation costs which has had a negative impact on our production costs. Transportation costs would also escalate if there were a shortage of air or ocean cargo space and any
significant increase in transportation costs would cause an increase in our expenses and negatively impact our business, financial condition and results of operations. In addition, if we are unable to obtain cargo space or secure delivery of
components or products due to labor strikes, lockouts, work slowdowns or work stoppages by longshoremen, dock workers, airline pilots or other transportation industry workers, our delivery of products could be delayed.

The initial sales cycle associated with our products is typically lengthy, often lasting from nine to eighteen months, which could cause
delays in forecasted sales and cause us to incur substantial expenses before we record any associated revenues.

Our
customers normally conduct significant technical evaluations, trials and qualifications of our products before making purchase commitments. This qualification process involves a significant investment of time and resources from both our customers
and us in order to ensure that our product designs are fully qualified to perform as required. The qualification and evaluation process, as well as customer field trials, may take longer than initially forecasted, thereby delaying the shipment of
sales forecasted for a specific customer for a particular quarter and causing our operating results for the quarter to be less than originally forecasted. Such a sales shortfall would reduce our profitability and negatively impact our business,
financial condition and results of operations.

We conduct a significant portion of our business internationally, which
exposes us to increased business risks.

For fiscal years 2009, 2008 and 2007, international revenues (excluding North
American sales) accounted for approximately 73%, 70% and 73% of our net sales, respectively. There are many risks that currently impact, and will continue to impact, our international business and multinational operations, including the following:



| |  |  | compliance with multiple and potentially conflicting regulations in Europe, Asia and North and South America, including export requirements, tariffs,
import duties and other trade barriers, as well as health and safety requirements;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | potential labor strikes, lockouts, work slowdowns and work stoppages at U.S. and international ports;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | differences in intellectual property protections throughout the world;
| | - |  | ----------------------------------------------------------------------



| |  |  | difficulties in staffing and managing foreign operations in Europe, Asia and South America, including relations with unionized labor pools in Europe
and in Asia;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | longer accounts receivable collection cycles in Europe, Asia and South America;
| | - |  | -------------------------------------------------------------------------------



| |  |  | currency fluctuations and resulting losses on currency translations;
| | - |  | --------------------------------------------------------------------



| |  |  | terrorist attacks on American companies;
| | - |  | ----------------------------------------



| |  |  | economic instability, including inflation and interest rate fluctuations, such as those previously seen in South Korea and Brazil;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | competition for foreign-based suppliers throughout the world;
| | - |  | -------------------------------------------------------------



| |  |  | overlapping or differing tax structures;
| | - |  | ----------------------------------------



| |  |  | the complexity of global tax and transfer pricing rules and regulations and our potential inability to benefit/offset losses in one tax jurisdiction
with income from another;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | cultural and language differences between the United States and the rest of the world; and
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | political or civil turmoil.
| | - |  | ---------------------------

Any failure on our part to manage these risks effectively would seriously reduce our competitiveness in the wireless infrastructure marketplace.

Protection of our intellectual property is limited.

We rely upon trade secrets and patents to protect our intellectual property. We execute confidentiality and non-disclosure agreements with certain employees and our suppliers, as well as limit access to
and distribution of our proprietary information. We have an ongoing program to identify and file applications for U.S. and other international patents.



19



---

##### Table of Contents

The departure of any of our management and technical personnel, the breach of their
confidentiality and non-disclosure obligations to us, or the failure to achieve our intellectual property objectives could have a material adverse effect on our business, financial condition and results of operations. We do not have non-compete
agreements with our employees who are generally employed on an at-will basis. Therefore, we have had, and may continue to have, employees leave us and go to work for competitors. If we are not successful in prohibiting the unauthorized use of our
proprietary technology or the use of our processes by a competitor, our competitive advantage may be significantly reduced which would result in reduced revenues.

We are at risk of third-party claims of infringement that could harm our competitive position.

We have received third-party claims of infringement in the past and have been able to resolve such claims without having a material impact on our business. As the number of patents, copyrights and other
intellectual property rights in our industry increases, and as the coverage of these rights and the functionality of the products in the market further overlap, we believe that we may face additional infringement claims. These claims, whether valid
or not, could result in substantial cost and diversion of our resources. A third-party claiming infringement may also obtain an injunction or other equitable relief, which could effectively block the distribution or sale of allegedly infringing
products, which would adversely affect our customer relationships and negatively impact our revenues.

The communications
industry is heavily regulated. We must obtain regulatory approvals to manufacture and sell our products, and our customers must obtain approvals to operate our products. Any failure or delay by us or any of our customers to obtain these approvals
could negatively impact our ability to sell our products.

Various governmental agencies have adopted regulations that
impose stringent radio frequency emissions standards on the communications industry. Future regulations may require that we alter the manner in which radio signals are transmitted or otherwise alter the equipment transmitting such signals. The
enactment by governments of new laws or regulations or a change in the interpretation of existing regulations could negatively impact the market for our products.

The increasing demand for wireless communications has exerted pressure on regulatory bodies worldwide to adopt new standards for such products, generally following extensive investigation and deliberation
over competing technologies. The delays inherent in this type of governmental approval process have caused, and may continue to cause, the cancellation, postponement or rescheduling of the installation of communications systems by our customers.
These types of unanticipated delays would result in delayed or canceled customer orders.

We are subject to numerous
governmental regulations concerning the manufacturing and use of our products. We must stay in compliance with all such regulations and any future regulations. Any failure to comply with such regulations, and the unanticipated costs of complying
with future regulations, may adversely affect our business, financial condition and results of operations.

We manufacture
and sell products which contain electronic components, and as such components may contain materials that are subject to government regulation in both the locations that we manufacture and assemble our products, as well as the locations where we sell
our products. An example of a regulated material is the use of lead in electronic components. We maintain compliance with all current government regulations concerning the materials utilized in our products, for all the locations in which we
operate. Since we operate on a global basis, this is a complex process which requires continual monitoring of regulations and an ongoing compliance process to ensure that we and our suppliers are in compliance with all existing regulations. There
are areas where future regulations may be enacted which could increase our cost of the components that we utilize. While we do not currently know of any proposed regulation regarding components in our products, which would have a material impact on
our business, if there is an unanticipated new regulation which significantly impacts our use of various components or requires more expensive components, that would have a material adverse impact on our business, financial condition and results of
operations.

Our manufacturing process is also subject to numerous governmental regulations, which cover both the use of
various materials as well as environmental concerns. We maintain compliance with all current government regulations concerning our production processes, for all locations in which we operate. Since we operate on a global basis, this is also a
complex process which requires continual monitoring of regulations and an ongoing compliance process to ensure that we and our suppliers are in compliance with all existing regulations. There are areas where future regulations may be enacted which
could increase our cost of manufacture. One area which has a large number of potential changes in regulations is the environmental area. Environmental areas such as pollution and climate change have had significant legislative and regulatory efforts
on a global basis, and there are expected to be additional changes to the regulations in these areas. These changes could directly increase the cost of energy which may have an impact on the way we manufacture products or utilize energy to produce
our products. In addition, any new regulations or laws in the environmental area might increase the cost of raw materials we use in our products. While future changes in regulations appears likely, we are currently unable to predict how any such
changes will impact us and if such impacts will be material to our business. If there is a new law or regulation that significantly increases our costs of manufacturing or causes us to significantly alter the way that we manufacture our products,
this would have a material adverse affect on our business, financial condition and results of operations.

The wireless
communications infrastructure equipment industry is extremely competitive and is characterized by rapid technological change, frequent new product development, rapid product obsolescence, evolving industry standards and significant price erosion
over the life of a product. If we are unable to compete effectively, our business, financial condition and results of operations would be adversely affected.

Our products compete on the basis of the following characteristics:



| |  |  | performance;
| | - |  | ------------



| |  |  | functionality;
| | - |  | --------------



| |  |  | reliability;
| | - |  | ------------



| |  |  | pricing;
| | - |  | --------



| |  |  | quality;
| | - |  | --------



| |  |  | designs that can be efficiently manufactured in large volumes;
| | - |  | --------------------------------------------------------------



| |  |  | time-to-market delivery capabilities; and
| | - |  | -----------------------------------------



| |  |  | compliance with industry standards.
| | - |  | -----------------------------------

If we fail to address the above factors, there could be a material adverse effect on our business, financial condition and results of operations.

Our current competitors include ADC Telecommunications, Inc., CommScope, Inc., Fujitsu Limited, Hitachi Kokusai Electric Inc., Japan Radio
Co., Ltd., Kathrein-Werke KG, Mitsubishi Electric Corporation, and Radio Frequency Systems, in addition to a number of privately-held companies throughout the world, subsidiaries of certain multinational corporations and the internal manufacturing
operations and design groups of the leading wireless infrastructure manufacturers such as Alcatel-Lucent, Ericsson, Huawei, Motorola, Nokia Siemens and Samsung. Some competitors have adopted aggressive pricing strategies in an attempt to gain market
share, which in turn, has caused us to lower our prices in order to remain competitive. Such pricing actions have had an adverse effect on our business, financial condition and results of operations. In addition, some competitors have significantly
greater financial, technical, manufacturing, sales, marketing and other resources than we



20



---

##### Table of Contents

do and have achieved greater name recognition for their products and technologies than we have. If we are unable to successfully increase our market penetration or our overall share of the
wireless communications infrastructure equipment market, our revenues will decline, which would negatively impact our business, financial condition and results of operations.

Our failure to enhance our existing products or to develop and introduce new products that meet changing customer requirements and
evolving technological standards could have a negative impact on our ability to sell our products.

To succeed, we must
improve current products and develop and introduce new products that are competitive in terms of price, performance and quality. These products must adequately address the requirements of wireless infrastructure manufacturing customers and
end-users. To develop new products, we invest in the research and development of wireless communications network products and coverage solutions. We target our research and development efforts on major wireless network deployments worldwide, which
cover a broad range of frequency and transmission protocols. In addition, we are currently working on products for next generation networks, as well as development projects for products requested by our customers and improvements to our existing
products. The deployment of a wireless network may be delayed which could result in the failure of a particular research or development effort to generate a revenue producing product. Additionally, the new products we develop may not achieve market
acceptance or may not be able to be manufactured cost effectively in sufficient volumes. Our research and development efforts are generally funded internally and our customers do not normally pay for our research and development efforts. These costs
are expensed as incurred. Therefore, if our efforts are not successful at creating or improving products that are purchased by our customers, there will be a negative impact on our business, financial condition and results of operations due to high
research and development expenses.

Our business depends on effective information management systems.

We rely on our enterprise resource planning (ERP) systems to support critical business operations such as invoicing and processing sales
orders, inventory control, purchasing and supply chain management, human resources and financial reporting. We periodically implement upgrades to the ERP systems or migrate one or more of our affiliates, facilities or operations from one system to
another. If we are unable to adequately maintain these systems to support our developing business requirements or effectively manage any upgrade or migration, we could encounter difficulties that could have a material adverse impact on our business,
financial condition and results of operations.

We may experience significant variability in our quarterly and annual
effective tax rate.

Variability in the mix and profitability of domestic and international activities, repatriation of
earnings from foreign affiliates, identification and resolution of various tax uncertainties and the inability to realize net operating losses and other carry-forwards included in deferred tax assets, among other matters, may significantly impact
our effective income tax rate in the future. A significant increase in our effective income tax rate could have a material adverse impact on our business, financial condition and results of operations.

Our business is subject to the risks of earthquakes and other natural catastrophic events, and to interruptions by man-made problems such
as computer viruses or terrorism.

Our corporate headquarters and a large portion of our U.S.-based research and
development operations are located in the State of California in regions known for seismic activity. In addition, we have production facilities and have outsourced some of our production to contract manufacturers in Asia, another region known for
seismic activity. A significant natural disaster, such as an earthquake in either of these regions, could have a material adverse effect on our business, financial condition and results of operations. In addition, despite our implementation of
network security measures, our servers are vulnerable to computer viruses, break-ins, and similar disruptions from unauthorized tampering with our computer systems. Any such event could have a material adverse effect on our business, financial
condition and results of operations.



21



---

##### Table of Contents

At times over the past year, our stock price has not met the minimum bid price for
continued listing on the NASDAQ Global Select Market. Our ability to publicly or privately sell equity securities and the liquidity of our Common Stock could be adversely affected if we are delisted from the NASDAQ Global Select Market or if we are
unable to transfer our listing to another stock market.

The bid price for our Common Stock on the NASDAQ Global Select
Market was below $1.00 for a significant period of time during fiscal 2009. The NASDAQ Marketplace Rules provide that one of the continuing listing requirements for an issuers common stock is having a minimum bid price of $1.00 per
share. Due to the current economic crisis, NASDAQ announced a moratorium on the enforcement of this minimum bid requirement. However, this moratorium was rescinded on July 31, 2009, and NASDAQ has not indicated an intention to
reinstate the moratorium. We cannot control whether NASDAQ will reinstate the moratorium again in the future or whether NASDAQ will make any other concessions to allow issuers to avoid potential delisting. Accordingly, if the bid price of
our Common Stock does not stay above $1.00 per share, we risk being delisted from the NASDAQ Global Select Market.

If
our Common Stock is delisted by NASDAQ, our Common Stock may be eligible to trade on the OTC Bulletin Board maintained by NASDAQ, another over-the-counter quotation system, or on the pink sheets. Each of these alternatives will likely result in it
being more difficult for investors to dispose of, or obtain accurate quotations as to the market value of our Common Stock. In addition, there can be no assurance that our Common Stock will be eligible for trading on any of such alternative
exchanges or markets.

In addition, delisting from NASDAQ could adversely affect our ability to raise additional capital
through the public or private sale of equity securities. Delisting from NASDAQ also would make trading our Common Stock more difficult for investors, potentially leading to further declines in our share price and inhibiting a stockholders
ability to liquidate all or part of their investment in Powerwave.

The price of our Common Stock has been, and may
continue to be, volatile and our shareholders may not be able to resell shares of our Common Stock at or above the price paid for such shares.

The price for shares of our Common Stock has exhibited high levels of volatility with significant volume and price fluctuations, which makes our Common Stock unsuitable for many investors. For example,
for the three years ended January 3, 2010, the closing price of our Common Stock ranged from a high of $7.45 to a low of $0.23 per share. At times, the fluctuations in the price of our Common Stock may have been unrelated to our operating
performance. These broad fluctuations may negatively impact the market price of shares of our Common Stock. The price of our Common Stock may also have been influenced by:



| |  |  | fluctuations in our results of operations or the operations of our competitors or customers;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | the aggregate amount of our outstanding debt and perceptions about our ability to make debt service payments;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | failure of our results of operations and sales revenues to meet the expectations of stock market analysts and investors;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | reductions in wireless infrastructure demand or expectations regarding future wireless infrastructure demand by our customers;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | delays or postponement of wireless infrastructure deployments, including new 3G deployments;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | changes in stock market analyst recommendations regarding us, our competitors or our customers;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | the timing and announcements of technological innovations, new products or financial results by us or our competitors;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | lawsuits attempting to allege misconduct by the Company and its officers;
| | - |  | -------------------------------------------------------------------------



| |  |  | increases in the number of shares of our Common Stock outstanding; and
| | - |  | ----------------------------------------------------------------------



| |  |  | changes in the wireless industry.
| | - |  | ---------------------------------

In addition, the potential conversion of our outstanding convertible debt instruments would add approximately 29.0 million shares of Common Stock to our outstanding shares. Such an increase may lead
to sales of shares or the perception that sales may occur, either of which may adversely affect the market for, and the market price of, our Common Stock. Any potential future sale or issuance of shares of our Common Stock or instruments convertible
or exchangeable into shares of our Common Stock, or the perception that such sales or transactions could occur, could adversely affect the market price of our Common Stock.



22



---

##### Table of Contents

Based on the above, we expect that our stock price will continue to be extremely volatile.
Therefore, we cannot guarantee that our investors will be able to resell our Common Stock at or above the price at which they purchased it.

Failure to maintain effective internal controls over financial reporting could adversely affect our business and the market price of our Common Stock.

Pursuant to rules adopted by the SEC under the Sarbanes-Oxley Act of 2002, we are required to assess the effectiveness of our internal
controls over financial reporting and provide a management report on our internal controls over financial reporting in all annual reports. This report contains, among other matters, a statement as to whether our internal controls over financial
reporting are effective and the disclosure of any material weaknesses in our internal controls over financial reporting identified by management. Section 404 also requires our independent registered public accounting firm to audit
managements report.

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) provides a framework
for companies to assess and improve their internal control systems. Auditing Standard No. 5 provides the professional standards and related performance guidance for auditors to report on managements assessment of the effectiveness of
internal control over financial reporting under Section 404. Managements assessment of internal controls over financial reporting requires management to make subjective judgments and, particularly because Section 404 and Auditing
Standard No. 5 are newly effective, some of the judgment will be in areas that may be open to interpretation. Therefore, our managements report on our internal controls over financial reporting may be difficult to prepare, and our
auditors may not agree with our managements assessment.

While we currently believe our internal controls over financial
reporting are effective, we are required to comply with Section 404 on an annual basis. If, in the future, we identify one or more material weaknesses in our internal controls over financial reporting during this continuous evaluation process,
our management may not be able to assert that such internal controls are effective. Although we currently anticipate satisfying the requirements of Section 404 in a timely fashion, we cannot be certain as to the timing of completion for our
future evaluation, testing and any required remediation due in large part to the fact that there are limited precedents available by which to measure compliance with these new requirements. Therefore, if we are unable to assert that our
internal controls over financial reporting are effective in the future, or if our auditors are unable to attest that our managements report is fairly stated or they are unable to express an opinion on the effectiveness of our internal
controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which would have an adverse effect on our business and the market price of our Common Stock.

Negative conditions in the financial and credit markets may impact our liquidity.

Recent dramatic changes in the global financial markets have weakened global economic conditions. These changes have had, and we anticipate
they will continue to have, an impact on our liquidity. These impacts include some of our customers facing liquidity shortages which impacts their payments to us, and the general tightness in the financial credit markets which limits credit
available to us as well as some of our customers. Given our current operating cash flow, financial assets, access to the capital markets and available lines of credit, we continue to believe that we will be able to meet our financing needs for the
foreseeable future. However, there can be no assurance that global economic conditions will not worsen, which could have a corresponding negative effect on our liquidity. In addition, while we believe that we have invested our financial assets in
sound financial institutions, should these institutions limit access to our assets, breach their agreements with us or fail, we may be adversely affected. Furthermore, volatile financial and credit markets may reduce our ability to raise capital or
refinance our debt on favorable terms, if at all, which could materially impact our ability to meet our obligations. As market conditions change, we will continue to monitor our liquidity position.

Our shareholder rights plan and charter documents could make it more difficult for a third-party to acquire us, even if doing so would be
beneficial to our shareholders.

Our shareholder rights plan and certain provisions of our certificate of incorporation
and Delaware law are intended to encourage potential acquirers to negotiate with us and allow our Board of Directors the opportunity to consider alternative proposals in the interest of maximizing shareholder value. However, such provisions may also
discourage acquisition proposals or delay or prevent a change in control, which in turn, could harm our stock price and our shareholders.



23



---

##### Table of Contents

|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

None.



|ITEM 2. | PROPERTIES
|------- | ----------

We believe
that our existing facilities provide adequate space for our operations. The following table shows our significant facilities:



|                           |  |              |  |                                    
|-------------------------- |  | ------------ |  | -----------------------------------
|Location                   |  | Owned/Leased |  | ApproximateFloor Area inSquare Feet
|Administrative Facilities: |  |              |  |                                    
|Santa Ana, California      |  | Owned        |  | 360,000                            
|Fort Worth, Texas          |  | Leased       |  | 78,000                             
|Coppell, Texas             |  | Leased       |  | 17,000                             
|Kempele, Finland           |  | Owned        |  | 248,000                            
|Hyderabad, India           |  | Leased       |  | 39,000                             
|Kista, Sweden              |  | Leased       |  | 21,000                             
|Shipley, United Kingdom    |  | Leased       |  | 20,000                             
|Manufacturing Facilities:  |  |              |  |                                    
|Suzhou, China              |  | Leased       |  | 158,000                            
|Saku Vald, Estonia         |  | Leased       |  | 38,000                             
|Laem Chabang, Thailand     |  | Owned        |  | 135,000                            
|                           |  |              |  |                                    
|Total                      |  |              |  | 1,114,000                          
|                           |  |              |  |                                    

Additionally, we maintain 14 sales, engineering, and
operating offices worldwide. The administrative facilities consist of our sales, engineering, research and development and corporate headquarters. In April 2008, we closed our Salisbury, Maryland manufacturing facility and the sale of the related
building was completed in October 2009. In the first quarter of 2009, we opened a research and development facility in Hyderabad, India. Additionally, in the fourth quarter of 2009, we opened a manufacturing facility in Laem Chabang, Thailand.



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------

In the
first quarter of 2007, four purported shareholder class action complaints were filed in the United States District Court for the Central District of California against the Company, its President and Chief Executive Officer, its former Executive
Chairman of the Board of Directors and its Chief Financial Officer. The complaints were Jerry Crafton v. Powerwave Technologies, Inc., et. al., Kenneth Kwan v. Powerwave Technologies, Inc., et. al., Achille Tedesco v. Powerwave Technologies,
Inc., et. al. and Farokh Etemadieh v. Powerwave Technologies, Inc. et. al.and were brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In June 2007, the four cases were consolidated into one
action before the Honorable Judge Philip Gutierrez, and a lead plaintiff was appointed. In October 2007, the lead plaintiff filed an amended complaint asserting the same causes of action and purporting to state claims on behalf of all persons who
purchased Powerwave securities between May 2, 2005 and November 2, 2006. The essence of the allegations in the amended complaint was that the defendants made misleading statements or omissions concerning the Companys projected and
actual sales revenues, the integration of certain acquisitions and the sufficiency of the Companys internal controls. In December 2007, the defendants filed a motion to dismiss the amended complaint. On April 17, 2008, the Court granted
defendants motion to dismiss plaintiffs claims in connection with the Companys projected sales revenues, but denied defendants motion to dismiss plaintiffs other claims. On August 29, 2008, the defendants answered
the amended complaint. On May 14, 2009, the parties executed a stipulation of settlement to resolve the consolidated action. According to the terms of the proposed settlement, the settlement payment will be funded by the Companys
directors and officers liability insurance. The Court granted preliminary approval of the proposed settlement and provisionally certified a settlement class on June 22, 2009, and on October 19, 2009 entered a judgment that granted final
approval of the settlement.

In March 2007, one additional lawsuit that relates to the pending shareholder class action was
filed. The lawsuit, Cucci v. Edwards, et al., filed in the Superior Court of California, is a shareholder derivative action, purported to be brought by an individual shareholder on behalf of Powerwave, against current and former directors of
Powerwave. Powerwave is also named as a nominal defendant. The allegations of the derivative complaint closely resemble those in the class action and pertain to the time period of May 2, 2005 through October 9, 2006. Based on those
allegations, the derivative complaint



24



---

##### Table of Contents

asserts various claims for breach of fiduciary duty, waste of corporate assets, mismanagement, and insider trading under state law. The derivative complaint was removed to federal court, and was
also pending before Judge Gutierrez. On May 15, 2009, the parties executed a stipulation of settlement to resolve the derivative action. According to the terms of the proposed settlement, the Company will adopt certain enhancements to its
corporate governance policies and procedures and counsel for the derivative plaintiff will be reimbursed its legal fees and expenses, which will be funded by the Companys directors and officers liability insurance. The Court granted
preliminary approval of the proposed settlement on June 22, 2009, and on October 19, 2009 entered a judgment that granted final approval of the settlement.

The Company is subject to other legal proceedings and claims in the normal course of business. The Company is currently defending these proceedings and claims, and, although the outcome of legal
proceedings is inherently uncertain presently, the Company anticipates that it will be able to resolve these matters in a manner that will not have a material adverse effect on the Companys consolidated financial position, results of
operations or cash flows.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

No matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the quarter ended January 3, 2010.



25



---

##### Table of Contents

PART II



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------

Market Information

Powerwaves Common Stock is quoted on the NASDAQ Global Select Market under the symbol PWAV. Below are the high and low sales prices as reported by NASDAQ for Powerwaves Common Stock for the periods indicated.



|                                       |  |      |      |     |   |     
|-------------------------------------- |  | ---- | ---- | --- | - | ----
|                                       |  | High |      | Low
|Fiscal Year 2009                       |  |      |      |     |   |     
|First Quarter Ended March 29, 2009     |  | $    | 0.67 |     | $ | 0.22
|Second Quarter Ended June 28, 2009     |  | $    | 1.68 |     | $ | 0.44
|Third Quarter Ended September 27, 2009 |  | $    | 1.79 |     | $ | 1.12
|Fourth Quarter Ended January 3, 2010   |  | $    | 1.74 |     | $ | 1.06
|Fiscal Year 2008                       |  |      |      |     |   |     
|First Quarter Ended March 30, 2008     |  | $    | 4.55 |     | $ | 2.12
|Second Quarter Ended June 29, 2008     |  | $    | 4.49 |     | $ | 2.19
|Third Quarter Ended September 28, 2008 |  | $    | 5.30 |     | $ | 3.37
|Fourth Quarter Ended December 28, 2008 |  | $    | 4.05 |     | $ | 0.35

Holders

There were 614 stockholders of record as of February 16, 2010. We believe there are approximately 17,000 stockholders of
Powerwaves Common Stock held in street name.

Dividends

We have not paid any dividends to date and do not anticipate paying any dividends on our Common Stock in the foreseeable future. We
anticipate that all future earnings will be retained to finance future growth.

Issuer Purchases of Equity Securities

The following table details the repurchases that were made during the quarter ended January 3, 2010:



|                          |  |                               |     |  |                      |      |                                                                  |   |                                                                         |  
|------------------------- |  | ----------------------------- | --- |  | -------------------- | ---- | ---------------------------------------------------------------- | - | ----------------------------------------------------------------------- | -
|Period                    |  | TotalNumberof SharesPurchased |     |  | AveragePriceperShare |      | Total Number ofShares Purchasedas Part of PubliclyAnnounced Plan |   | Approximate DollarValue of SharesThat May Yet BePurchased Underthe Plan
|                          |  |                               |     |  |                      |      | (In thousands)                                                   |   | (In thousands)                                                         
|September 28  November 1 |  |                              |     |  |                      |     |                                                                  |  |                                                                         | 
|November 2  November 29  |  | 1,719                         | (1) |  | $                    | 1.26 |                                                                  |  |                                                                         | 
|November 30  January 3   |  |                              |     |  |                      |     |                                                                  |  |                                                                         | 



|(1) | During November 2009, 1,719 shares of Common Stock were surrendered to the Company to satisfy tax withholding obligations in connection with the
vesting of 4,687 shares under restricted stock grants.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



26



---

##### Table of Contents

STOCK PERFORMANCE GRAPH

The following graph compares the cumulative total shareholder return for our Common Stock with the cumulative total return of the S&P
500 Index and the S&P Communications Equipment Index. The presentation assumes $100 invested on January 2, 2005 in our Common Stock, the S&P 500 Index and the S&P Communications Equipment Index with all dividends reinvested. No cash
dividends were declared on our Common Stock during this period. Shareholder returns over the indicated period should not be considered indicative of future shareholder returns.

LOGO



|                                         |  |                             |        |                 |   |                                    |  |   |       
|---------------------------------------- |  | --------------------------- | ------ | --------------- | - | ---------------------------------- |  | - | ------
|Measurement Period (Fiscal Year Covered) |  | PowerwaveTechnologies, Inc. |        | S & P 500 Index |   | S & PCommunicationsEquipment Index
|2005                                     |  | $                           | 148.23 |                 | $ | 104.91                             |  | $ | 102.12
|2006                                     |  | $                           | 76.06  |                 | $ | 121.48                             |  | $ | 117.95
|2007                                     |  | $                           | 52.59  |                 | $ | 128.16                             |  | $ | 120.37
|2008                                     |  | $                           | 5.87   |                 | $ | 80.74                              |  | $ | 72.01 
|2009                                     |  | $                           | 14.86  |                 | $ | 102.11                             |  | $ | 105.71

The material in this
performance graph is not soliciting material and is not deemed filed with the SEC and is not to be incorporated by reference in any of our filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made
before or after the date hereof.



27



---

##### Table of Contents

|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------

The following selected financial data should be read together with the information under Managements Discussion and Analysis of Financial Condition and Results of Operations and our financial statements and the notes to those
financial statements included elsewhere in this Annual Report on Form 10-K. The selected statements of operations data for the years ended January 3, 2010, December 28, 2008 and December 30, 2007 and balance sheet data as of
January 3, 2010 and December 28, 2008 set forth below have been derived from the audited financial statements included elsewhere in this Annual Report on Form 10-K. The selected consolidated statements of operations data for the years
ended December 31, 2006 and January 1, 2006 and consolidated balance sheet data as of December 30, 2007, December 31, 2006 and January 1, 2006 set forth below have been derived from the audited financial statements for
such years not included in this Annual Report on Form 10-K. The historical results presented here are not necessarily indicative of future results.



|                                                                   |  |                                                        |         |   |                          |   |          |                          |  |   |                              |   |  |                        |           |   |  |   |           |  
|------------------------------------------------------------------ |  | ------------------------------------------------------ | ------- | - | ------------------------ | - | -------- | ------------------------ |  | - | ---------------------------- | - |  | ---------------------- | --------- | - |  | - | --------- | -
|                                                                   |  | Fiscal Year Ended(in thousands, except
per share data) |        
|                                                                   |  | January 3,2010
(5)                                     |         |   | December 28,2008 (1)
(5) |   |          | December 30,2007 (1)
(5) |  |   | December 31,2006 (1) (2) (3) |   |  | January 1,2006
(3) (4) |          
|Consolidated Statements of Operations Data:                        |  |                                                        |         |   |                          |   |          |                          |  |   |                              |   |  |                        |           |   |  |   |           |  
|Net sales                                                          |  | $                                                      | 567,486 |   |                          | $ | 890,234  |                          |  | $ | 780,517                      |   |  | $                      | 716,886   |   |  | $ | 784,330   |  
|Gross profit                                                       |  |                                                        | 142,492 |   |                          |   | 147,528  |                          |  |   | 87,251                       |   |  |                        | 90,891    |   |  |   | 204,653   |  
|Operating income (loss)                                            |  |                                                        | (1,877  | ) |                          |   | (380,043 | )                        |  |   | (300,271                     | ) |  |                        | (135,839  | ) |  |   | 54,236    |  
|Income (loss) from continuing operations                           |  |                                                        | 3,222   |   |                          |   | (348,664 | )                        |  |   | (309,535                     | ) |  |                        | (137,546  | ) |  |   | 52,560    |  
|Total discontinued operations, net of tax                          |  |                                                        |        |   |                          |   |         |                          |  |   |                             |   |  |                        | (21,357   | ) |  |   | (1,914    | )
|Net income (loss)                                                  |  | $                                                      | 3,222   |   |                          | $ | (348,664 | )                        |  | $ | (309,535                     | ) |  | $                      | (158,903  | ) |  | $ | 50,646    |  
|Earnings (loss) per share from continuing operations:              |  |                                                        |         |   |                          |   |          |                          |  |   |                              |   |  |                        |           |   |  |   |           |  
|Basic                                                              |  | $                                                      | 0.02    |   |                          | $ | (2.66    | )                        |  | $ | (2.37                        | ) |  | $                      | (1.19     | ) |  | $ | 0.51      |  
|Diluted                                                            |  | $                                                      | 0.02    |   |                          | $ | (2.66    | )                        |  | $ | (2.37                        | ) |  | $                      | (1.19     | ) |  | $ | 0.44      |  
|Earnings (loss) per share from discontinued operations:            |  |                                                        |         |   |                          |   |          |                          |  |   |                              |   |  |                        |           |   |  |   |           |  
|Basic                                                              |  | $                                                      |        |   |                          | $ |         |                          |  | $ |                             |   |  | $                      | (0.18     | ) |  | $ | (0.02     | )
|Diluted                                                            |  | $                                                      |        |   |                          | $ |         |                          |  | $ |                             |   |  | $                      | (0.18     | ) |  | $ | (0.02     | )
|Net earnings (loss) per share:                                     |  |                                                        |         |   |                          |   |          |                          |  |   |                              |   |  |                        |           |   |  |   |           |  
|Basic                                                              |  | $                                                      | 0.02    |   |                          | $ | (2.66    | )                        |  | $ | (2.37                        | ) |  | $                      | (1.37     | ) |  | $ | 0.49      |  
|Diluted                                                            |  | $                                                      | 0.02    |   |                          | $ | (2.66    | )                        |  | $ | (2.37                        | ) |  | $                      | (1.37     | ) |  | $ | 0.42      |  
|Basic weighted average common shares                               |  |                                                        | 131,803 |   |                          |   | 131,077  |                          |  |   | 130,396                      |   |  |                        | 115,918   |   |  |   | 103,396   |  
|Diluted weighted average common shares                             |  |                                                        | 134,006 |   |                          |   | 131,077  |                          |  |   | 130,396                      |   |  |                        | 115,918   |   |  |   | 135,906   |  
|Consolidated Balance Sheet Data:                                   |  |                                                        |         |   |                          |   |          |                          |  |   |                              |   |  |                        |           |   |  |   |           |  
|Cash, cash equivalents, restricted cash and short-term investments |  | $                                                      | 63,039  |   |                          | $ | 50,339   |                          |  | $ | 65,517                       |   |  | $                      | 47,836    |   |  | $ | 237,479   |  
|Working capital                                                    |  | $                                                      | 175,414 |   |                          | $ | 179,059  |                          |  | $ | 192,160                      |   |  | $                      | 249,464   |   |  | $ | 384,677   |  
|Total assets                                                       |  | $                                                      | 390,185 |   |                          | $ | 487,896  |                          |  | $ | 981,094                      |   |  | $                      | 1,215,732 |   |  | $ | 1,130,184 |  
|Long-term debt, net of current portion                             |  | $                                                      | 280,887 |   |                          | $ | 306,321  |                          |  | $ | 350,000                      |   |  | $                      | 330,000   |   |  | $ | 330,000   |  
|Total shareholders equity (deficit)                               |  | $                                                      | (10,959 | ) |                          | $ | (15,079  | )                        |  | $ | 382,484                      |   |  | $                      | 651,598   |   |  | $ | 581,261   |  



|(1) | Fiscal years 2006, 2007 and 2008 include significant restructuring and impairment charges (see Note 6 of the Notes to Consolidated Financial Statements
under Part II, Item 8, Financial Statements and Supplementary Data).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Fiscal year 2006 includes the financial results of Filtronic plc beginning October 2006.
|--- | ----------------------------------------------------------------------------------------

|(3) | In September 2006, we sold Arkivator Falköping AB, which has been classified as discontinued operations for all periods presented.
|--- | ----------------------------------------------------------------------------------------------------------------------------------

|(4) | Fiscal year 2005 includes the financial results of REMECs Wireless Infrastructure Business beginning September 2005.
|--- | ---------------------------------------------------------------------------------------------------------------------

|(5) | Fiscal years 2007, 2008 and 2009 include gains related to the repurchase of outstanding convertible subordinated debt of $2.1 million, $32.2 million
and $12.7 million, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | There were no cash dividends paid in the periods listed above.
|--- | --------------------------------------------------------------



28



---

##### Table of Contents

|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

The following discussion should be read in conjunction with the Consolidated Financial Statements and notes thereto. This discussion contains
forward-looking statements, the realization of which may be impacted by certain important factors including, but not limited to, those risk factors disclosed pursuant to Part 1, Item 1A.

Introduction and Overview

Powerwave is a global supplier of end-to-end wireless solutions for wireless communications networks. Our business consists of the design, manufacture, marketing and sale of products to improve coverage,
capacity and data speed in wireless communications networks, including antennas, boosters, combiners, cabinets, shelters, filters, radio frequency power amplifiers, remote radio head transceivers, repeaters, tower-mounted amplifiers and advanced
coverage solutions. These products are utilized in major wireless networks throughout the world which support voice and data communications by use of cell phones and other wireless communication devices. We sell our products to both original
equipment manufacturers, who incorporate our products into their proprietary base stations (which they then sell to wireless network operators), and directly to individual wireless network operators for deployment into their existing networks.

During the last ten years, demand for wireless communications infrastructure equipment has fluctuated dramatically. While
demand for wireless infrastructure was strong during 2005, it weakened for Powerwave during 2006 and 2007 due to significant reductions at three major customers, as well as a general slowdown in overall demand within the wireless infrastructure
industry. For most of 2008, demand once again increased. However, in the fourth quarter of 2008, demand for our products was negatively impacted by the global economic recession. This significantly impacted demand during 2009, and our revenues fell
by 36% from 2008 levels, thus negatively impacting our financial results. During 2008 and 2009, we initiated several cost cutting measures aimed at lowering our operating expenses. These initiatives will continue and we may be required to further
reduce operating expenses if there is a significant or prolonged reduction in spending by our customers.

In the past there
have been significant deferrals in capital spending by wireless network operators due to delays in the expected deployment of infrastructure equipment and financial difficulties on the part of the wireless network operators who were forced to
consolidate and reduce spending to strengthen their balance sheets and improve their profitability. Economic conditions, such as the turmoil in the global equity and credit markets, as well as the global recession, and the rise of inflationary
pressures related to rising commodity prices, have also had a negative impact on capital spending by wireless network operators, and will likely have a negative impact going forward in the near term. All of these factors can have a significant
negative impact on overall demand for wireless infrastructure products, and at various times, have directly reduced demand for our products and increased price competition within our industry which has in the past led to reductions in our revenues
and contributed to our reported operating losses. In addition to the significant reduction in revenues during 2009, an example of prior reductions was during fiscal 2006 and 2007, when we experienced a significant slowdown in demand from one of our
direct network operator customers, AT&T, as well as reduced demand from several of our original equipment manufacturing customers, including Nokia Siemens and Nortel Networks, all of which combined to result in directly reduced demand for our
products and contributed to our operating losses for both fiscal 2006 and 2007.

We believe that we have maintained our
overall market share within the wireless communications infrastructure equipment market during this period of changing demand for wireless communications infrastructure equipment. We continue to invest in the research and development of wireless
communications network technology and the diversification of our product offerings, and we believe that we have one of our industrys leading product portfolios in terms of performance and features. We believe that our proprietary design
technology is a further differentiator for our products.

Looking back over the last six years, beginning in fiscal 2004, we
focused on cost savings while we expanded our market presence, as evidenced by our acquisition of LGP Allgon. This acquisition involved the integration of two companies based in different countries that previously operated independently, which was a
complex, costly and time-consuming process. During fiscal 2005, we continued to focus on cost savings while we expanded our market presence, as evidenced by our acquisition of selected assets and liabilities of REMEC, Inc.s wireless systems
business (the REMEC Wireless Acquisition.) We believe that this acquisition further strengthened our position in the global wireless infrastructure market. In October 2006, we completed the Filtronic plc wireless acquisition. We believe
that this strategic acquisition provided us with the leading position in transmit and receive filter products, as well as broadening our RF conditioning and base station solutions product portfolio and added significant additional technology to our
intellectual property portfolio. For fiscal years 2007, 2008 and 2009, we completed the integration of this acquisition, as well as focused on consolidating operations and reducing our overall cost structure. During this same time, we encountered a
significant unanticipated reduction in revenues, which caused us to revise our integration and consolidation plans with a goal of further reducing our operating costs and significantly lowering our breakeven operating structure. As has been
demonstrated during the last six years, these acquisitions do not provide any guarantee that our revenues will increase. As we enter 2010, we have a small number of ongoing restructuring activities which are aimed at further reducing our overall
operating cost structure.



29



---

##### Table of Contents

We measure our success by monitoring our net sales by product and consolidated gross
margins, with a short-term goal of maintaining a positive operating cash flow while striving to achieve long-term operating profits. We believe that there continues to be long-term growth opportunities within the wireless communications
infrastructure marketplace, and we are focused on positioning Powerwave to benefit from these long-term opportunities.

Critical Accounting Policies and Estimates

We prepare our condensed consolidated financial statements
in conformity with accounting principles generally accepted in the United States of America. We are required to make certain estimates, judgments and assumptions that we believe are reasonable based upon the information currently available. These
estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Any future changes to these estimates and
assumptions could cause a material change to our reported amounts of revenue, expenses, assets and liabilities. The critical accounting policies that we believe are the most significant for purposes of fully understanding and evaluating our reported
financial results include the following:

Revenue Recognition

The majority of our revenue is derived from the sale of products. We recognize revenue from product sales at the time of shipment or delivery
and passage of title depending upon the terms of the sale provided that persuasive evidence of an arrangement exists, the fee is fixed or determinable and collectibility is reasonably assured. We offer certain customers the right to return products
within a limited time after delivery under specified circumstances, generally related to product defects. We monitor and track product returns and record a provision for the estimated amount of future returns based on historical experience and any
notification we receive of pending returns. While returns have historically been within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same return rates that we have in the past. Any
significant increase in product returns could have a material adverse effect on our operating results for the period or periods in which these returns materialize.

Accounts Receivable

We perform ongoing credit evaluations of our customers
and adjust credit limits based upon each customers payment history and credit worthiness, as well as various other factors as determined by our review of their credit information. We monitor collections and payments from our customers and
maintain an allowance for estimated credit losses based upon our historical experience and any specific customer collection issues that we have identified. While credit losses have historically been within our expectations and the provisions
established, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past. Since our accounts receivable are highly concentrated in a small number of customers, a significant change in the liquidity or
financial position of any one of these customers could have a material adverse effect on the collectibility of our accounts receivable, our liquidity and our future operating results.

Inventories

We value our inventories at the lower of cost (determined on an average cost basis) or fair market value and include materials, labor and manufacturing overhead. We write down excess and obsolete inventory to estimated net realizable value.
In assessing the ultimate realization of inventories, we make judgments as to future demand requirements and compare those requirements with the current or committed inventory levels. Depending on the product line and other factors, we estimate
future demand based on either historical usage for the preceding twelve months, adjusted for known changes in demand for such products, or the forecast of product demand and production requirements for the next twelve months. These provisions reduce
the cost basis of the respective inventory and are recorded as a charge to cost of sales. Our industry is characterized by rapid technological change, frequent new product development and rapid product obsolescence that could result in an increase
in the amount of obsolete inventory quantities on hand. As demonstrated during the past seven fiscal years, demand for our products can fluctuate significantly. A significant increase in the demand for our products could result in a short-term
increase in the cost of inventory purchases while a significant decrease in demand could result in an increase in the amount of excess inventory quantities on hand. In addition, our estimates of future product demand may prove to be inaccurate, in
which case we may have understated or overstated the provision required for excess and obsolete inventory. In the future, if our inventory is determined to be overvalued, we would be required to recognize additional charges in our cost of goods sold
at the time of this determination. Likewise, if our inventory is determined to be undervalued, we may have over-reported our costs of goods sold in previous periods and would be required to recognize additional gross profit at the time such
inventory is sold. Although we make reasonable efforts to ensure the accuracy of our forecasts of future product demand, any significant unanticipated changes in demand or technological developments could have a material effect on the value of our
inventory and our reported operating results.



30



---

##### Table of Contents

Income Taxes

We provide for income taxes based on the estimated effective income tax rate for the complete fiscal year. The income tax provision (benefit)
is computed on the pretax income (loss) of the consolidated entities located within each taxing jurisdiction based on current tax law. Deferred tax assets and liabilities are determined based on the future tax consequences associated with temporary
differences between income and expenses reported for financial accounting and tax reporting purposes. In accordance with the provisions of accounting guidance now codified as Financial Accounting Standards Board (FASB) Accounting Standards
Codification (ASC) Topic 740, Income Taxes, a valuation allowance for deferred tax assets is recorded to the extent we cannot determine that the ultimate realization of the net deferred tax assets is more likely than not.

Realization of deferred tax assets is principally dependent upon the achievement of future taxable income, the estimation of
which requires significant management judgment. Our judgments regarding future profitability may change due to many factors, including future market conditions and our ability to successfully execute our business plans and/or tax planning
strategies. These changes, if any, may require material adjustments to these deferred tax asset balances. Due to uncertainties surrounding the realization of our cumulative federal and state net operating losses, we have recorded a valuation
allowance against a portion of our gross deferred tax assets. For the foreseeable future, the Federal tax provision related to future earnings will be substantially offset by a reduction in the valuation reserve, and any future pretax losses will
not result in a tax benefit due to the uncertainty of the recoverability of the deferred tax assets. Accordingly, current and future tax expense will consist primarily of certain required state income taxes and taxes in certain foreign
jurisdictions.

Acquired tax liabilities related to prior tax returns of acquired entities at the date of purchase are
recognized based on our estimate of the ultimate settlement that may be accepted by the tax authorities. We continually evaluate these tax-related matters. At the date of any material change in our estimate of items relating to an acquired
entitys prior tax returns, and at the date that the items are settled with the tax authorities, any liabilities previously recognized are adjusted to increase or decrease the remaining balance of goodwill attributable to that acquisition.
However, effective beginning in 2009, adjustments to acquired tax liabilities will increase or decrease income tax expense in accordance with accounting guidance now codified as FASB ASC Topic 740.

Accounting guidance now codified as FASB ASC Topic 740-20, Income Taxes  Intraperiod Tax Allocation,clarifies the
accounting and disclosure for uncertainty in tax positions, as defined. FASB ASC Topic 740-20 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. We are
subject to the provisions of FASB ASC Topic 740-20 and have analyzed filing positions in all of the federal, state and foreign jurisdictions where we are required to file income tax returns for all open tax years in
these jurisdictions. The periods subject to examination for our U.S. federal return are the 2007 through 2009 tax years, including adjustments to net operating loss and credit carryovers to those years. In addition, we have subsidiaries in
various foreign jurisdictions that have statutes of limitation generally ranging from 3 to 6 years. We recognize interest and penalties related to unrecognized tax benefits in income tax expense.

Goodwill, Intangible Assets and Long-Lived Assets

We record the assets acquired and liabilities assumed in business combinations at their respective fair values at the date of acquisition, with any excess purchase price over fair value recorded as
goodwill. Because of the expertise required to value intangible assets and in-process research and development, we typically engage third-party valuation specialists to assist us in determining those values. Valuation of intangible assets and
in-process research and development entails significant estimates and assumptions including, but not limited to, determining the timing and expected costs to complete development projects, estimating future cash flows from product sales, developing
appropriate discount rates, estimating probability rates for the successful completion of development projects, continuation of customer relationships and renewal of customer contracts, and approximating the useful lives of the intangible assets
acquired. To the extent actual results differ from these estimates, our future results of operations may be affected.

We
review the recoverability of the carrying value of goodwill on an annual basis or more frequently when an event occurs or circumstances change to indicate that an impairment of goodwill might have occurred. The determination of whether any potential
impairment of goodwill exists is based upon a comparison of the fair value of a reporting unit to the accounting value of the underlying net assets of such reporting unit. To determine the fair value of a reporting unit, we utilize subjective
valuations for the reporting unit based upon a discounted cash flow analysis as well as quoted market prices of our Common Stock plus an estimated market premium based upon companies with similar market transactions. The discounted cash flow
analysis is dependent upon a number of various factors including estimates of forecasted revenues and costs, appropriate discount rates and other variables. If the forecast assumptions utilized materially change, it could result in a lower fair
value calculation which could require an impairment of existing goodwill. If the fair value of the reporting unit is less than the carrying value of the underlying net assets, goodwill is deemed impaired and an impairment loss is recorded to the
extent that the carrying value of goodwill is less than the difference between the fair value of the reporting unit and the fair value of all its underlying identifiable assets and liabilities.



31



---

##### Table of Contents

Purchased intangible assets with determinable useful lives are carried at cost less
accumulated amortization, and are amortized using the straight-line method over their estimated useful lives, which generally range up to six years. We review the recoverability of the carrying value of identified intangibles and other long-lived
assets, including fixed assets, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of these assets is determined based on the forecasted undiscounted future net cash flows
expected to result from the use of the asset and its eventual disposition. Our estimate of future cash flows is based upon, among other things, certain assumptions about expected future operating performance, growth rates and other factors. The
actual cash flows realized from these assets may vary significantly from our estimates due to increased competition, changes in technology, fluctuations in demand, consolidation of our customers and reductions in average selling prices. If the
carrying value of an asset is determined not to be recoverable from future operating cash flows, the asset is deemed impaired and an impairment loss is recognized to the extent the carrying value exceeds the estimated fair market value of the asset.
While we do not believe that any of our long-lived assets are currently impaired, there have been other impairments in the past, and any future impairment of our long-lived assets could have a material adverse affect on our business, financial
condition and results of operations.

Vendor Cancellation Liabilities

We purchase subassemblies and finished goods from contract manufacturers under purchase agreements that limit our ability to cancel
deliveries inside defined lead time windows. When a contract manufacturer submits a cancellation claim, we estimate the amount of inventory remaining to be purchased against that claim. Any excess of the estimated purchase over the projected
consumption of the related product is recorded as a charge to cost of sales and an increase to accrued expenses and other current liabilities. Depending on the product line and other factors, we estimate future demand based on either historical
usage for the preceding twelve months, adjusted for known changes in demand for such products, or the forecast of product demands and production requirements for the next twelve months. Our industry is characterized by rapid technological change,
frequent new product development and rapid product obsolescence that could result in an increase in the amount of vendor cancellation liability. Our history shows that demand for our products can fluctuate significantly. A significant increase in
the demand for our products could result in a short-term increase in the cost of inventory purchases while a significant decrease in demand could result in an increase in the amount of vendor cancellation liabilities. In addition, our estimates of
future product demand may prove to be inaccurate, in which case we may have understated or overstated the provision required for vendor cancellation liabilities. Although we make reasonable efforts to ensure the accuracy of our forecasts of future
product demand, any significant unanticipated changes in demand or technological developments could have a material effect on the amount of vendor cancellation liabilities and our reported operating results.

Warranties

We offer warranties of various lengths to our customers depending upon the specific product and terms of the customer purchase agreement. Our standard warranties require us to repair or replace defective product returned to us during the
warranty period at no cost to the customer. We record an estimate for standard warranty-related costs based on our actual historical return rates and repair costs at the time of the sale and update these estimates throughout the warranty period.
While our warranty costs have historically been within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same warranty return rates or repair costs that we have in the past. We also have
contractual commitments to various customers that require us to incur costs to repair an epidemic defect with respect to our products outside of our standard warranty period if such defect were to occur. Any costs related to epidemic defects are
generally recorded at the time the epidemic defect becomes known to us and the costs of repair can be reasonably estimated. While we have occasionally experienced significant costs due to epidemic defects, historically, we have not regularly
experienced significant costs related to epidemic defects. We cannot guarantee that we will not experience significant costs to repair epidemic defects in the future. A significant increase in product return rates or in the costs to repair our
products, or an unexpected epidemic defect in our products, could have a material adverse effect on our operating results during the period in which the returns or additional costs materialize.

Subsequent Events

We have evaluated activities through February 19, 2010, and all known subsequent events have been included in this report.



32



---

##### Table of Contents

Accruals for Restructuring and Impairment Charges

We recorded $4.5 million, $368.3 million and $198.2 million of restructuring and impairment charges during fiscal years 2009, 2008 and 2007,
respectively. These include charges of $315.9 million and $151.7 million related to the impairment of goodwill in 2008 and 2007, respectively, and charges of $29.5 million and $2.7 million related to the impairment of our intangible assets in 2008
and 2007, respectively. See further discussions of these charges under Operating Expenses below and in Note 6 of the Notes to Consolidated Financial Statements.

2009 Restructuring Plan

In January 2009, we formulated and began to
implement a plan to further reduce manufacturing overhead costs and operating expenses. As part of this plan, we initiated personnel reductions in both our domestic and foreign locations, with primary reductions in the United States, Estonia and
Sweden. These reductions were undertaken in response to current economic conditions and the ongoing global macroeconomic slowdown that began in the fourth quarter of 2008. We finalized this plan in the fourth quarter of 2009; however, additional
amounts may be accrued in 2010 related to actions associated with this plan.

A summary of the activity affecting our accrued
restructuring liability related to the 2009 Restructuring Plan for the fiscal year ended January 3, 2010 is as follows:



|                             |  |                     |        |   |                                         |   |     |       |  |   |        |  
|---------------------------- |  | ------------------- | ------ | - | --------------------------------------- | - | --- | ----- |  | - | ------ | -
|                             |  | WorkforceReductions |        |   | Facility Closures&
EquipmentWrite-downs |   |     | Total | 
|Balance at December 28, 2008 |  | $                   |       |   |                                         | $ |    |       |  | $ |       |  
|Amounts accrued              |  |                     | 2,769  |   |                                         |   | 78  |       |  |   | 2,847  |  
|Amounts paid/incurred        |  |                     | (2,268 | ) |                                         |   | (78 | )     |  |   | (2,346 | )
|Effects of exchange rates    |  |                     |       |   |                                         |   |    |       |  |   |       |  
|                             |  |                     |        |   |                                         |   |     |       |  |   |        |  
|Balance at January 3, 2010   |  | $                   | 501    |   |                                         |   |    |       |  |   | 501    |  
|                             |  |                     |        |   |                                         |   |     |       |  |   |        |  

The costs associated with these exit activities were recorded in accordance with the accounting guidance now
codified as FASB ASC Topic 420, Exit or Disposal Obligations. Pursuant to this guidance, a liability for a cost associated with an exit or disposal activity shall be recognized in the period in which the liability is incurred,
except for a liability for one-time employee termination benefits that is incurred over time. In the unusual circumstance in which fair value cannot be reasonably estimated, the liability shall be recognized initially in the period in which fair
value can be reasonably estimated. The restructuring and integration plan is subject to continued future refinement as additional information becomes available. We expect that the workforce reduction amounts will be paid through the second quarter
of 2011.

2008 Restructuring Plan

In June 2008, we formulated and began to implement a plan to further consolidate operations and reduce manufacturing and operating expenses. As part of this plan, we closed our Salisbury, Maryland
manufacturing facility and transferred most of the production to our other manufacturing operations. In addition, we closed our design and development center in Bristol, UK and discontinued manufacturing operations in Kempele, Finland. These actions
were finalized in the first quarter of 2009.

A summary of the activity affecting our accrued restructuring liability related
to the 2008 Restructuring Plan for the fiscal year ended January 3, 2010 is as follows:



|                             |  |                     |        |   |                                         |   |      |       |  |   |        |  
|---------------------------- |  | ------------------- | ------ | - | --------------------------------------- | - | ---- | ----- |  | - | ------ | -
|                             |  | WorkforceReductions |        |   | Facility Closures&
EquipmentWrite-downs |   |      | Total | 
|Balance at December 28, 2008 |  | $                   | 3,106  |   |                                         | $ | 585  |       |  | $ | 3,691  |  
|Amounts accrued              |  |                     | 650    |   |                                         |   | 95   |       |  |   | 745    |  
|Amounts paid/incurred        |  |                     | (3,652 | ) |                                         |   | (406 | )     |  |   | (4,058 | )
|Effects of exchange rates    |  |                     | 73     |   |                                         |   | 60   |       |  |   | 133    |  
|                             |  |                     |        |   |                                         |   |      |       |  |   |        |  
|Balance at January 3, 2010   |  | $                   | 177    |   |                                         |   | 334  |       |  |   | 511    |  
|                             |  |                     |        |   |                                         |   |      |       |  |   |        |  

The costs associated with these exit activities were recorded in accordance with the accounting guidance in
FASB ASC Topic 420. The restructuring and integration plan is subject to continued future refinement as additional information becomes available. The workforce reductions will be paid out through the second quarter of 2010, and the facility closure
amounts will be paid out over the remaining lease term, which extends through September 2010.



33



---

##### Table of Contents

2007 Restructuring Plan

In the second quarter of 2007, we formulated and began to implement a plan to further consolidate operations and reduce operating costs. As
part of this plan, we closed our design and development centers in El Dorado Hills, California and Toronto, Canada, and discontinued our design and development center in Shipley, UK. Also as part of this plan, we sold our manufacturing operations
located in Hungary to Sanmina-SCI, a third-party contract manufacturing supplier, and entered into a manufacturing services agreement with Sanmina-SCI. The transaction included inventories and fixed assets and included a sublease of the existing
facility, along with the assumption of certain liabilities, including all transferred employees. We finalized this plan in the fourth quarter of 2007.

A summary of the activity affecting our accrued restructuring liability related to the 2007 Restructuring Plan for the fiscal year ended January 3, 2010 is as follows:



|                             |  |                                         |      |  
|---------------------------- |  | --------------------------------------- | ---- | -
|                             |  | Facility Closures&
EquipmentWrite-downs |     
|Balance at December 28, 2008 |  | $                                       | 551  |  
|Amounts accrued              |  |                                         | (179 | )
|Amounts paid/incurred        |  |                                         | (375 | )
|Effects of exchange rates    |  |                                         | 3    |  
|                             |  |                                         |      |  
|Balance at January 3, 2010   |  | $                                       |     |  
|                             |  |                                         |      |  

The costs associated with these exit activities were recorded in accordance with the accounting guidance in
FASB ASC Topic 420. The remaining payments on this plan were made during 2009, and all actions associated with this plan have been completed.

2006 Plan for Consolidation of Operations

In the fourth quarter of 2006,
and in connection with the Filtronic plc wireless acquisition, we formulated and began to implement a plan to restructure our global manufacturing operations, including the consolidation of our manufacturing facilities in Wuxi and Shanghai, China,
into the manufacturing facility located in Suzhou, China. The plan includes a reduction of workforce, impairment and disposal of inventory and equipment utilized in discontinued product lines, and facility closure costs. In addition, we also ceased
the production of certain product lines manufactured at these facilities to eliminate duplicative product lines.

A summary of
the activity affecting our accrued restructuring liability related to the 2006 Plan for Consolidation of Operations for the fiscal year ended January 3, 2010 is as follows:



|                             |  |                                         |      |  
|---------------------------- |  | --------------------------------------- | ---- | -
|                             |  | Facility Closures&
EquipmentWrite-downs |     
|Balance at December 28, 2008 |  | $                                       | 146  |  
|Amounts accrued              |  |                                         | 175  |  
|Amounts paid/incurred        |  |                                         | (321 | )
|Effects of exchange rates    |  |                                         |     |  
|                             |  |                                         |      |  
|Balance at January 3, 2010   |  | $                                       |     |  
|                             |  |                                         |      |  

The costs associated with these exit activities were recorded in accordance with the accounting guidance in
FASB ASC Topic 420. The remaining payments on this plan were made during 2009, and all actions associated with this plan have been completed.

Integration of LGP Allgon and REMEC, Inc.s Wireless Systems Business

We recorded liabilities in connection with the acquisitions for estimated restructuring and integration costs related to the consolidation of REMEC, Inc.s wireless systems business and LGP Allgons operations, including severance
and future lease obligations on excess facilities. These estimated costs were included in the allocation of the purchase consideration and resulted in additional goodwill pursuant to the accounting guidance now codified as FASB ASC Topic 805,
Business Combinations. The costs associated with these exit activities were recorded in accordance with the accounting guidance in FASB ASC Topic 420. The implementation of the restructuring and integration plan is complete.



34



---

##### Table of Contents

A summary of the activity affecting our accrued restructuring liability related to the
integration of the REMEC, Inc.s wireless systems business and LGP Allgon for the fiscal year ended January 3, 2010 is as follows:



|                             |  |                                         |       |  
|---------------------------- |  | --------------------------------------- | ----- | -
|                             |  | Facility Closures&
EquipmentWrite-downs |      
|Balance at December 28, 2008 |  | $                                       | 1,425 |  
|Amounts accrued              |  |                                         |      |  
|Amounts paid/incurred        |  |                                         | (634  | )
|Effects of exchange rates    |  |                                         |      |  
|                             |  |                                         |       |  
|Balance at January 3, 2010   |  | $                                       | 791   |  
|                             |  |                                         |       |  

We expect that the facility closure amounts will be paid out over the remaining lease term which extends
through January 2011.

All of these restructuring and impairment accruals related primarily to workforce reductions,
consolidation of facilities, and the discontinuation of certain product lines, including the associated write-downs of inventory, manufacturing and test equipment, and certain intangible assets. Such accruals were based on estimates and assumptions
made by management about matters which were uncertain at the time, including the timing and amount of sublease income that would be recovered on vacated property and the net realizable value of used equipment that is no longer needed in our
continuing operations. While we used our best current estimates based on facts and circumstances available at the time to quantify these charges, different estimates could reasonably be used in the relevant periods to arrive at different accruals
and/or the actual amounts incurred or recovered may be substantially different from the assumptions utilized, either of which could have a material impact on the presentation of our financial condition or results of operations for a given period. As
a result, we periodically review the estimates and assumptions used and reflect the effects of those revisions in the period that they become known.

Newly Adopted Accounting Pronouncements

In June 2009, FASB
issued guidance now codified as FASB ASC Topic 105, Generally Accepted Accounting Principles, as the single source of authoritative non-governmental U.S. GAAP. FASB ASC Topic 105 does not change current U.S. GAAP, but is intended
to simplify user access to all authoritative U.S. GAAP by providing all authoritative literature related to a particular topic in one place. All existing accounting standard documents will be superseded and all other accounting literature not
included in the FASB Codification will be considered non-authoritative. These provisions of FASB ASC Topic 105 were effective for interim and annual periods ending after September 15, 2009 and, accordingly, were effective for us for the current
fiscal reporting period. The adoption of this pronouncement did not have an impact on our business, financial condition or results of operations, but will impact our financial reporting process by eliminating all references to pre-codification
standards. On the effective date of FASB ASC Topic 105, the Codification superseded all then-existing non-SEC accounting and reporting standards, and all other non-grandfathered non-SEC accounting literature not included in the Codification became
non-authoritative.

In May 2009, the FASB issued guidance now codified as FASB ASC Topic 855, Subsequent
Events, which establishes general standards of accounting for, and disclosures of, events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This pronouncement was effective
for interim or fiscal periods ending after June 15, 2009. The adoption of this pronouncement did not have a material impact on our business, results of operations or financial position; however, the provisions of FASB ASC Topic 855 resulted in
additional disclosures with respect to subsequent events.

In April 2009, the FASB issued guidance now codified as FASB
ASC Topic 820, Fair Value Measurements and Disclosures,which amends previous guidance to require disclosures about fair value of financial instruments in interim as well as annual financial statements in the current economic
environment. This pronouncement was effective for periods ending after June 15, 2009. The adoption of this pronouncement did not have a material impact on our business, financial condition or results of operations; however, these provisions of
FASB ASC Topic 820 resulted in additional disclosures with respect to the fair value of our financial instruments.

In
November 2008, the FASB issued guidance now codified as FASB ASC Topic 350, Intangibles  Goodwill and Other,which applies to defensive intangible assets, which are acquired intangible assets that the acquirer does not
intend to actively use but intends to hold to prevent its competitors from obtaining access to them. As these assets are separately identifiable, this pronouncement requires an acquiring entity to account for defensive intangible assets as a
separate unit of accounting, and such assets should be amortized to expense over the period such assets diminish in value. Defensive intangible assets must be recognized at fair value in accordance with FASB ASC Topic 820. This pronouncement was
effective for financial statements in the first quarter of 2009. The adoption of the provisions of FASB ASC Topic 350 did not have a material impact on our business, financial condition or results of operations.



35



---

##### Table of Contents

In April 2008, the FASB issued guidance now codified as FASB ASC Topic 350,
Intangibles  Goodwill and Other,which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. The pronouncement was
effective in the first quarter of 2009. The adoption of the provisions of FASB ASC Topic 350 did not have a material impact on our business, financial condition or results of operations.

In December 2007, the FASB issued guidance now codified as FASB ASC Topic 805-10, Business Combinations,which changes
how business acquisitions are accounted for and changes the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. The provisions of FASB ASC Topic 805-10
were effective in the first quarter of 2009. The adoption of the provisions of FASB ASC Topic 805-10 did not have a material impact on our business, financial condition or results of operations.

New Accounting Pronouncements

In October 2009, the FASB issued an update to FASB ASC Topic 605, Revenue Recognition. This Accounting Standards Update (ASU), No. 2009-13, Multiple Deliverable Revenue
Arrangements  A Consensus of the FASB Emerging Issues Task Force, provides accounting principles and application guidance on whether multiple deliverables exist, how the arrangement should be separated, and the consideration
allocated. This guidance eliminates the requirement to establish the fair value of undelivered products and services and instead provides for separate revenue recognition based upon managements estimate of the selling price for an undelivered
item when there is no other means to determine the fair value of that undelivered item. Previous accounting guidance required that the fair value of the undelivered item be the price of the item either sold in a separate transaction between
unrelated third parties or the price charged for each item when the item is sold separately by the vendor. This was difficult to determine when the product was not individually sold because of its unique features. Under previous accounting guidance,
if the fair value of all of the elements in the arrangement was not determinable, then revenue was deferred until all of the items were delivered or fair value was determined. This new approach is effective prospectively for revenue arrangements
entered into or materially modified in fiscal years beginning on or after June 15, 2010. We are currently evaluating the potential impact of this standard on our business, financial condition or results of operations.



36



---

##### Table of Contents

Results of Operations

The following table summarizes our results of operations as a percentage of net sales for the years ended January 3, 2010,
December 28, 2008 and December 30, 2007:



|                                     |  |                    |   |  |                  |    |  |                  |   
|------------------------------------ |  | ------------------ | - |  | ---------------- | -- |  | ---------------- | --
|                                     |  | Fiscal Years Ended |  
|                                     |  | January 3,2010     |   |  | December 28,2008 |    |  | December 30,2007 |   
|Net sales                            |  | 100.0              | % |  | 100.0            | %  |  | 100.0            | % 
|Cost of sales:                       |  |                    |   |  |                  |    |  |                  |   
|Cost of goods                        |  | 74.1               |   |  | 77.2             |    |  | 81.8             |   
|Intangible amortization              |  | 0.5                |   |  | 2.1              |    |  | 2.5              |   
|Restructuring and impairment charges |  | 0.3                |   |  | 4.1              |    |  | 4.5              |   
|                                     |  |                    |   |  |                  |    |  |                  |   
|Total cost of sales                  |  | 74.9               |   |  | 83.4             |    |  | 88.8             |   
|                                     |  |                    |   |  |                  |    |  |                  |   
|Gross profit                         |  | 25.1               |   |  | 16.6             |    |  | 11.2             |   
|Operating expenses:                  |  |                    |   |  |                  |    |  |                  |   
|Sales and marketing                  |  | 6.0                |   |  | 5.1              |    |  | 6.8              |   
|Research and development             |  | 10.4               |   |  | 8.7              |    |  | 10.9             |   
|General and administrative           |  | 8.4                |   |  | 7.1              |    |  | 9.6              |   
|Intangible asset amortization        |  | 0.2                |   |  | 1.1              |    |  | 1.4              |   
|Restructuring and impairment charges |  | 0.4                |   |  | 1.8              |    |  | 1.5              |   
|Goodwill impairment charge           |  |                   |   |  | 35.5             |    |  | 19.4             |   
|                                     |  |                    |   |  |                  |    |  |                  |   
|Total operating expenses             |  | 25.4               |   |  | 59.3             |    |  | 49.6             |   
|                                     |  |                    |   |  |                  |    |  |                  |   
|Operating income (loss)              |  | (0.3               | ) |  | (42.7            | )  |  | (38.4            | ) 
|Other income (expense), net          |  | 1.5                |   |  | 3.9              |    |  | (0.3             | ) 
|                                     |  |                    |   |  |                  |    |  |                  |   
|Income (loss) before income taxes    |  | 1.2                |   |  | (38.8            | )  |  | (38.7            | ) 
|Income tax provision                 |  | 0.6                |   |  | 0.4              |    |  | 1.0              |   
|                                     |  |                    |   |  |                  |    |  |                  |   
|Net income (loss)                    |  | 0.6                | % |  | (39.2            | )% |  | (39.7            | )%
|                                     |  |                    |   |  |                  |    |  |                  |   

Years ended January 3, 2010 and December 28, 2008

Net Sales

Our sales are derived from the sale of wireless communications network products and coverage solutions, including antennas, boosters, combiners, cabinets, shelters, filters, radio frequency power amplifiers, remote radio head transceivers,
repeaters, tower-mounted amplifiers and advanced coverage solutions for use in cellular, PCS, 3G, and 4G wireless communications networks throughout the world.

The following table presents an analysis of our sales based upon our various customer groups:



|                                     |  |                                  |         |  |                   |   |  |   |         |  |     |  
|------------------------------------ |  | -------------------------------- | ------- |  | ----------------- | - |  | - | ------- |  | --- | -
|                                     |  | Fiscal Years Ended(in thousands) |        
|Customer Group                       |  | January 3, 2010                  |         |  | December 28, 2008 |  
|Wireless network operators and other |  | $                                | 208,661 |  | 37                | % |  | $ | 333,030 |  | 37  | %
|Original equipment manufacturers     |  |                                  | 358,825 |  | 63                | % |  |   | 557,204 |  | 63  | %
|                                     |  |                                  |         |  |                   |   |  |   |         |  |     |  
|Total                                |  | $                                | 567,486 |  | 100               | % |  | $ | 890,234 |  | 100 | %
|                                     |  |                                  |         |  |                   |   |  |   |         |  |     |  

Sales decreased by 36% to $567.5 million for the fiscal year ended January 3, 2010, from $890.2 million
for the fiscal year ended December 28, 2008. This decrease was due to several factors, including decreased demand from both our network operator customers and our original equipment manufacturer customers, which decreased by approximately 37%
and 36%, respectively. The decreases were primarily due to significantly reduced demand related to the global macroeconomic crisis and associated global credit crisis and economic recession that began in the fall of 2008. This economic instability
and the tight credit markets have impacted our customers demand for products throughout fiscal 2009.



37



---

##### Table of Contents

The following table presents an analysis of our sales based upon our various product groups:



|                                      |  |                                  |         |  |                   |   |  |   |         |  |     |  
|------------------------------------- |  | -------------------------------- | ------- |  | ----------------- | - |  | - | ------- |  | --- | -
|                                      |  | Fiscal Years Ended(in thousands) |        
|Wireless Communications Product Group |  | January 3, 2010                  |         |  | December 28, 2008 |  
|Antenna systems                       |  | $                                | 150,610 |  | 27                | % |  | $ | 233,090 |  | 26  | %
|Base station systems                  |  |                                  | 364,166 |  | 64                | % |  |   | 571,526 |  | 64  | %
|Coverage systems                      |  |                                  | 52,710  |  | 9                 | % |  |   | 85,618  |  | 10  | %
|                                      |  |                                  |         |  |                   |   |  |   |         |  |     |  
|Total                                 |  | $                                | 567,486 |  | 100               | % |  | $ | 890,234 |  | 100 | %
|                                      |  |                                  |         |  |                   |   |  |   |         |  |     |  

Antenna systems consist of base station antennas and tower-mounted amplifiers. Base station systems consist
of products that are installed into or around the base station of wireless networks and include products such as boosters, combiners, filters, radio frequency power amplifiers, VersaFlex cabinets and radio transceivers. Coverage systems consist
primarily of repeaters and advanced coverage solutions. The decrease in all product group sales as listed in the table above is due to the significantly reduced demand related to the global economic crisis and recession impacting both our original
equipment manufacturer and network operator customers during the year ended January 3, 2010 as compared to the year ended December 28, 2008.

We track the geographic location of our sales based upon the location of our customers to which we ship our products. However, since many of our original equipment manufacturer customers purchase products
from us at central locations and then re-ship the product with other base station equipment to locations throughout the world, we are unable to identify the final installation location of many of our products.

The following table presents an analysis of our sales based upon the geographic area to which a product was shipped:



|                    |  |                                  |         |  |                   |   |  |   |         |  |     |  
|------------------- |  | -------------------------------- | ------- |  | ----------------- | - |  | - | ------- |  | --- | -
|                    |  | Fiscal Years Ended(in thousands) |        
|Geographic Area     |  | January 3, 2010                  |         |  | December 28, 2008 |  
|Americas            |  | $                                | 163,794 |  | 29                | % |  | $ | 281,528 |  | 32  | %
|Asia Pacific        |  |                                  | 233,463 |  | 41                | % |  |   | 302,169 |  | 34  | %
|Europe              |  |                                  | 135,600 |  | 24                | % |  |   | 274,977 |  | 31  | %
|Other international |  |                                  | 34,629  |  | 6                 | % |  |   | 31,560  |  | 3   | %
|                    |  |                                  |         |  |                   |   |  |   |         |  |     |  
|Total               |  | $                                | 567,486 |  | 100               | % |  | $ | 890,234 |  | 100 | %
|                    |  |                                  |         |  |                   |   |  |   |         |  |     |  

Revenues decreased in all regions during fiscal 2009 as compared to fiscal 2008 with the exception of the
other international category. The slight increase in revenues in the other international category largely represents increased revenues in the Middle East region. The decrease in the other regions was largely due to
contraction in both the network operator channel and the original equipment manufacturer sales channel, resulting from the global macroeconomic crisis and recession. Since wireless network infrastructure spending is dependent on individual network
coverage and capacity demands, we do not believe that our revenue fluctuations for any geographic region are necessarily indicative of a trend for our future revenues by geographic area. In addition, as noted above, growth in one geographic location
may not reflect actual demand growth in that location due to the centralized buying processes of our original equipment manufacturer customers.

A large portion of our revenues are generated in currencies other than the U.S. Dollar. During the last year, the value of the U.S. Dollar has fluctuated significantly against many other currencies.
We have calculated that when comparing exchange rates in effect for the year ended January 3, 2010 to those in effect for the year ended December 28, 2008, the change in the value of foreign currencies as compared with the U.S. Dollar
had a negative impact on our revenues for fiscal 2009 of less than one percent. This impact did not have a material impact on our sales. We are unable to predict the future impact of such currency fluctuations on our future results.

For the year ended January 3, 2010, total sales to Nokia Siemens accounted for approximately 34% of sales for the year. For the year
ended December 28, 2008, total sales to Nokia Siemens accounted for approximately 31% of sales, and sales to Alcatel-Lucent accounted for approximately 17% of sales for the year. Sales to Alcatel-Lucent accounted for less than 10% of total
sales for the year ended January 3, 2010. Our business remains largely dependent upon a limited number of customers within the wireless communications market, and we cannot guarantee that we will continue to be successful in attracting new
customers or retaining or increasing business with our existing customers.



38



---

##### Table of Contents

A number of factors have caused delays and may cause future delays in new wireless
infrastructure and upgrade deployment schedules throughout the world, including those in the United States, Europe, Asia, South America and other areas. In addition, a number of factors may cause original equipment manufacturers to alter their
outsourcing strategies concerning certain wireless communications network products, which could cause such original equipment manufacturers to reduce or eliminate their demand for external supplies of such products or shift their demand to
alternative suppliers or internal suppliers. Such factors include lower perceived internal manufacturing costs and competitive reasons to remain vertically integrated. Due to the possible uncertainties associated with wireless infrastructure
deployments and original equipment manufacturer demand, we have experienced and expect to continue to experience significant fluctuations in demand from our original equipment manufacturer and network operator customers. Such fluctuations have
caused and may continue to cause significant reductions in our revenues and/or operating results, which has adversely impacted and may continue to adversely impact our business, financial condition and results of operations.

Cost of Sales and Gross Profit

Our cost of sales includes both fixed and variable cost components and consists primarily of materials, assembly and test labor, overhead, which includes equipment and facility depreciation,
transportation costs, warranty costs and amortization of product-related intangibles. Components of our fixed cost structure include test equipment and facility depreciation, purchasing and procurement expenses and quality assurance costs. Given the
fixed nature of such costs, typically the absorption of our overhead costs into inventory decreases and the amount of overhead variances expensed to cost of sales increases as manufacturing volumes decline since we have fewer units to absorb our
overhead costs against. Conversely, the absorption of our overhead costs into inventory increases and the amount of overhead variances expensed to cost of sales decreases as volumes increase since we have more units to absorb our overhead costs
against. As a result, our gross profit margins generally decrease as revenue and manufacturing volumes decline due to higher amounts of overhead variances expensed to cost of sales. Our gross profit margins generally increase as our revenue and
manufacturing volumes increase due to lower amounts of overhead variances expensed to cost of sales. Offsetting these general trends are absolute reductions to our total overhead costs and expenses.

The following table presents an analysis of our gross profit:



|                                     |  |                                  |         |  |                   |   |  |   |         |  |       |  
|------------------------------------ |  | -------------------------------- | ------- |  | ----------------- | - |  | - | ------- |  | ----- | -
|                                     |  | Fiscal Years Ended(in thousands) |        
|                                     |  | January 3, 2010                  |         |  | December 28, 2008 |  
|Net sales                            |  | $                                | 567,486 |  | 100.0             | % |  | $ | 890,234 |  | 100.0 | %
|Cost of sales:                       |  |                                  |         |  |                   |   |  |   |         |  |       |  
|Cost of sales                        |  |                                  | 420,568 |  | 74.1              | % |  |   | 687,310 |  | 77.2  | %
|Intangible amortization              |  |                                  | 2,494   |  | 0.5               | % |  |   | 19,166  |  | 2.1   | %
|Restructuring and impairment charges |  |                                  | 1,932   |  | 0.3               | % |  |   | 36,230  |  | 4.1   | %
|                                     |  |                                  |         |  |                   |   |  |   |         |  |       |  
|Total cost of sales                  |  |                                  | 424,994 |  | 74.9              | % |  |   | 742,706 |  | 83.4  | %
|                                     |  |                                  |         |  |                   |   |  |   |         |  |       |  
|Gross profit                         |  | $                                | 142,492 |  | 25.1              | % |  | $ | 147,528 |  | 16.6  | %
|                                     |  |                                  |         |  |                   |   |  |   |         |  |       |  

Our total gross profit decreased during fiscal 2009 compared to fiscal 2008, primarily as a result of our
decreased revenues. At the same time, our gross margin percentage significantly increased to 25.1% in fiscal 2009, as compared to 16.6% in fiscal 2008. Our cost reduction activities, which included manufacturing plant consolidations and closures,
helped to reduce our fixed costs and manufacturing cost overheads, which contributed to the improved gross margin percentage. The decrease in intangible amortization costs in 2009 is due to the intangible asset impairment recorded in the fourth
quarter of 2008 (see Note 6 of the Notes to Consolidated Financial Statements under Part II, Item 8, Financial Statements and Supplementary Data). We incurred approximately $1.9 million of restructuring and impairment charges in cost of
sales during fiscal 2009 primarily related to severance charges in the United States, Finland, Sweden and the UK. We incurred approximately $36.2 million of restructuring and impairment charges in cost of sales during fiscal 2008, primarily related
to the write-down and impairment of certain intangibles, which amounted to $29.5 million. The balance of these charges was related to the closure of our manufacturing facilities in Salisbury, Maryland and China, and the related impairment of
inventory that either has been or will be disposed of and is not expected to generate future revenue. These charges and amortization accounted for approximately 5.4% of the improved gross margins from 2008 to 2009. Included in cost of sales was $1.1
million for stock-based compensation expense that was recorded during fiscal 2009 for stock options and employee stock purchase plans pursuant to accounting guidance now codified as FASB ASC Topic 718, Compensation  Stock
Compensation. During fiscal 2008, approximately $1.0 million was recorded for similar expenses.



39



---

##### Table of Contents

The wireless communications infrastructure equipment industry is extremely competitive and
is characterized by rapid technological change, new product development and product obsolescence, evolving industry standards and significant price erosion over the life of a product. Certain of our competitors have aggressively lowered prices in an
attempt to gain market share. Due to these competitive pressures and the pressures of our customers to continually lower product costs, we expect that the average sales prices of our products will continue to decrease and negatively impact our gross
margins. In addition, we have introduced new products at lower sales prices and these lower sales prices have impacted the average sales prices of our products. We have also reduced prices on our existing products in response to our competitors and
customer demands. We currently expect that pricing pressures will remain strong in our industry. Future pricing actions by our competitors and us may adversely impact our gross profit margins and profitability, which could result in decreased
liquidity and adversely affect our business, financial condition and results of operations.

We continue to strive for
manufacturing and engineering cost reductions to offset pricing pressures on our products, as evidenced by our prior decisions to close and consolidate several of our manufacturing locations as part of our restructuring plans to reduce our
manufacturing costs over the last three years. However, we cannot guarantee that these cost reductions and our outsourcing or product redesign efforts will keep pace with price declines and cost increases. If we are unable to further reduce our
costs through our manufacturing, outsourcing and/or engineering efforts, our gross margins and profitability will be adversely affected. See Our average sales prices have declined and Our reliance on contract
manufacturers exposes us to risks under Part II, Item 1A, Risk Factors.

Operating Expenses

The following table presents a breakdown of our operating expenses by functional category and as a percentage of net
sales:



|                                     |  |                                  |         |  |                   |   |  |   |         |  |      |  
|------------------------------------ |  | -------------------------------- | ------- |  | ----------------- | - |  | - | ------- |  | ---- | -
|                                     |  | Fiscal Years Ended(in thousands) |        
|                                     |  | January 3, 2010                  |         |  | December 28, 2008 |  
|Operating Expenses                   |  |                                  |         |  |                   |   |  |   |         |  |      |  
|Sales and marketing                  |  | $                                | 34,233  |  | 6.0               | % |  | $ | 44,857  |  | 5.1  | %
|Research and development             |  |                                  | 58,920  |  | 10.4              | % |  |   | 77,652  |  | 8.7  | %
|General and administrative           |  |                                  | 47,658  |  | 8.4               | % |  |   | 63,491  |  | 7.1  | %
|Intangible amortization              |  |                                  | 947     |  | 0.2               | % |  |   | 9,508   |  | 1.1  | %
|Restructuring and impairment charges |  |                                  | 2,611   |  | 0.4               | % |  |   | 16,178  |  | 1.8  | %
|Goodwill impairment charge           |  |                                  |        |  |                  |   |  |   | 315,885 |  | 35.5 | %
|                                     |  |                                  |         |  |                   |   |  |   |         |  |      |  
|Total operating expenses             |  | $                                | 144,369 |  | 25.4              | % |  | $ | 527,571 |  | 59.3 | %
|                                     |  |                                  |         |  |                   |   |  |   |         |  |      |  

Sales and marketing expenses consist primarily of salaries and sales commissions, travel expenses,
advertising and marketing expenses, selling expenses, customer demonstration unit expenses and trade show expenses. Sales and marketing expenses decreased by $10.6 million, or 24%, during fiscal 2009 as compared to fiscal 2008. The decrease was due
primarily to lower personnel costs resulting from restructuring actions taken in the last year, lower travel expenses and lower trade show expenses, slightly offset by an increase in bad debt expense. In addition, expenses for fiscal 2008 included
an employee bonus accrual of $0.2 million. No bonuses were accrued during fiscal 2009.

Research and development expenses
consist primarily of ongoing design and development expenses for new wireless communications network products, as well as for advanced coverage solutions. We also incur design expenses associated with reducing the cost and improving the
manufacturability of our existing products. Research and development expenses can fluctuate dramatically from period to period depending on numerous factors including new product introduction schedules, prototype developments and hiring patterns.
Research and development expenses decreased by $18.7 million, or 24%, during fiscal 2009 as compared with fiscal 2008, due to reduced personnel costs from restructuring actions taken in the last year, lower travel expenses and lower professional
fees for outsourced research and development costs. In addition, a significant portion of the reduction in our research and development expense is related to the ramp-up of our India research and development center and the corresponding reduction in
engineering resources at higher cost locations. Also contributing to the decrease in research and development expenses were lower material expenses used in research and development activities. In addition, expenses for fiscal 2008 included an
employee bonus accrual of $1.3 million. No bonuses were accrued during fiscal 2009.

General and administrative expenses
consist primarily of salaries and other expenses for management, finance, information systems, legal fees, facilities and human resources. General and administrative expenses decreased by $15.8 million, or 25%, during fiscal 2009 as compared to
fiscal 2008. This decrease was due primarily to reduced payroll resulting from personnel reductions taken in the last year from our restructuring activities and lower tax, audit and professional fees. In addition, expenses for fiscal 2008 included
an employee bonus accrual of $1.4 million. No bonuses were accrued during fiscal 2009.



40



---

##### Table of Contents

Included in total operating expenses is approximately $3.3 million for compensation expense
that was recognized during fiscal 2009 for restricted stock, stock options and employee stock purchase plan awards pursuant to FASB ASC Topic 718. During fiscal 2008, approximately $3.8 million was recorded for similar expenses.

Amortization of customer-related intangibles from our acquisitions, amounted to $0.9 million for fiscal 2009, compared with $9.5 million for
fiscal 2008 (see Note 6 of the Notes to Consolidated Financial Statements included under Part II, Item 8, Financial Statements and Supplementary Data). The decreased amortization expense for fiscal 2009 was a result of the intangible
asset impairment recorded in the fourth quarter of 2008, which led to lower amortization in 2009. The amortization of these intangibles from our past acquisitions was fully completed in fiscal 2009.

Restructuring charges of $2.6 million were recorded in fiscal 2009, primarily related to severance costs in the United States, Finland and
Sweden, compared with charges of $16.2 million during fiscal 2008. The expenses for 2008 include charges related to the closure of our design and development center in Bristol, UK and the closure of manufacturing facilities in Salisbury, Maryland,
Finland and China. These expenses also include impairment charges related to the closure of these manufacturing facilities, the sale of the Salisbury, Maryland facility and severance costs related to the reduction of personnel.

For fiscal 2008, we recorded a goodwill impairment charge of $315.9 million. For further discussion of this charge, see Note 6 of the Notes
to Consolidated Financial Statements under Part II, Item 8, Financial Statements and Supplementary Data.

Other
Income (Expense), net

The following table presents an analysis of other income (expense), net:



|                                       |  |                                  |         |   |                   |      |    |  |   |         |   |  |      |   
|-------------------------------------- |  | -------------------------------- | ------- | - | ----------------- | ---- | -- |  | - | ------- | - |  | ---- | --
|                                       |  | Fiscal Years Ended(in thousands) |        
|                                       |  | January 3, 2010                  |         |   | December 28, 2008 |     
|Interest income                        |  | $                                | 572     |   |                   | 0.1  | %  |  | $ | 682     |   |  | 0.1  | % 
|Interest expense                       |  |                                  | (11,070 | ) |                   | (2.0 | )% |  |   | (11,233 | ) |  | (1.3 | )%
|Foreign currency gain                  |  |                                  | 3,964   |   |                   | 0.7  | %  |  |   | 11,455  |   |  | 1.3  | % 
|Gain on repurchase of convertible debt |  |                                  | 12,693  |   |                   | 2.3  | %  |  |   | 32,207  |   |  | 3.6  | % 
|Other income, net                      |  |                                  | 2,222   |   |                   | 0.4  | %  |  |   | 1,730   |   |  | 0.2  | % 
|                                       |  |                                  |         |   |                   |      |    |  |   |         |   |  |      |   
|Other income (expense), net            |  | $                                | 8,381   |   |                   | 1.5  | %  |  | $ | 34,841  |   |  | 3.9  | % 
|                                       |  |                                  |         |   |                   |      |    |  |   |         |   |  |      |   

Interest income and interest expense both decreased slightly during the year ended January 3, 2010, as
compared to the year ended December 28, 2008. Interest expense decreased slightly due to lower interest expense associated with the retirement of approximately $25.4 million of our long-term debt during fiscal 2009, as compared to fiscal 2008.
During fiscal 2009, we recognized a gain of $12.7 million on the purchase of $25.4 million in aggregate par value of our outstanding 1.875% convertible subordinated notes due 2024, compared to a gain of $32.2 million on the purchase of $43.7 million
in aggregate par value of the same notes during fiscal 2008. We recognized a net foreign currency gain of $4.0 million for the year ended January 3, 2010 primarily due to fluctuations between the U.S. Dollar, the Euro and the Swedish
Krona, compared to a foreign currency gain of $11.5 million for the year ended December 28, 2008.

Income Tax
Provision

Our effective tax rate for the year ended January 3, 2010 was an expense of approximately 50.5% of our
pre-tax income of $6.5 million. Our effective tax rate was reduced by approximately $2.7 million from a reduction in our liability for income taxes associated with uncertain tax positions as a result of the expiration of the statutory audit
period of the tax jurisdiction as well as being effectively settled under audit. The high effective tax rate as a percentage of income is primarily due to tax expense from operations in foreign jurisdictions, primarily China, which cannot be offset
against tax losses incurred in other jurisdictions, primarily the U.S. Due to the uncertainty of the timing and ultimate realization of our deferred tax assets, we have recorded a valuation allowance against a portion of the assets pursuant to the
accounting guidance now codified as FASB ASC Topic 740. As such, for the foreseeable future, the tax provision or tax benefit related to future U.S. earnings or losses will be offset substantially by a reduction in the valuation allowance. For the
year ended January 3, 2010, tax expense consisted primarily of taxes from operations in certain foreign jurisdictions, primarily China. We expect our effective tax rate to continue to fluctuate based on the percentage of income earned in each
tax jurisdiction. Our effective tax rate for the fiscal year ended December 28, 2008 was an expense of approximately 1.0% of our pre-tax losses of $345.2 million. Although we had a pre-tax loss in 2008, we recognized income tax expense because
of tax expense from operations in foreign jurisdictions, primarily China, which cannot be offset against tax losses in other jurisdictions, primarily the U.S.



41



---

##### Table of Contents

Net Income (Loss)

The following table presents a reconciliation of operating loss to net income (loss):



|                                  |  |                                  |        |   |                   |   |          |  
|--------------------------------- |  | -------------------------------- | ------ | - | ----------------- | - | -------- | -
|                                  |  | Fiscal Years Ended(in thousands) |       
|                                  |  | January 3, 2010                  |        |   | December 28, 2008 |  
|Operating loss                    |  | $                                | (1,877 | ) |                   | $ | (380,043 | )
|Other income (expense), net       |  |                                  | 8,381  |   |                   |   | 34,841   |  
|                                  |  |                                  |        |   |                   |   |          |  
|Income (loss) before income taxes |  |                                  | 6,504  |   |                   |   | (345,202 | )
|Income tax provision              |  |                                  | 3,282  |   |                   |   | 3,462    |  
|                                  |  |                                  |        |   |                   |   |          |  
|Net income (loss)                 |  | $                                | 3,222  |   |                   | $ | (348,664 | )
|                                  |  |                                  |        |   |                   |   |          |  

Our net income for the year ended January 3, 2010 was $3.2 million compared to a loss of $348.7 million
for the year ended December 28, 2008. The increase in our net income during fiscal 2009 as compared with fiscal 2008 is the result of lower manufacturing costs and operating expenses resulting from our worldwide cost-cutting and restructuring
activities, lower restructuring and impairment costs, lower intangible asset amortization costs resulting from prior year asset impairments and gains on our debt repurchases during the period. The net loss during fiscal 2008 was primarily
attributable to the goodwill impairment charge of $315.9 million incurred in the fourth quarter of 2008, partially offset by improved operating results.

Years ended December 28, 2008 and December 30, 2007

Net Sales

Sales increased by 14% to $890.2 million for the year ended December 28, 2008, from $780.5
million, for the year ended December 30, 2007. This increase was due to several factors, which included higher demand from our direct network operator customers, which increased by approximately $120.4 million or 57% for the year ended
December 28, 2008 as compared with the year ended December 30, 2007. These increases were slightly offset by a reduction in our sales to original equipment manufacturer customers, which decreased by $10.6 million or 2% from 2007 to 2008.
For the first three quarters of 2008, we experienced stronger demand from our direct network operator customers, as we believe many operators were spending to expand their 3G data capabilities in order to support increased user demand for data
intensive services on their wireless networks.

The following table presents an analysis of our sales based upon our various
customer groups:



|                                     |  |                                  |         |  |                   |   |  |   |         |  |     |  
|------------------------------------ |  | -------------------------------- | ------- |  | ----------------- | - |  | - | ------- |  | --- | -
|                                     |  | Fiscal Years Ended(in thousands) |        
|Customer Group                       |  | December 28, 2008                |         |  | December 30, 2007 |  
|Wireless network operators and other |  | $                                | 333,030 |  | 37                | % |  | $ | 212,675 |  | 27  | %
|Original equipment manufacturers     |  |                                  | 557,204 |  | 63                | % |  |   | 567,842 |  | 73  | %
|                                     |  |                                  |         |  |                   |   |  |   |         |  |     |  
|Total                                |  | $                                | 890,234 |  | 100               | % |  | $ | 780,517 |  | 100 | %
|                                     |  |                                  |         |  |                   |   |  |   |         |  |     |  

The following table presents an analysis of our sales based upon our various product groups:



|                                      |  |                                  |         |  |                   |   |  |   |         |  |     |  
|------------------------------------- |  | -------------------------------- | ------- |  | ----------------- | - |  | - | ------- |  | --- | -
|                                      |  | Fiscal Years Ended(in thousands) |        
|Wireless Communications Product Group |  | December 28, 2008                |         |  | December 30, 2007 |  
|Antenna systems                       |  | $                                | 233,090 |  | 26                | % |  | $ | 160,974 |  | 21  | %
|Base station systems                  |  |                                  | 571,526 |  | 64                | % |  |   | 565,084 |  | 72  | %
|Coverage systems                      |  |                                  | 85,618  |  | 10                | % |  |   | 54,459  |  | 7   | %
|                                      |  |                                  |         |  |                   |   |  |   |         |  |     |  
|Total                                 |  | $                                | 890,234 |  | 100               | % |  | $ | 780,517 |  | 100 | %
|                                      |  |                                  |         |  |                   |   |  |   |         |  |     |  



42



---

##### Table of Contents

The increase in all three product groups is the result of higher demand from our direct
network operator customers during the year ended December 28, 2008 as compared to the year ended December 30, 2007. In addition, the increase in coverage systems sales was due to increased demand for data service within indoor networks,
such as those included within the coverage solutions group.

The following table presents an analysis of our sales based upon
the geographic area to which a product was shipped:



|                    |  |                                  |         |  |                   |   |  |   |         |  |     |  
|------------------- |  | -------------------------------- | ------- |  | ----------------- | - |  | - | ------- |  | --- | -
|                    |  | Fiscal Years Ended(in thousands) |        
|Geographic Area     |  | December 28, 2008                |         |  | December 30, 2007 |  
|Americas            |  | $                                | 281,528 |  | 32                | % |  | $ | 220,798 |  | 28  | %
|Asia Pacific        |  |                                  | 302,169 |  | 34                | % |  |   | 203,904 |  | 26  | %
|Europe              |  |                                  | 274,977 |  | 31                | % |  |   | 334,095 |  | 43  | %
|Other international |  |                                  | 31,560  |  | 3                 | % |  |   | 21,720  |  | 3   | %
|                    |  |                                  |         |  |                   |   |  |   |         |  |     |  
|Total               |  | $                                | 890,234 |  | 100               | % |  | $ | 780,517 |  | 100 | %
|                    |  |                                  |         |  |                   |   |  |   |         |  |     |  

Revenues in the Americas increased by 28% during fiscal 2008 as compared to fiscal 2007, primarily as a
result of increased demand from direct network operator customers. The 48% increase in revenues in the Asia region is largely attributable to an increase in original equipment manufacturers taking delivery of products in Asia for the Asian market,
and increased demand in parts of the region including China, India and South Korea. The reduction in European revenues relates primarily to the shift in original equipment manufacturer deliveries to Asia as mentioned above. In addition, weakness in
the European direct operator market continued to contribute to the overall decline in revenues for Europe. The 45% increase in other international markets is primarily related to increased direct network operator sales in the Middle East. Since
wireless network infrastructure spending is dependent on individual network coverage and capacity demands, we do not believe that our revenue fluctuations for any geographic region are necessarily indicative of a predictable trend for our future
revenues by geographic area. In addition, as noted above, growth in one geographic location may not reflect actual demand growth in that location due to the centralized buying processes of our original equipment manufacturer customers.

We have calculated that when comparing exchange rates in effect for the year ended December 30, 2007 to those in effect for the year
ended December 28, 2008, approximately 4.7% of our 2008 revenues could be attributable to the increase in the value of foreign currencies as compared to the U.S. Dollar.

For the year ended December 28, 2008, total sales to Nokia Siemens accounted for approximately 31% of sales and sales to Alcatel-Lucent
accounted for approximately 17% for the period. For the year ended December 30, 2007, total sales to Nokia Siemens accounted for approximately 35% of sales and sales to Alcatel-Lucent accounted for approximately 16% of sales.

Cost of Sales and Gross Profit

The following table presents an analysis of our gross profit:



|                                     |  |                                  |         |  |                   |   |  |   |         |  |       |  
|------------------------------------ |  | -------------------------------- | ------- |  | ----------------- | - |  | - | ------- |  | ----- | -
|                                     |  | Fiscal Years Ended(in thousands) |        
|                                     |  | December 28, 2008                |         |  | December 30, 2007 |  
|Net sales                            |  | $                                | 890,234 |  | 100.0             | % |  | $ | 780,517 |  | 100.0 | %
|Cost of sales:                       |  |                                  |         |  |                   |   |  |   |         |  |       |  
|Cost of sales                        |  |                                  | 687,310 |  | 77.2              | % |  |   | 638,487 |  | 81.8  | %
|Intangible amortization              |  |                                  | 19,166  |  | 2.1               | % |  |   | 19,609  |  | 2.5   | %
|Restructuring and impairment charges |  |                                  | 36,230  |  | 4.1               | % |  |   | 35,170  |  | 4.5   | %
|                                     |  |                                  |         |  |                   |   |  |   |         |  |       |  
|Total cost of sales                  |  |                                  | 742,706 |  | 83.4              | % |  |   | 693,266 |  | 88.8  | %
|                                     |  |                                  |         |  |                   |   |  |   |         |  |       |  
|Gross profit                         |  | $                                | 147,528 |  | 16.6              | % |  | $ | 87,251  |  | 11.2  | %
|                                     |  |                                  |         |  |                   |   |  |   |         |  |       |  

Our total gross profit increased during fiscal 2008 compared to fiscal 2007, primarily as a result of our
increased revenues and cost reduction activities. Our increased revenues allowed us to absorb more of our manufacturing cost overhead and fixed costs, which in turn improved our gross margins. In addition, our cost reduction activities, which
included manufacturing plant consolidations and closures, helped to reduce our fixed costs and manufacturing cost overheads, which contributed to the improved gross margins. Also contributing to the increase in our gross margins for fiscal 2008 was
a significant increase in direct network operator sales, which typically carry higher gross margins than our original equipment



43



---

##### Table of Contents

manufacturer-based sales. The completion of the Filtronic plc wireless acquisition in the fourth quarter of 2006 added significant additional manufacturing overhead expenses which were not being
absorbed by our lower revenues during fiscal 2007. In addition, cost of sales includes $1.0 million for stock-based compensation expense that was recorded during fiscal 2008 for stock options and employee stock purchase plans pursuant to accounting
FASB ASC Topic 718. During fiscal 2007, approximately $0.7 million was recorded for similar expenses. We incurred approximately $36.2 million of restructuring and impairment charges in cost of sales during fiscal 2008, primarily related to the
write-down and impairment of certain intangibles, which amounted to $29.5 million. The balance of these charges was related to the closures of our manufacturing facilities in Salisbury, Maryland and China, and related impairment of inventory. For
fiscal 2007, we incurred a total of $35.2 million of restructuring and impairment costs primarily related to the closure of our Costa Rica and Philippines manufacturing locations and our 2007 restructuring activities. We also recorded a $2.7 million
intangible asset impairment for fiscal 2007 (see Note 6 of the Notes to Consolidated Financial Statements under Part II, Item 8, Financial Statements and Supplementary Data).

Operating Expenses

The following table presents a breakdown of our operating expenses by functional category and as a percentage of net sales:



|                                     |  |                                  |         |  |                   |   |  |   |         |  |      |  
|------------------------------------ |  | -------------------------------- | ------- |  | ----------------- | - |  | - | ------- |  | ---- | -
|                                     |  | Fiscal Years Ended(in thousands) |        
|                                     |  | December 28, 2008                |         |  | December 30, 2007 |  
|Operating Expenses                   |  |                                  |         |  |                   |   |  |   |         |  |      |  
|Sales and marketing                  |  | $                                | 44,857  |  | 5.1               | % |  | $ | 52,991  |  | 6.8  | %
|Research and development             |  |                                  | 77,652  |  | 8.7               | % |  |   | 84,992  |  | 10.9 | %
|General and administrative           |  |                                  | 63,491  |  | 7.1               | % |  |   | 75,267  |  | 9.6  | %
|Intangible amortization              |  |                                  | 9,508   |  | 1.1               | % |  |   | 11,033  |  | 1.4  | %
|In-process research and development  |  |                                  |        |  |                  |   |  |   | 208     |  | 0.0  | %
|Restructuring and impairment charges |  |                                  | 16,178  |  | 1.8               | % |  |   | 11,296  |  | 1.5  | %
|Goodwill impairment charge           |  |                                  | 315,885 |  | 35.5              | % |  |   | 151,735 |  | 19.4 | %
|                                     |  |                                  |         |  |                   |   |  |   |         |  |      |  
|Total operating expenses             |  | $                                | 527,571 |  | 59.3              | % |  | $ | 387,522 |  | 49.6 | %
|                                     |  |                                  |         |  |                   |   |  |   |         |  |      |  

Sales and marketing expenses decreased by $8.1 million, or 15%, during fiscal 2008 as compared to fiscal
2007. The decrease resulted primarily from decreased payroll associated with personnel reductions, as well as decreased travel expenses, lower marketing expenses and lower bad debt costs.

Research and development expenses decreased by $7.3 million, or 9%, during fiscal 2008 as compared to fiscal 2007, primarily due to
decreased payroll associated with personnel reductions offset slightly by the increase in engineering expenses in India. In addition, for fiscal 2008 we had reduced material expenses and lower general office expenses as well as decreased development
activities.

General and administrative expenses decreased $11.8 million, or 16%, during fiscal 2008 as compared to fiscal
2007. This decrease was due to several factors including, decreased payroll associated with lower personnel levels as a result of the various facility closures, lower travel expenses and decreased general office expenses.

In addition, total operating expenses includes approximately $3.8 million for compensation expense that was recognized during fiscal 2008
for restricted stock, stock options and employee stock purchase plan awards pursuant to FASB ASC Topic 718. During fiscal 2007, approximately $4.2 million was recorded for similar expenses.

Amortization of customer-related intangibles from our prior acquisitions amounted to $9.5 million for fiscal 2008, compared to $11.0 million
for fiscal 2007. The decrease in 2008 was related to certain intangibles being fully amortized during 2008 and the impairment of intangibles in the fourth quarter of 2008.

We recorded a one-time charge in fiscal 2007 of $0.2 million for purchased in-process research and development associated with the
acquisition of Cognition Networks LLC in the fourth quarter of 2007. This charge related to certain product development activities of the acquired businesses that had not reached technological feasibility. Successful development was uncertain and no
future alternative uses existed.

For fiscal 2008, we recognized restructuring and impairment charges of $16.2 million. This
includes expenses related to the closure of our design and development center in Bristol, UK and the closure of manufacturing facilities in Salisbury, Maryland, Finland and China. These expenses include impairment charges related to the closure and
sale of said facilities and severance costs related to the reduction of personnel. For fiscal 2007, we recognized restructuring and impairment charges of $11.3 million.



44



---

##### Table of Contents

For fiscal 2008, we recorded a goodwill impairment charge of $315.9 million, compared to an
impairment charge of $151.7 million for fiscal 2007. For further discussion of these charges, see Note 6 of the Notes to Consolidated Financial Statements under Part II, Item 8, Financial Statements and Supplementary Data.

Other Income (Expense), net

The following table presents a breakdown of other income (expense), net:



|                                       |  |                                  |         |   |                   |      |    |  |   |         |   |  |      |   
|-------------------------------------- |  | -------------------------------- | ------- | - | ----------------- | ---- | -- |  | - | ------- | - |  | ---- | --
|                                       |  | Fiscal Years Ended(in thousands) |        
|                                       |  | December 28, 2008                |         |   | December 30, 2007 |     
|Interest income                        |  | $                                | 682     |   |                   | 0.1  | %  |  | $ | 2,137   |   |  | 0.3  | % 
|Interest expense                       |  |                                  | (11,233 | ) |                   | (1.3 | )% |  |   | (10,086 | ) |  | (1.3 | )%
|Foreign currency gain                  |  |                                  | 11,455  |   |                   | 1.3  | %  |  |   | 910     |   |  | 0.1  | % 
|Gain on repurchase of convertible debt |  |                                  | 32,207  |   |                   | 3.6  | %  |  |   | 2,101   |   |  |     | % 
|Other income, net                      |  |                                  | 1,730   |   |                   | 0.2  | %  |  |   | 2,872   |   |  | 0.6  | % 
|                                       |  |                                  |         |   |                   |      |    |  |   |         |   |  |      |   
|Other income (expense), net            |  | $                                | 34,841  |   |                   | 3.9  | %  |  | $ | (2,066  | ) |  | (0.3 | )%
|                                       |  |                                  |         |   |                   |      |    |  |   |         |   |  |      |   

Interest income decreased by $1.5 million during fiscal 2008 primarily due to our lower cash balances, as
well as the significantly reduced short-term interest rates. Interest expense increased by $1.1 million due primarily to additional interest expense related to the issuance of $150.0 million 3.875% convertible subordinated notes in September 2007 as
well as interest expense related to borrowings under our line of credit during fiscal 2008. We recognized a net foreign currency gain of $11.5 million for the year ended December 28, 2008, primarily due to the strength of the U.S. Dollar
versus several currencies, including the Euro and Swedish Krona, as compared to the year ended December 30, 2007. We recognized a gain of $32.2 million on the purchase of $43.7 million in aggregate par value of our outstanding 1.875%
convertible subordinated notes due 2024 that were purchased at a discount. During 2007, we recognized a gain of $2.1 million related to the repurchase of $116.4 million of 1.25% convertible subordinated notes due July 2008.

Income Tax Provision

Our effective tax rate for the year ended December 28, 2008 was an expense of approximately 1.0% of our pre-tax losses of $345.2 million. Due to the uncertainty as to the timing and ultimate
realization of our deferred tax assets, we recorded a valuation allowance against a portion of our deferred tax assets pursuant to FASB ASC Topic 740. For the year ended December 30, 2007, tax expense consisted primarily of taxes or tax
benefits in certain foreign jurisdictions. However, during 2007, income tax expense was impacted by a required income tax payment of approximately $1.6 million related to the sale of our building in the Philippines, as well as a charge of $0.4
million related to a settlement with the Internal Revenue Service related to an income tax examination for the 2004 tax year.

Net Loss

The following table presents a reconciliation of operating loss to net loss:



|                            |  |                                  |          |   |                  |   |          |  
|--------------------------- |  | -------------------------------- | -------- | - | ---------------- | - | -------- | -
|                            |  | Fiscal Years Ended(in thousands) |         
|                            |  | December 28,2008                 |          |   | December 30,2007 |  
|Operating loss              |  | $                                | (380,043 | ) |                  | $ | (300,271 | )
|Other income (expense), net |  |                                  | 34,841   |   |                  |   | (2,066   | )
|                            |  |                                  |          |   |                  |   |          |  
|Loss before income taxes    |  |                                  | (345,202 | ) |                  |   | (302,337 | )
|Income tax provision        |  |                                  | 3,462    |   |                  |   | 7,198    |  
|                            |  |                                  |          |   |                  |   |          |  
|Net loss                    |  | $                                | (348,664 | ) |                  | $ | (309,535 | )
|                            |  |                                  |          |   |                  |   |          |  

Our net loss for fiscal 2008 of $348.7 million compared to a net loss of $309.5 million for fiscal 2007. The
increase in the loss during fiscal 2008 as compared to fiscal 2007 is primarily due to the goodwill impairment charge of $315.9 million incurred in the fourth quarter of 2008, versus the goodwill impairment charge of $151.7 million incurred in 2007.



45



---

##### Table of Contents

Liquidity and Capital Resources

We have historically financed our operations through a combination of cash on hand, cash provided from operations, equipment lease
financings, available borrowings under bank lines of credit, private debt placements and both private and public equity offerings. Our principal sources of liquidity consist of existing cash balances, funds expected to be generated from future
operations and borrowings under our Credit Agreement with Wells Fargo Capital Finance, LLC. As of January 3, 2010, we had working capital of $175.4 million, including $60.4 million in unrestricted cash and cash equivalents as compared to
working capital of $179.1 million at December 28, 2008, which included $46.9 million in unrestricted cash and cash equivalents. We currently invest our excess cash in short-term, investment-grade, money-market instruments with maturities
of three months or less. We typically hold such investments until maturity and then reinvest the proceeds in similar money market instruments. We believe that all of our cash investments would be readily available to us should the need arise.

Cash Flows

The following table summarizes our cash flows for the years ended January 3, 2010 and December 28, 2008:



|                                                                    |  |                                  |         |   |                  |   |         |  
|------------------------------------------------------------------- |  | -------------------------------- | ------- | - | ---------------- | - | ------- | -
|                                                                    |  | Fiscal Years Ended(in thousands) |        
|                                                                    |  | January 3,2010                   |         |   | December 28,2008 |  
|Net cash provided by (used in):                                     |  |                                  |         |   |                  |   |         |  
|Operating activities                                                |  | $                                | 31,269  |   |                  | $ | 27,306  |  
|Investing activities                                                |  |                                  | (2,575  | ) |                  |   | (8,695  | )
|Financing activities                                                |  |                                  | (13,484 | ) |                  |   | (23,940 | )
|Effect of foreign currency translation on cash and cash equivalents |  |                                  | (1,677  | ) |                  |   | (5,916  | )
|                                                                    |  |                                  |         |   |                  |   |         |  
|Net increase (decrease) in cash and cash equivalents                |  | $                                | 13,533  |   |                  | $ | (11,245 | )
|                                                                    |  |                                  |         |   |                  |   |         |  

Operating Activities

Net cash provided by operations during the year ended January 3, 2010 was $31.3 million as compared with $27.3 million during the year ended December 28, 2008. The increase in cash flow from
operations is due to improved net income, increased cost controls, reduced operating expenses and improved working capital management during fiscal 2009. We also had a reduction in restructuring and impairment charges of approximately $48 million.

Investing Activities

Net cash used in investing activities during the year ended January 3, 2010 was $2.6 million as compared with net cash used in investing activities of $8.7 million during the year ended
December 28, 2008. The net cash used in investing activities during fiscal 2009 represents capital expenditures of $10.2 million, offset by a reduction in our restricted cash of $0.8 million, proceeds from a settlement of litigation of $2.0
million, proceeds from the final installment payment from the sale of the Arkivator business in 2006 of $0.5 million, proceeds from the sale of the Salisbury, Maryland building of $3.9 million and proceeds from the sale of fixed assets of $0.4
million. Capital expenditures for the year ended December 28, 2008 were approximately $13.5 million. The majority of the capital spending during both periods related to computer hardware and test equipment utilized in our manufacturing and
research and development areas.

Financing Activities

Net cash used in financing activities of $13.5 million during the year ended January 3, 2010 relates primarily to the repurchase of
$25.4 million in aggregate par value of our 1.875% convertible subordinated notes due 2024 for approximately $12.4 million, as well as $1.3 million in debt issuance costs incurred related to our new Credit Agreement. Net cash used in financing
activities of $23.9 million for the year ended December 28, 2008 represents the $13.6 million redemption of the 1.25% convertible notes due July 2008, excluding accrued interest, and the repurchase of $43.7 million par value of our 1.875%
convertible subordinated notes due November 2024 for approximately $10.9 million.

Future Cash Requirements

Our principal sources of liquidity consist of our existing cash balances, funds expected to be generated from operations and our Credit
Agreement with Wells Fargo Capital Finance, LLC, described below. We currently believe that these sources will provide us with sufficient funds to finance our current operations for at least the next twelve months. We regularly review our cash
funding requirements and attempt to meet those requirements through a combination of cash on hand and cash provided by operations. Our ability to increase revenues and generate profits is subject to numerous risks and uncertainties, and any
significant decrease in our revenues or profitability would reduce our operating cash flows and erode our existing cash balances. No assurances can be given that we will be able to generate positive operating cash flows in the future or maintain
and/or grow our existing cash balances.



46



---

##### Table of Contents

We had a total of $280.9 million of long-term convertible subordinated notes outstanding at
January 3, 2010, consisting of $130.9 million of 1.875% convertible subordinated notes due 2024 (2024 Notes) and $150.0 million of 3.875% convertible subordinated notes due 2027 (2027 Notes). Holders of the 2024 Notes
may require us to repurchase all or a portion of their notes for cash on November 15, 2011, 2014 and 2019 at 100% of the principal amount of the notes, plus accrued and unpaid interest. Holders of the 2027 Notes may require us to repurchase all
or a portion of their notes for cash on October 1, 2014, 2017 and 2022 at 100% of the principal amount of the notes, plus accrued and unpaid interest. No assurance can be given that we will be able to generate positive operating cash flows in
the future or maintain and/or grow our existing cash balances. If we do not generate sufficient cash from operations, or improve our ability to generate cash, we may not have sufficient funds available to repurchase our debt on the dates referenced
above. If we have not retired the debt prior to the repurchase dates referenced above, and if we do not have adequate cash available at that time, we would be required to refinance the notes and no assurance can be given that we will be able to
refinance the notes on terms acceptable to us or at all given current conditions in the credit markets. If our financial performance is poor or if credit markets remain tight, we will likely encounter a more difficult environment in terms of raising
additional financing. If we are not able to repay or refinance the notes or if we experience a prolonged period of reduced customer demand for our products, our ability to maintain operations may be impacted.

Credit Agreement

We entered into a Credit Agreement with Wells Fargo Capital Finance, LLC on April 3, 2009. See Note 5 of the Notes to Consolidated Financial Statements under Part II, Item 8, Financial Statements and Supplementary
Data. Pursuant to the Credit Agreement, the lenders thereunder have made available to us a senior secured credit facility in the form of a revolving line of credit up to a maximum of $50.0 million. Availability under the Credit Agreement is
based on the calculation of our borrowing base as defined in the Credit Agreement. The Credit Agreement is secured by a first priority security interest on a majority of our assets, including without limitation, all accounts, equipment, inventory,
chattel paper, records, intangibles, deposit accounts, cash and cash equivalents and proceeds of the foregoing. The Credit Agreement expires on August 15, 2011. The Credit Agreement contains customary affirmative and negative covenants for
credit facilities of this type, including limitations on us with respect to indebtedness, liens, investments, distributions, mergers and acquisitions and dispositions of assets. The Credit Agreement also includes financial covenants including
minimum EBITDA and maximum capital expenditures that are applicable only if the availability under our line of credit falls below $20.0 million. On December 31, 2009, the Company entered into a Waiver, Consent, Amendment to the Credit
Agreement. Under the amendment, certain immaterial technical defaults by the Company were waived by Wells Fargo. In addition, certain financial covenants were amended, including the lowering of the minimum EBITDA thresholds. As of January 3,
2010, the Company had approximately $29.4 million of availability under the Credit Agreement, of which approximately $5 million was utilized for an outstanding letter of credit.

Also on April 3, 2009, in connection with entering into the Credit Agreement referenced above, we terminated our Amended Receivables
Purchase Agreement with Deutsche Bank AG. As of the date of termination, we did not have any borrowings outstanding under the Amended Receivables Purchase Agreement. In addition, we did not incur any early termination penalties in connection with
the termination of the Amended Receivables Purchase Agreement.

On occasion, we have previously utilized both operating and
capital lease financing for certain equipment purchases used in our manufacturing and research and development operations and may selectively continue to do so in the future. We may require additional funds in the future to support our working
capital requirements or for other purposes such as acquisitions, and we may seek to raise such additional funds through the sale of public or private equity and/or debt financing, as well as from other sources. Our ability to secure additional
financing or sources of funding is dependent upon our financial performance, credit rating and the market price for our Common Stock, which are all directly impacted by our ability to grow revenues and generate profits. In addition, our ability to
obtain financing is directly dependent upon the availability of financial markets to provide sources of financing on reasonable terms and conditions. During the last half of fiscal 2008 and throughout fiscal 2009, the capital and credit markets have
experienced extreme volatility and disruption. In several cases, the markets have exerted downward pressure on stock prices and credit capacity for certain issuers. Given current market conditions, we can make no guarantee that we will be able to
obtain additional financing or secure new financing arrangements in the future. If our operating performance was to deteriorate and our cash balances were to be significantly reduced, we would likely encounter a more difficult environment in terms
of raising additional funding to support our business, the cost of additional funding or borrowing could increase, and we may be required to further reduce operating expenses or scale back operations.



47



---

##### Table of Contents

Off-Balance Sheet Arrangements

Our off-balance sheet arrangements consist primarily of conventional operating leases, purchase commitments and other commitments arising in
the normal course of business, as further discussed below under Contractual Obligations and Commercial Commitments. As of January 3, 2010, we did not have any other relationships with unconsolidated entities or financial partners,
such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Contractual Obligations and Commercial Commitments

We incur various contractual obligations and commercial commitments in our normal course of business. Such obligations and commitments
consist primarily of the following:

Short-Term Debt

At January 3, 2010, we had no short-term debt outstanding.

Long-Term Debt

At January 3, 2010, we had $280.9 million of long-term debt, consisting of our outstanding $150.0 million par value 3.875% convertible subordinated notes due October 2027 and $130.9 million 1.875% convertible subordinated notes due
November 2024. These notes are convertible into shares of our Common Stock at the option of the holder (see Note 5 of the Notes to Consolidated Financial Statements included under Part II, Item 8, Financial Statements and Supplementary
Data.)

Operating Lease Obligations

We have various operating leases covering vehicles, equipment, facilities and sales offices located throughout the world.

Purchase Commitments with Contract Manufacturers

We generally issue
purchase orders to our contract manufacturers with delivery dates from four to six weeks from the purchase order date. In addition, we regularly provide our contract manufacturers with rolling six-month forecasts of material and finished goods
requirements for planning and long-lead time parts procurement purposes only. We are committed to accept delivery of materials pursuant to our purchase orders subject to various contract provisions which allow us to delay receipt of such orders or
cancel orders beyond certain agreed lead times. Such cancellations may or may not result in cancellation costs payable by us. In the past, we have been required to take delivery of materials from our suppliers that were in excess of our requirements
and we have previously recognized charges and expenses related to such excess material. If we are unable to adequately manage our contract manufacturers and adjust such commitments for changes in demand, we may incur additional inventory expenses
related to excess and obsolete inventory. These expenses could have a material adverse effect on our business, financial condition and results of operations.

Contract Agreements with Contract Manufacturers

Our typical contractual
agreements with contract manufacturers do not require us to purchase a fixed amount of products or generate a fixed amount of profit for the contract manufacturer. Pricing and other terms are normally reviewed on a quarterly basis. To further
clarify the pricing clauses common in our contracts with contract manufacturers, the actual revenue margin of a third-party contract manufacturer is proprietary information that is not readily available to any customer. While our agreements normally
state that pricing shall be on an open book basis, they also state that such basis is to be consistent with current practices and that it must be consistent with their confidentiality terms with other third parties. What this means in practice is
that it is extremely difficult for Powerwave to accurately forecast what is actually being earned by a contract manufacturer, therefore it is typical that an ongoing negotiation occurs between the parties to determine what actual prices will be. If
we are unable to adequately manage and negotiate pricing with our contract manufacturing partners, we may pay higher prices for contract manufacturing services which would have a negative impact on our business, operating margins, financial
condition and results of operations.

Other Commitments

We also incur various purchase obligations with other vendors and suppliers for the purchase of inventory, as well as other goods and
services, in the normal course of business. These obligations are generally evidenced by purchase orders with delivery dates from four to six weeks from the purchase order date, and in certain cases, supply agreements that contain the terms and
conditions associated with these purchase arrangements. We are committed to accept delivery of materials pursuant to such purchase orders; however, various contract provisions allow us to delay receipt of orders or cancel orders that are beyond
certain agreed lead times. These cancellations may or may not result in cancellation costs payable by us. In



48



---

##### Table of Contents

the past, we have been required to take delivery of materials from our suppliers that were in excess of our requirements, and we have previously recognized charges and expenses related to this
excess material. If we are not able to adequately manage our supply chain and adjust these commitments for changes in demand, we may incur additional inventory expenses related to excess and obsolete inventory. These expenses could have a material
adverse effect on our business, financial condition and results of operations.

Guarantees Under Letters of Credit

We occasionally issue guarantees for certain contingent liabilities under various contractual arrangements, including customer
contracts, self-insured retentions under certain insurance policies and governmental value-added tax compliance programs. These guarantees normally take the form of standby letters of credit issued by our bank that may be secured by our Credit
Agreement, cash deposits or pledges or performance bonds issued by an insurance company.

Contractual Obligations

As of January 3, 2010, expected future cash payments related to contractual obligations and commercial commitments
were as follows:



|                                                           |  |                                      |        |          |   |          |  |            |        |       |   |         |  |   |        
|---------------------------------------------------------- |  | ------------------------------------ | ------ | -------- | - | -------- |  | ---------- | ------ | ----- | - | ------- |  | - | -------
|                                                           |  | Payments Due by Period(in
thousands)
|                                                           |  | Less than 1Year                      |        | 1-3Years |   | 3-5Years |  | Thereafter |        | Total
|Short-term and long-term debt (including interest) (1) (2) |  | $                                    | 8,267  |          | $ | 16,533   |  | $          | 16,533 |       | $ | 379,230 |  | $ | 420,563
|Operating lease obligations                                |  |                                      | 4,238  |          |   | 2,848    |  |            | 1,271  |       |   | 734     |  |   | 9,091  
|Purchase commitments with contract manufacturers           |  |                                      | 16,534 |          |   |         |  |            |       |       |   |        |  |   | 16,534 
|Other purchase commitments                                 |  |                                      | 38,104 |          |   |         |  |            |       |       |   |        |  |   | 38,104 
|                                                           |  |                                      |        |          |   |          |  |            |        |       |   |         |  |   |        
|Total contractual obligations and commercial commitments   |  | $                                    | 67,143 |          | $ | 19,381   |  | $          | 17,804 |       | $ | 379,964 |  | $ | 484,292
|                                                           |  |                                      |        |          |   |          |  |            |        |       |   |         |  |   |        



|(1) | Holders of the $130.9 million outstanding principal amount of convertible subordinated notes due 2024 may require us to repurchase all or a portion of
their notes for cash on November 15, 2011, 2014 and 2019 at 100% of the principal amount of the notes, plus accrued and unpaid interest up to but not including the date of such repurchase. The figures in the table assume the notes will be held
to maturity and the holders will not utilize the repurchase option.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Holders of the $150.0 million outstanding principal amount of convertible subordinated notes due 2027 may require us to repurchase all or a portion of
their notes for cash on October 1, 2014, 2017 and 2022 at 100% of the principal amount of the notes, plus accrued and unpaid interest up to but not including the date of such repurchase. The figures in the table assume the notes will be held to
maturity and the holders will not utilize the repurchase option.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We believe that our existing cash balances
and funds expected to be generated from future operations and our available credit facilities will be sufficient to satisfy these contractual obligations and commercial commitments and that the ultimate payments associated with these commitments
will not have a material adverse effect on our liquidity position.



49



---

##### Table of Contents

|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------

Our financial instruments include cash and cash equivalents, restricted cash, short-term investments, capital leases and long-term debt. As of January 3, 2010, the carrying values of our financial
instruments approximated their fair values based upon current market prices and rates except for long-term debt for which the fair value is estimated based on the quoted market price for the debt.

We have exposure to a number of market risks in the ordinary course of business. These risks, which include foreign currency risk, interest
rate risk and commodity price risk, arise in the normal course of business rather than from trading. We have examined our exposure to these risks and have concluded that none of our exposure in these areas are material to fair values, cash flows or
earnings.

Foreign Currency Risk

Our international operations represent a substantial portion of our operating results and asset base. We maintain various operations in multiple foreign locations including Brazil, China, Estonia,
Finland, France, Germany, India, Singapore, Sweden, Thailand and the United Kingdom. These international operations generally incur local operating costs and generate third-party revenues in currencies other than the U.S. Dollar. These foreign
currency revenues and expenses expose us to foreign currency risk and give rise to foreign currency exchange gains and losses. We do not presently hedge against the risks of foreign currently fluctuations. In the event of significant
fluctuations in foreign currencies, we may experience declines in revenue and adverse impacts on operating results and such changes could be material.

We regularly pursue new customers in various international locations where new deployments or upgrades to existing wireless communication networks are planned. As a result, a significant portion of our
revenues are derived from international sources (excluding North America), with our international customers accounting for approximately 73% of our net sales during fiscal 2009, 70% of our net sales during fiscal 2008 and 73% of our fiscal 2007 net
sales. International sources include Europe, Asia and South America, where there has been historical volatility in several of the regions currencies. Changes in the value of the U.S. Dollar versus the local currency in which our products
are sold exposes us to foreign currency risk since the weakening of an international customers local currency and banking market may negatively impact such customers ability to meet their payment obligations to us. Alternatively, if a
sale price is denominated in U.S. Dollars and the value of the Dollar falls, we may suffer a loss due to the lower value of the Dollar. In addition, some of our international customers require that we transact business with them in their own local
currency, regardless of the location of our operations, which also exposes us to foreign currency risk. Since we sell products or services in foreign currencies, we are required to convert the payments received into U.S. Dollars or utilize such
foreign currencies as payments for expenses of our business, which gives rise to foreign exchange gains and losses. Given the uncertainty as to when and what specific foreign currencies we may be required or decide to accept as payment from our
international customers, we cannot predict the ultimate impact that such a decision would have on our business, financial condition and results of operations. For the year ended January 3, 2010, we recorded a foreign exchange translation gain
of $4.0 million due to fluctuations in the value of the U.S. Dollar. There can be no assurance that we will not incur foreign exchange translation losses in the future if the Dollar further weakens.

Interest Rate Risk

As of January 3, 2010, we had cash equivalents of approximately $63.0 million in both interest and non-interest bearing accounts, including restricted cash. We also had $130.9 million of our
convertible subordinated notes due November 2024 at a fixed annual interest rate of 1.875% and $150.0 million of convertible subordinated notes due October 2027 at a fixed rate of 3.875%. We have exposure to interest rate risk primarily through our
convertible subordinated debt, our Credit Agreement and our cash investment portfolio. Short-term investment rates decreased significantly during 2008 and remained low throughout 2009 as the U.S. Federal Reserve has attempted to mitigate the impact
of the recession. In spite of this, we believe that we are not subject to material fluctuations in principal given the short-term maturities and high-grade investment quality of our investment portfolio, and the fact that the effective interest rate
of our portfolio tracks closely to various short-term money market interest rate benchmarks. Therefore, we currently do not use derivative instruments to manage our interest rate risk. Based on our overall interest rate exposure at January 3,
2010, we do not believe that a 100 basis point change in interest rates would have a material effect on our consolidated business, financial condition or results of operations.

Commodity Price Risk

Our internal manufacturing operations and contract manufacturers require significant quantities of transistors, semiconductors and various metals for use in the manufacture of our products. Therefore, we
are exposed to certain commodity price risks associated with variations in the market prices for these electronic components as these prices directly impact the cost to manufacture products and the price we pay our contract manufacturers to
manufacture our products. We attempt to manage this risk by entering into supply agreements with our contract manufacturers and various suppliers of these



50



---

##### Table of Contents

components in order to mitigate the impact of any fluctuations in commodity prices. These supply agreements are not long-term supply agreements. If we or our contract manufacturers become subject
to a significant increase in the price of one of these components, we may be unable to pass such costs onto our customers. In addition, certain transistors and semiconductors are regularly revised or changed by their manufacturers, which may result
in a requirement for us to redesign a product that utilizes these components or cease the production of such products. In such events, our business, financial condition or results of operations could be adversely affected. Additionally, we require
specialized electronic test equipment, which is utilized in both the design and manufacture of our products. The electronic test equipment is available from limited sources and may not be available in the time periods required for us to meet our
customers demand. If required, we may be forced to pay higher prices for equipment and/or we may not be able to obtain the equipment in the time periods required, which would then delay our development or production of new products. These
delays and any potential additional costs could have a material adverse effect on our business, financial condition or results of operations. Prior increases to the price of oil and energy have translated into higher freight and transportation costs
and, in certain cases, higher raw material supply costs. These higher costs negatively impacted our production costs. We may not be able to pass on these higher costs to our customers and if we insist on raising prices, our customers may curtail
their purchases from us. There are significant concerns in the business community about inflationary pressures on costs. Further increases in energy prices may negatively impact our business, financial condition and results of operations.



51



---

##### Table of Contents

|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------

Index to Financial Statements/Schedule:



|                                                          |  |   
|--------------------------------------------------------- |  | --
|Consolidated Financial Statements                         |  |   
|                                                          | 
|Report of Independent Registered Public Accounting Firm   |  | 53
|                                                          | 
|Consolidated Balance Sheets                               |  | 55
|                                                          | 
|Consolidated Statements of Operations                     |  | 56
|                                                          | 
|Consolidated Statements of Comprehensive Operations       |  | 57
|                                                          | 
|Consolidated Statements of Shareholders Equity (Deficit) |  | 58
|                                                          | 
|Consolidated Statements of Cash Flows                     |  | 59
|                                                          | 
|Notes to Consolidated Financial Statements                |  | 61
|                                                          | 
|Quarterly Financial Data (Unaudited)                      |  | 88
|                                                          | 
|Financial Statement Schedule                              |  |   
|                                                          | 
|Schedule II  Valuation and Qualifying Accounts           |  | 97



52



---

##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Powerwave Technologies, Inc.:

We have audited the accompanying consolidated balance sheets of Powerwave Technologies, Inc. and subsidiaries (the Company) as of
January 3, 2010 and December 28, 2008, and the related consolidated statements of operations, shareholders equity (deficit), and cash flows for each of the years ended January 3, 2010, December 28, 2008 and
December 30, 2007. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Companys management. Our
responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Powerwave Technologies, Inc. and subsidiaries at January 3, 2010 and December 28, 2008, and the results of
their operations and their cash flows for each of the years ended January 3, 2010, December 28, 2008 and December 30, 2007, in conformity with accounting principles generally accepted in the United States of America. Also, in our
opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

As discussed in Note 15 to the consolidated financial statements, the Company adopted the provisions of accounting guidance now codified as Financial
Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 740, Income Taxes in 2007.

We have also
audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Companys internal control over financial reporting as of January 3, 2010, based on the criteria established in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 19, 2010 expressed an unqualified opinion on the Companys internal control over financial
reporting.



|                         
|-------------------------
|/s/ DELOITTE & TOUCHE LLP
|                         
|Costa Mesa, California   

February 19, 2010



53



---

##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Powerwave Technologies, Inc.:

We have audited the internal control over financial reporting of Powerwave Technologies, Inc. and subsidiaries (the Company) as of January 3, 2010, based on the criteria established
in Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Companys management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Managements Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an
opinion on the Companys internal control over financial reporting based on our audit.

We conducted our audit in accordance with the
standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A companys internal control over financial reporting is a process designed by, or under the supervision of, the companys principal executive and principal financial officers, or persons
performing similar functions, and effected by the companys board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or
fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting as of January 3, 2010, based on the criteria established in Internal Control  Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended January 3, 2010, of the Company and our report dated February 19, 2010, expressed an unqualified opinion
on those consolidated financial statements and financial statement schedule.



|                         
|-------------------------
|/s/ DELOITTE & TOUCHE LLP
|                         
|Costa Mesa, California   

February 19, 2010



54



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)



|                                                                                                                                        |  |                |          |   |                  |   |          |  
|--------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | -------- | - | ---------------- | - | -------- | -
|                                                                                                                                        |  | January 3,2010 |          |   | December 28,2008 |  
|ASSETS                                                                                                                                  |  |                |          |   |                  |   |          |  
|Current assets:                                                                                                                         |  |                |          |   |                  |   |          |  
|Cash and cash equivalents                                                                                                               |  | $              | 60,439   |   |                  | $ | 46,906   |  
|Restricted cash                                                                                                                         |  |                | 2,600    |   |                  |   | 3,433    |  
|Accounts receivable, net of allowance for sales returns and doubtful accounts of $8,349 and $9,478, respectively                        |  |                | 142,949  |   |                  |   | 213,871  |  
|Inventories                                                                                                                             |  |                | 60,544   |   |                  |   | 81,098   |  
|Prepaid expenses and other current assets                                                                                               |  |                | 21,334   |   |                  |   | 25,303   |  
|Deferred income taxes                                                                                                                   |  |                | 6,449    |   |                  |   | 3,204    |  
|                                                                                                                                        |  |                |          |   |                  |   |          |  
|Total current assets                                                                                                                    |  |                | 294,315  |   |                  |   | 373,815  |  
|Property, plant and equipment, net                                                                                                      |  |                | 89,883   |   |                  |   | 98,616   |  
|Intangible assets, net                                                                                                                  |  |                |         |   |                  |   | 3,803    |  
|Asset held for sale                                                                                                                     |  |                |         |   |                  |   | 4,845    |  
|Other assets                                                                                                                            |  |                | 5,987    |   |                  |   | 6,817    |  
|                                                                                                                                        |  |                |          |   |                  |   |          |  
|TOTAL ASSETS                                                                                                                            |  | $              | 390,185  |   |                  | $ | 487,896  |  
|                                                                                                                                        |  |                |          |   |                  |   |          |  
|LIABILITIES AND SHAREHOLDERS DEFICIT                                                                                                   |  |                |          |   |                  |   |          |  
|Current liabilities:                                                                                                                    |  |                |          |   |                  |   |          |  
|Accounts payable                                                                                                                        |  | $              | 81,830   |   |                  | $ | 139,267  |  
|Accrued payroll and employee benefits                                                                                                   |  |                | 11,322   |   |                  |   | 12,286   |  
|Accrued restructuring costs                                                                                                             |  |                | 1,803    |   |                  |   | 5,813    |  
|Accrued expenses and other current liabilities                                                                                          |  |                | 23,946   |   |                  |   | 37,390   |  
|                                                                                                                                        |  |                |          |   |                  |   |          |  
|Total current liabilities                                                                                                               |  |                | 118,901  |   |                  |   | 194,756  |  
|Long-term debt                                                                                                                          |  |                | 280,887  |   |                  |   | 306,321  |  
|Other liabilities                                                                                                                       |  |                | 1,356    |   |                  |   | 1,898    |  
|                                                                                                                                        |  |                |          |   |                  |   |          |  
|Total liabilities                                                                                                                       |  |                | 401,144  |   |                  |   | 502,975  |  
|Commitments and contingencies (Notes 9 and 10)                                                                                          |  |                |          |   |                  |   |          |  
|Shareholders deficit:                                                                                                                  |  |                |          |   |                  |   |          |  
|Preferred Stock, $0.0001 par value, 5,000,000 shares authorized and no shares issued or outstanding                                     |  |                |         |   |                  |   |         |  
|Common Stock, $0.0001 par value, 250,000,000 shares authorized, 132,357,287 and 131,637,460 shares issued and outstanding,
respectively |  |                | 769,825  |   |                  |   | 765,204  |  
|Accumulated other comprehensive income                                                                                                  |  |                | 10,522   |   |                  |   | 14,245   |  
|Accumulated deficit                                                                                                                     |  |                | (791,306 | ) |                  |   | (794,528 | )
|                                                                                                                                        |  |                |          |   |                  |   |          |  
|Net shareholders deficit                                                                                                               |  |                | (10,959  | ) |                  |   | (15,079  | )
|                                                                                                                                        |  |                |          |   |                  |   |          |  
|TOTAL LIABILITIES AND SHAREHOLDERS DEFICIT                                                                                             |  | $              | 390,185  |   |                  | $ | 487,896  |  
|                                                                                                                                        |  |                |          |   |                  |   |          |  

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



55



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)



|                                                             |  |                |         |   |                  |   |          |                  |  |   |          |  
|------------------------------------------------------------ |  | -------------- | ------- | - | ---------------- | - | -------- | ---------------- |  | - | -------- | -
|                                                             |  | January 3,2010 |         |   | December 28,2008 |   |          | December 30,2007 | 
|Net sales                                                    |  | $              | 567,486 |   |                  | $ | 890,234  |                  |  | $ | 780,517  |  
|Cost of sales:                                               |  |                |         |   |                  |   |          |                  |  |   |          |  
|Cost of goods                                                |  |                | 420,568 |   |                  |   | 687,310  |                  |  |   | 638,487  |  
|Intangible asset amortization                                |  |                | 2,494   |   |                  |   | 19,166   |                  |  |   | 19,609   |  
|Restructuring and impairment charges                         |  |                | 1,932   |   |                  |   | 36,230   |                  |  |   | 35,170   |  
|                                                             |  |                |         |   |                  |   |          |                  |  |   |          |  
|Total cost of sales                                          |  |                | 424,994 |   |                  |   | 742,706  |                  |  |   | 693,266  |  
|                                                             |  |                |         |   |                  |   |          |                  |  |   |          |  
|Gross profit                                                 |  |                | 142,492 |   |                  |   | 147,528  |                  |  |   | 87,251   |  
|Operating expenses:                                          |  |                |         |   |                  |   |          |                  |  |   |          |  
|Sales and marketing                                          |  |                | 34,233  |   |                  |   | 44,857   |                  |  |   | 52,991   |  
|Research and development                                     |  |                | 58,920  |   |                  |   | 77,652   |                  |  |   | 84,992   |  
|General and administrative                                   |  |                | 47,658  |   |                  |   | 63,491   |                  |  |   | 75,267   |  
|Intangible asset amortization                                |  |                | 947     |   |                  |   | 9,508    |                  |  |   | 11,033   |  
|In-process research and development                          |  |                |        |   |                  |   |         |                  |  |   | 208      |  
|Restructuring and impairment charges                         |  |                | 2,611   |   |                  |   | 16,178   |                  |  |   | 11,296   |  
|Goodwill impairment charge                                   |  |                |        |   |                  |   | 315,885  |                  |  |   | 151,735  |  
|                                                             |  |                |         |   |                  |   |          |                  |  |   |          |  
|Total operating expenses                                     |  |                | 144,369 |   |                  |   | 527,571  |                  |  |   | 387,522  |  
|                                                             |  |                |         |   |                  |   |          |                  |  |   |          |  
|Operating loss                                               |  |                | (1,877  | ) |                  |   | (380,043 | )                |  |   | (300,271 | )
|Other income (expense), net                                  |  |                | 8,381   |   |                  |   | 34,841   |                  |  |   | (2,066   | )
|                                                             |  |                |         |   |                  |   |          |                  |  |   |          |  
|Income (loss) before income taxes                            |  |                | 6,504   |   |                  |   | (345,202 | )                |  |   | (302,337 | )
|Income tax provision                                         |  |                | 3,282   |   |                  |   | 3,462    |                  |  |   | 7,198    |  
|                                                             |  |                |         |   |                  |   |          |                  |  |   |          |  
|Net income (loss)                                            |  | $              | 3,222   |   |                  | $ | (348,664 | )                |  | $ | (309,535 | )
|                                                             |  |                |         |   |                  |   |          |                  |  |   |          |  
|Basic earnings (loss) per share:                             |  | $              | 0.02    |   |                  | $ | (2.66    | )                |  | $ | (2.37    | )
|                                                             |  |                |         |   |                  |   |          |                  |  |   |          |  
|Diluted earnings (loss) per share:                           |  | $              | 0.02    |   |                  | $ | (2.66    | )                |  | $ | (2.37    | )
|                                                             |  |                |         |   |                  |   |          |                  |  |   |          |  
|Shares used in the computation of earnings (loss) per share: |  |                |         |   |                  |   |          |                  |  |   |          |  
|Basic                                                        |  |                | 131,803 |   |                  |   | 131,077  |                  |  |   | 130,396  |  
|Diluted                                                      |  |                | 134,006 |   |                  |   | 131,077  |                  |  |   | 130,396  |  

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



56



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS

(in thousands)



|                                                            |  |                    |        |   |                  |   |          |                  |  |   |          |  
|----------------------------------------------------------- |  | ------------------ | ------ | - | ---------------- | - | -------- | ---------------- |  | - | -------- | -
|                                                            |  | Fiscal Years Ended |       
|                                                            |  | January 3,2010     |        |   | December 28,2008 |   |          | December 30,2007 | 
|Net income (loss)                                           |  | $                  | 3,222  |   |                  | $ | (348,664 | )                |  | $ | (309,535 | )
|Other comprehensive income (loss):                          |  |                    |        |   |                  |   |          |                  |  |   |          |  
|Foreign currency translation adjustments, net of income tax |  |                    | (3,723 | ) |                  |   | (54,215  | )                |  |   | 33,250   |  
|                                                            |  |                    |        |   |                  |   |          |                  |  |   |          |  
|Comprehensive loss                                          |  | $                  | (501   | ) |                  | $ | (402,879 | )                |  | $ | (276,285 | )
|                                                            |  |                    |        |   |                  |   |          |                  |  |   |          |  

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



57



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (DEFICIT)

(in thousands)



|                                                                            |  |              |   |  |                                            |         |   |                                      |   |         |                                    |  |   |          |   |  |   |          |  
|--------------------------------------------------------------------------- |  | ------------ | - |  | ------------------------------------------ | ------- | - | ------------------------------------ | - | ------- | ---------------------------------- |  | - | -------- | - |  | - | -------- | -
|                                                                            |  | Common Stock |   |  | AccumulatedOtherComprehensiveIncome (Loss) |         |   | RetainedEarnings(AccumulatedDeficit) |   |         | TotalShareholdersEquity (Deficit) | 
|                                                                            |  |              |   | 
|                                                                            |  |              |   | 
|                                                                            |  | Shares       |   |  | Amount                                     |         |   |                                      |  
|Balance at December 31, 2006                                                |  | 130,081      |   |  | $                                          | 751,380 |   |                                      | $ | 35,210  |                                    |  | $ | (134,992 | ) |  | $ | 651,598  |  
|Implementation of FASB ASC Topic 740                                        |  |             |   |  |                                            |        |   |                                      |   |        |                                    |  |   | (1,337   | ) |  |   | (1,337   | )
|Issuance of Common Stock related to employee stock-based compensation plans |  | 997          |   |  |                                            | 3,973   |   |                                      |   |        |                                    |  |   |         |   |  |   | 3,973    |  
|Repurchase of Common Stock                                                  |  | (61          | ) |  |                                            | (352    | ) |                                      |   |        |                                    |  |   |         |   |  |   | (352     | )
|Stock-based compensation expense                                            |  |             |   |  |                                            | 4,887   |   |                                      |   |        |                                    |  |   |         |   |  |   | 4,887    |  
|Foreign currency translation adjustments                                    |  |             |   |  |                                            |        |   |                                      |   | 33,250  |                                    |  |   |         |   |  |   | 33,250   |  
|Net loss                                                                    |  |             |   |  |                                            |        |   |                                      |   |        |                                    |  |   | (309,535 | ) |  |   | (309,535 | )
|                                                                            |  |              |   |  |                                            |         |   |                                      |   |         |                                    |  |   |          |   |  |   |          |  
|Balance at December 30, 2007                                                |  | 131,017      |   |  |                                            | 759,888 |   |                                      |   | 68,460  |                                    |  |   | (445,864 | ) |  |   | 382,484  |  
|Issuance of Common Stock related to employee stock-based compensation plans |  | 789          |   |  |                                            | 1,086   |   |                                      |   |        |                                    |  |   |         |   |  |   | 1,086    |  
|Repurchase of Common Stock                                                  |  | (169         | ) |  |                                            | (524    | ) |                                      |   |        |                                    |  |   |         |   |  |   | (524     | )
|Stock-based compensation expense                                            |  |             |   |  |                                            | 4,754   |   |                                      |   |        |                                    |  |   |         |   |  |   | 4,754    |  
|Foreign currency translation adjustments                                    |  |             |   |  |                                            |        |   |                                      |   | (54,215 | )                                  |  |   |         |   |  |   | (54,215  | )
|Net loss                                                                    |  |             |   |  |                                            |        |   |                                      |   |        |                                    |  |   | (348,664 | ) |  |   | (348,664 | )
|                                                                            |  |              |   |  |                                            |         |   |                                      |   |         |                                    |  |   |          |   |  |   |          |  
|Balance at December 28, 2008                                                |  | 131,637      |   |  |                                            | 765,204 |   |                                      |   | 14,245  |                                    |  |   | (794,528 | ) |  |   | (15,079  | )
|Issuance of Common Stock related to employee stock-based compensation plans |  | 732          |   |  |                                            | 281     |   |                                      |   |        |                                    |  |   |         |   |  |   | 281      |  
|Repurchase of Common Stock                                                  |  | (12          | ) |  |                                            | (15     | ) |                                      |   |        |                                    |  |   |         |   |  |   | (15      | )
|Stock-based compensation expense                                            |  |             |   |  |                                            | 4,355   |   |                                      |   |        |                                    |  |   |         |   |  |   | 4,355    |  
|Foreign currency translation adjustments                                    |  |             |   |  |                                            |        |   |                                      |   | (3,723  | )                                  |  |   |         |   |  |   | (3,723   | )
|Net income                                                                  |  |             |   |  |                                            |        |   |                                      |   |        |                                    |  |   | 3,222    |   |  |   | 3,222    |  
|                                                                            |  |              |   |  |                                            |         |   |                                      |   |         |                                    |  |   |          |   |  |   |          |  
|Balance at January 3, 2010                                                  |  | 132,357      |   |  | $                                          | 769,825 |   |                                      | $ | 10,522  |                                    |  | $ | (791,306 | ) |  | $ | (10,959  | )
|                                                                            |  |              |   |  |                                            |         |   |                                      |   |         |                                    |  |   |          |   |  |   |          |  

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



58



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



|                                                                                                   |  |                    |         |   |                  |   |          |                  |  |   |          |  
|-------------------------------------------------------------------------------------------------- |  | ------------------ | ------- | - | ---------------- | - | -------- | ---------------- |  | - | -------- | -
|                                                                                                   |  | Fiscal Years Ended |        
|                                                                                                   |  | January 3,2010     |         |   | December 28,2008 |   |          | December 30,2007 | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                              |  |                    |         |   |                  |   |          |                  |  |   |          |  
|Net income (loss)                                                                                  |  | $                  | 3,222   |   |                  | $ | (348,664 | )                |  | $ | (309,535 | )
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |                    |         |   |                  |   |          |                  |  |   |          |  
|Depreciation and amortization                                                                      |  |                    | 24,509  |   |                  |   | 51,219   |                  |  |   | 56,015   |  
|Goodwill impairment charge                                                                         |  |                    |        |   |                  |   | 315,885  |                  |  |   | 151,735  |  
|In-process research and development charge                                                         |  |                    |        |   |                  |   |         |                  |  |   | 208      |  
|Non-cash restructuring and impairment charges                                                      |  |                    | 4,543   |   |                  |   | 52,408   |                  |  |   | 46,466   |  
|Provision for sales returns and doubtful accounts                                                  |  |                    | 1,860   |   |                  |   | 878      |                  |  |   | 4,073    |  
|Provision for excess and obsolete inventories                                                      |  |                    | 9,057   |   |                  |   | 5,854    |                  |  |   | 18,496   |  
|Deferred income taxes                                                                              |  |                    | (3,245  | ) |                  |   | (373     | )                |  |   | (1,972   | )
|Compensation costs related to stock-based awards                                                   |  |                    | 4,355   |   |                  |   | 4,754    |                  |  |   | 4,887    |  
|Gain on repurchase of convertible debt                                                             |  |                    | (12,693 | ) |                  |   | (32,207  | )                |  |   | (2,211   | )
|Gain on disposal of property, plant and equipment                                                  |  |                    | (95     | ) |                  |   | (466     | )                |  |   | (678     | )
|Gain on settlement of litigation                                                                   |  |                    | (645    | ) |                  |   |         |                  |  |   |         |  
|Changes in operating assets and liabilities, net of acquisitions:                                  |  |                    |         |   |                  |   |          |                  |  |   |          |  
|Accounts receivable                                                                                |  |                    | 66,817  |   |                  |   | 4,886    |                  |  |   | (19,915  | )
|Inventories                                                                                        |  |                    | 10,247  |   |                  |   | (3,051   | )                |  |   | 38,456   |  
|Prepaid expenses and other current assets                                                          |  |                    | 1,330   |   |                  |   | 9,640    |                  |  |   | 15,665   |  
|Accounts payable                                                                                   |  |                    | (55,481 | ) |                  |   | 9,881    |                  |  |   | 8,341    |  
|Accrued expenses and other current liabilities                                                     |  |                    | (21,501 | ) |                  |   | (44,523  | )                |  |   | (34,278  | )
|Other non-current assets                                                                           |  |                    | 167     |   |                  |   | 939      |                  |  |   | (1,642   | )
|Other non-current liabilities                                                                      |  |                    | (1,178  | ) |                  |   | 246      |                  |  |   | (808     | )
|                                                                                                   |  |                    |         |   |                  |   |          |                  |  |   |          |  
|Net cash provided by (used in) operating activities                                                |  |                    | 31,269  |   |                  |   | 27,306   |                  |  |   | (26,697  | )
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                              |  |                    |         |   |                  |   |          |                  |  |   |          |  
|Purchase of property, plant and equipment                                                          |  |                    | (10,151 | ) |                  |   | (13,536  | )                |  |   | (14,307  | )
|Restricted cash                                                                                    |  |                    | 833     |   |                  |   | 3,933    |                  |  |   | (1,074   | )
|Proceeds from the sale of property, plant and equipment                                            |  |                    | 394     |   |                  |   | 4,513    |                  |  |   | 13,753   |  
|Proceeds from the sale of business                                                                 |  |                    | 500     |   |                  |   | 500      |                  |  |   | 500      |  
|Proceeds from the sale of assets held for sale                                                     |  |                    | 3,889   |   |                  |   |         |                  |  |   |         |  
|Acquisitions, net of cash acquired                                                                 |  |                    | 1,960   |   |                  |   | (4,105   | )                |  |   | 6,783    |  
|                                                                                                   |  |                    |         |   |                  |   |          |                  |  |   |          |  
|Net cash provided by (used in) investing activities                                                |  |                    | (2,575  | ) |                  |   | (8,695   | )                |  |   | 5,655    |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                              |  |                    |         |   |                  |   |          |                  |  |   |          |  
|Proceeds from long-term debt                                                                       |  |                    |        |   |                  |   |         |                  |  |   | 150,000  |  
|Debt issuance costs                                                                                |  |                    | (1,305  | ) |                  |   |         |                  |  |   | (4,863   | )
|Proceeds from stock-based compensation arrangements                                                |  |                    | 281     |   |                  |   | 1,086    |                  |  |   | 3,434    |  
|Repurchase of common stock                                                                         |  |                    | (15     | ) |                  |   | (524     | )                |  |   | (352     | )
|Retirement of short-term debt                                                                      |  |                    |        |   |                  |   | (13,630  | )                |  |   |         |  
|Retirement of long-term debt                                                                       |  |                    | (12,445 | ) |                  |   | (10,872  | )                |  |   | (113,740 | )
|                                                                                                   |  |                    |         |   |                  |   |          |                  |  |   |          |  
|Net cash provided by (used in) financing activities                                                |  |                    | (13,484 | ) |                  |   | (23,940  | )                |  |   | 34,479   |  
|EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS                                              |  |                    | (1,677  | ) |                  |   | (5,916   | )                |  |   | 3,170    |  
|                                                                                                   |  |                    |         |   |                  |   |          |                  |  |   |          |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                               |  |                    | 13,533  |   |                  |   | (11,245  | )                |  |   | 16,607   |  
|CASH AND CASH EQUIVALENTS, beginning of period                                                     |  |                    | 46,906  |   |                  |   | 58,151   |                  |  |   | 41,544   |  
|                                                                                                   |  |                    |         |   |                  |   |          |                  |  |   |          |  
|CASH AND CASH EQUIVALENTS, end of period                                                           |  | $                  | 60,439  |   |                  | $ | 46,906   |                  |  | $ | 58,151   |  
|                                                                                                   |  |                    |         |   |                  |   |          |                  |  |   |          |  

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



59



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

(in thousands)



|                                              |  |                |       |                  |   |                  |  |   |      
|--------------------------------------------- |  | -------------- | ----- | ---------------- | - | ---------------- |  | - | -----
|                                              |  | January 3,2010 |       | December 28,2008 |   | December 30,2007
|SUPPLEMENTAL CASH FLOW INFORMATION:           |  |                |       |                  |   |                  |  |   |      
|Cash paid for:                                |  |                |       |                  |   |                  |  |   |      
|Interest expense                              |  | $              | 9,117 |                  | $ | 10,161           |  | $ | 6,090
|Income taxes                                  |  | $              | 9,095 |                  | $ | 23,103           |  | $ | 7,549
|SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES: |  |                |       |                  |   |                  |  |   |      
|Unpaid purchases of property and equipment    |  | $              | 1,774 |                  | $ | 895              |  | $ | 752  



60



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tabular amounts in thousands, except per share data)

Note 1. Nature of Operations

Powerwave Technologies Inc. (the Company) is a global supplier of end-to-end wireless solutions for wireless
communications networks. The Company designs, manufactures and markets antennas, boosters, combiners, cabinets, shelters, filters, radio frequency power amplifiers, repeaters, tower-mounted amplifiers, remote radio head transceivers and advanced
coverage solutions for use in cellular, PCS, 3G and 4G networks throughout the world.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include the accounts of the Company and its
wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in the accompanying consolidated financial statements.

Fiscal Year

The Company operates on a conventional 52-53 week
accounting fiscal year that ends on the Sunday closest to December 31. The Companys fiscal quarters generally span 13 weeks, with the exception of a 53-week fiscal year, when an additional week is added during the fourth quarter to adjust
the year to the Sunday closest to December 31. Fiscal year 2007 ended on December 30, 2007, fiscal year 2008 ended on December 28, 2008, fiscal year 2009 ended on January 3, 2010, and fiscal year 2010 ends on January 2,
2011. Fiscal years 2007 and 2008 each consisted of 52 weeks, and fiscal year 2009 consisted of 53 weeks.

Foreign
Currency

In accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic
830, Foreign Currency Matters,some of the Companys international operations use the respective local currencies as their functional currency while other international operations use the U.S. Dollar as their functional
currency. Gains and losses from foreign currency transactions are recorded in other income (expense), net. Revenue and expenses from the Companys international subsidiaries are translated using the monthly average exchange rates in effect for
the period in which they occur. The Companys international subsidiaries that have the U.S. Dollar as their functional currency translate monetary assets and liabilities using current rates of exchange at the balance sheet date and
translate non-monetary assets and liabilities using historical rates of exchange. Gains and losses from remeasurement for such subsidiaries are included in other income (expense), net. The Companys international subsidiaries that do not have
the U.S. Dollar as their functional currency translate assets and liabilities at current rates of exchange in effect at the balance sheet date. The resulting gains and losses from translation for such subsidiaries are included as a component of
shareholders equity.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during reporting years. Actual results may differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents generally consist of cash, time deposits, commercial paper, money market funds and other money
market instruments with original maturity dates of three months or less. The Company invests its excess cash in only investment grade money market instruments from companies in a variety of industries and, therefore, believes that it bears minimal
principal risk. Such investments are stated at cost, which approximates fair value.

Restricted Cash

Restricted cash consists of cash and cash equivalents which the Company has pledged to fulfill certain obligations and is not available
for general corporate purposes.



61



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



Accounts Receivable

The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history, the customers
creditworthiness and various other factors, as determined by its review of their credit information. The Company monitors collections and payments from its customers and maintains an allowance for estimated credit losses based upon its historical
experience and any customer-specific collection issues that it has identified.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash
equivalents and accounts receivable. The Company maintains cash and cash equivalents with major financial institutions and performs periodic evaluations of the relative credit standing of these financial institutions in order to limit the amount of
credit exposure with any one institution. The Companys customers are concentrated in the wireless communications industry and may be influenced by the prevailing macroeconomic conditions present in this industry.

Receivables from the Companys customers are generally unsecured. To reduce the overall risk of collection, the Company performs
ongoing evaluations of its customers financial condition. The Companys product sales have historically been concentrated in a small number of customers. During the years ended January 3, 2010, December 28, 2008 and
December 30, 2007, sales to customers that accounted for 10% or more of revenues for the year totaled $195.3 million, $424.9 million and $396.9 million, respectively. For fiscal year 2009, sales to Nokia Siemens accounted for approximately 34%
of revenues. For fiscal year 2008, sales to Nokia Siemens accounted for approximately 31% of revenues, and sales to Alcatel-Lucent accounted for approximately 17% of revenues. For fiscal year 2007, sales to Nokia Siemens accounted for approximately
35% of revenues, and sales to Alcatel-Lucent accounted for approximately 16% of revenues.

As of January 3, 2010,
approximately 33% of total accounts receivable related to Nokia Siemens. The inability to collect outstanding receivables from Nokia Siemens or the loss of, or reduction in, sales to this customer could have a material adverse effect on the
Companys business, financial condition and results of operations.

Inventories

The Company values inventories at the lower of cost (determined on an average cost basis) or fair market value and includes materials, labor
and manufacturing overhead. The Company writes down excess and obsolete inventory to estimated net realizable value. In assessing the ultimate realization of inventories, the Company makes judgments as to future demand requirements and compares
those requirements with the current or committed inventory levels. Depending on the product line and other factors, the Company estimates future demand based on either historical usage for the preceding twelve months, adjusted for known changes in
demand for such products, or the forecast of product demands and production requirements for the next twelve months. These provisions reduce the cost basis of the respective inventory and are recorded as a charge to cost of sales.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation expense includes amortization of assets under capital leases. The Company depreciates or amortizes these assets
using the straight-line method over the estimated useful lives of the various asset classes, as follows:



|                               |  |                                                     
|------------------------------ |  | ----------------------------------------------------
|Machinery and equipment        |  | 2 to 10 years                                       
|Office furniture and equipment |  | 3 to 10 years                                       
|Buildings                      |  | 30 years                                            
|Building improvements          |  | Shorter of useful life or remaining life of building

Leasehold improvements are amortized over the shorter of their estimated useful life or the remaining lease term.

Goodwill and Intangible Assets

The Company records the assets
acquired and liabilities assumed in business combinations at their respective fair values at the date of acquisition, with any excess purchase price recorded as goodwill. Because of the expertise required to value intangible assets and in-process
research and development, the Company typically engages third-party valuation specialists to assist it in determining those values. Valuation of intangible assets and in-process research and development entails significant estimates and assumptions
including, but not limited to, determining the timing and expected costs to complete development projects, estimating future cash flows from product sales, developing appropriate discount rates, estimating probability rates for the successful
completion of development projects, continuation of customer relationships and renewal of customer contracts, and approximating the useful lives of the intangible assets acquired.



62



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



The Company reviews the recoverability of the carrying value of goodwill on an annual
basis or more frequently when an event occurs or circumstances change to indicate that an impairment of goodwill has possibly occurred. The determination of whether any potential impairment of goodwill exists is based upon a comparison of the fair
value of the reporting unit to the carrying value of the underlying net assets of such reporting unit. To determine the fair value of the reporting unit, the Company utilizes subjective valuations for the reporting unit based upon market
capitalization and/or a discounted cash flow analysis. The discounted cash flow analysis is dependent upon a number of various factors including estimates of forecasted revenues and costs, appropriate discount rates and other variables. If the fair
value of the reporting unit is less than the carrying value of the underlying net assets, goodwill is deemed impaired and an impairment loss is recorded to the extent that the carrying value of goodwill is less than the difference between the fair
value of the reporting unit and the fair value of all its underlying identifiable assets and liabilities.

Purchased
intangible assets with determinable useful lives are carried at cost less accumulated amortization, and are amortized using the straight-line method over their estimated useful lives, which generally range up to 6 years. The Company reviews the
recoverability of the carrying value of identified intangibles and other long-lived assets, including fixed assets, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of
these assets is determined based upon the forecasted undiscounted future net cash flows expected to result from the use of such asset and its eventual disposition. The Companys estimate of future cash flows is based upon, among other things,
certain assumptions about expected future operating performance, growth rates and other factors. The actual cash flows realized from these assets may vary significantly from its estimates due to increased competition, changes in technology,
fluctuations in demand, consolidation of its customers and reductions in average selling prices. If the carrying value of an asset is determined not to be recoverable from future operating cash flows, the asset is deemed impaired and an impairment
loss is recognized to the extent the carrying value exceeds the estimated fair market value of the asset. The Company does not have any goodwill or intangible assets remaining on its consolidated balance sheet as of January 3, 2010.

Long-Lived Assets

The Company periodically reviews the recoverability of its long-lived assets using the methodology prescribed in accounting guidance now codified as FASB ASC Topic 360, Property, Plant and
Equipment.The Company also reviews these assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of these assets is determined by comparing the
forecasted undiscounted future net cash flows from the operations to which the assets relate, based on managements best estimates using appropriate assumptions and projections at the time, to the carrying amount of the assets. If the carrying
value is determined not to be recoverable from future operating cash flows, the asset is deemed impaired and an impairment loss is recognized equal to the amount by which the carrying amount exceeds the estimated fair value of the asset.

Vendor Cancellation Liabilities

The Company purchases subassemblies and finished goods from contract manufacturers under purchase agreements that limit its ability to cancel deliveries inside defined lead time windows. When a contract
manufacturer submits a cancellation claim, the Company estimates the amount of inventory remaining to be purchased against that claim. Any excess of the estimated purchase over the projected consumption of the related product is recorded as a charge
to cost of sales and an increase to accrued expenses and other current liabilities. Depending on the product line and other factors, the Company estimates future demand based on either historical usage for the preceding twelve months, adjusted for
known changes in demand for such products, or the forecast of product demands and production requirements for the next twelve months.

Warranties

The Company offers warranties of various lengths to its customers depending upon the
specific product and terms of the customer purchase agreement. The Companys standard warranties require it to repair or replace defective product returned during the warranty period at no cost to the customer. The Company records an estimate
for standard warranty-related costs based on its actual historical return rates and repair costs at the time of the sale and updates such estimates throughout the warranty period. The Company also has contractual commitments to various customers
that require it to incur costs to repair an epidemic defect with respect to its products outside of its standard warranty period if such defect were to occur. Any costs related to epidemic defects are generally recorded at the time the epidemic
defect becomes known to the Company and the costs of repair can be reasonably estimated.

Revenue Recognition

The majority of the Companys revenue is derived from the sale of products. The Company recognizes revenue from product
sales at the time of shipment or delivery and passage of title depending upon the terms of the sale provided that persuasive evidence of an arrangement exists, the fee is fixed or determinable and collectibility is reasonably assured. The



63



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



Company offers certain of its customers the right to return products within a limited time after delivery under specified circumstances, generally related to product defects. The Company monitors
and tracks product returns and records a provision for the estimated amount of future returns based on historical experience and any notification it receives of pending returns.

Advertising

Advertising costs are expensed as incurred. Total advertising costs, including participation at industry trade shows were $2.9 million, $5.2 million and $6.5 million for fiscal years ended January 3, 2010, December 28, 2008 and
December 30, 2007, respectively.

Shipping and Handling

Shipping and handling expenses are expensed as incurred and such amounts are included in cost of sales.

Research & Development

Research and development expenses are expensed as incurred.

Stock-Based
Compensation

The Company accounts for stock-based compensation in accordance with accounting guidance now codified as
FASB ASC Topic 718, Compensation  Stock Compensation. Under the fair value recognition provision of FASB ASC Topic 718, stock-based compensation cost is estimated at the grant date based on the fair value of the award. The
Company estimates the fair value of stock options granted using the Black-Scholes-Merton option pricing model and a multiple option award approach. The fair value of restricted stock awards is based on the closing market price of the Companys
common stock on the date of grant.

Income Taxes

The Company accounts for income taxes in accordance with accounting guidance now codified as FASB ASC Topic 740, Income
Taxes, which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect
in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some
or all deferred tax assets will not be realized.

Accounting guidance now codified as FASB ASC Topic 740-20, Income
Taxes  Intraperiod Tax Allocation, clarifies the accounting for uncertainties in income taxes recognized in accordance with FASB ASC Topic 740-20 by prescribing guidance for the recognition, de-recognition and measurement in
financial statements of income tax positions taken in previously filed tax returns or tax positions expected to be taken in tax returns, including a decision whether to file or not to file in a particular jurisdiction. FASB ASC Topic 740-20 requires
that any liability created for unrecognized tax benefits is disclosed. The application of FASB ASC Topic 740-20 may also affect the tax bases of assets and liabilities and therefore may change or create deferred tax liabilities or assets. The
Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense.

Earnings (Loss)
Per Share

In accordance with accounting guidance now codified as FASB ASC Topic 260, Earnings per
Share,basic earnings (loss) per share is based upon the weighted average number of common shares outstanding. Diluted earnings (loss) per share is based upon the weighted average number of common and potential common shares for each
period presented. Potential common shares include stock options using the treasury stock method.

Newly Adopted
Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (FASB) issued guidance now
codified as FASB Accounting Standards Codification (ASC) Topic 105, Generally Accepted Accounting Principles, as the single source of authoritative non-governmental U.S. GAAP. FASB ASC Topic 105 does not change current U.S. GAAP,
but is intended to simplify user access to all authoritative U.S. GAAP by providing all authoritative literature related to a particular topic in one place. All existing accounting standard documents will be superseded and all other accounting
literature not included in the FASB Codification will be considered non-authoritative. These provisions of FASB ASC Topic 105 were effective for interim and annual periods ending after September 15, 2009 and, accordingly, were effective for the
Company for the current fiscal reporting period. The adoption of this pronouncement did not have an impact on the Companys business, financial condition or results of operations, but will impact the Companys financial reporting process
by eliminating all references to



64



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



pre-codification standards. On the effective date of FASB ASC Topic 105, the Codification superseded all then-existing non-SEC accounting and reporting standards, and all other non-grandfathered
non-SEC accounting literature not included in the Codification became non-authoritative.

In May 2009, the FASB issued
guidance now codified as FASB ASC Topic 855, Subsequent Events, which establishes general standards of accounting for, and disclosures of, events that occur after the balance sheet date but before financial statements are issued
or are available to be issued. This pronouncement was effective for interim or fiscal periods ending after June 15, 2009. The adoption of this pronouncement did not have a material impact on the Companys business, results of operations or
financial position; however, the provisions of FASB ASC Topic 855 resulted in additional disclosures with respect to subsequent events.

In April 2009, the FASB issued guidance now codified as FASB ASC Topic 820, Fair Value Measurements and Disclosures,which amends previous guidance to require disclosures about
fair value of financial instruments in interim as well as annual financial statements in the current economic environment. This pronouncement was effective for periods ending after June 15, 2009. The adoption of this pronouncement did not have
a material impact on the Companys business, financial condition or results of operations; however, these provisions of FASB ASC Topic 820 resulted in additional disclosures with respect to the fair value of the Companys financial
instruments.

In November 2008, the FASB issued guidance now codified as FASB ASC Topic 350, Intangibles 
Goodwill and Other,which applies to defensive intangible assets, which are acquired intangible assets that the acquirer does not intend to actively use but intends to hold to prevent its competitors from obtaining access to them. As these
assets are separately identifiable, this pronouncement requires an acquiring entity to account for defensive intangible assets as a separate unit of accounting, and such assets should be amortized to expense over the period such assets diminish in
value. Defensive intangible assets must be recognized at fair value in accordance with FASB ASC Topic 820. This pronouncement was effective for financial statements in the first quarter of 2009. The adoption of the provisions of FASB ASC Topic 350
did not have a material impact on the Companys business, financial condition or results of operations.

In April 2008,
the FASB issued guidance now codified as FASB ASC Topic 350, Intangibles  Goodwill and Other,which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful
life of a recognized intangible asset. The pronouncement was effective in the first quarter of 2009. The adoption of the provisions of FASB ASC Topic 350 did not have a material impact on the Companys business, financial condition or results
of operations.

In December 2007, the FASB issued guidance now codified as FASB ASC Topic 805-10, Business
Combinations,which changes how business acquisitions are accounted for and changes the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. The
provisions of FASB ASC Topic 805-10 were effective in the first quarter of 2009. The adoption of the provisions of FASB ASC Topic 805-10 did not have a material impact on the Companys business, financial condition or results of operations.

New Accounting Pronouncements

In October 2009, the FASB issued an update to FASB ASC Topic 605, Revenue Recognition. This Accounting Standards Update (ASU), No. 2009-13, Multiple Deliverable Revenue
Arrangements  A Consensus of the FASB Emerging Issues Task Force, provides accounting principles and application guidance on whether multiple deliverables exist, how the arrangement should be separated, and the consideration
allocated. This guidance eliminates the requirement to establish the fair value of undelivered products and services and instead provides for separate revenue recognition based upon managements estimate of the selling price for an undelivered
item when there is no other means to determine the fair value of that undelivered item. Previous accounting guidance required that the fair value of the undelivered item be the price of the item either sold in a separate transaction between
unrelated third parties or the price charged for each item when the item is sold separately by the vendor. This was difficult to determine when the product was not individually sold because of its unique features. Under previous accounting guidance,
if the fair value of all of the elements in the arrangement was not determinable, then revenue was deferred until all of the items were delivered or fair value was determined. This new approach is effective prospectively for revenue arrangements
entered into or materially modified in fiscal years beginning on or after June 15, 2010. The Company is currently evaluating the potential impact of this standard on its business, financial condition and results of operations.

Subsequent Events

The Company has evaluated activities through February 19, 2010, and all known subsequent events have been included in this report.



65



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



Note 3. Supplemental Balance Sheet Information

Inventories

Inventories are as follows:



|                     |  |                |        |                  |   |       
|-------------------- |  | -------------- | ------ | ---------------- | - | ------
|                     |  | January 3,2010 |        | December 28,2008
|Parts and components |  | $              | 27,937 |                  | $ | 28,547
|Work-in-process      |  |                | 1,363  |                  |   | 2,618 
|Finished goods       |  |                | 31,244 |                  |   | 49,933
|                     |  |                |        |                  |   |       
|Total inventories    |  | $              | 60,544 |                  | $ | 81,098
|                     |  |                |        |                  |   |       

Inventories are net of an allowance for excess and
obsolete inventories of approximately $22.6 million and $43.4 million as of January 3, 2010 and December 28, 2008, respectively.

Property, Plant and Equipment

Net property, plant and equipment are
as follows:



|                                                |  |                |          |   |                  |   |          |  
|----------------------------------------------- |  | -------------- | -------- | - | ---------------- | - | -------- | -
|                                                |  | January 3,2010 |          |   | December 28,2008 |  
|Machinery and equipment                         |  | $              | 169,638  |   |                  | $ | 164,102  |  
|Buildings and improvements                      |  |                | 66,408   |   |                  |   | 63,545   |  
|Land                                            |  |                | 15,562   |   |                  |   | 15,521   |  
|Office furniture and equipment                  |  |                | 51,562   |   |                  |   | 48,606   |  
|Leasehold improvements                          |  |                | 8,457    |   |                  |   | 7,801    |  
|                                                |  |                |          |   |                  |   |          |  
|Gross property, plant and equipment             |  |                | 311,627  |   |                  |   | 299,575  |  
|Less: Accumulated depreciation and amortization |  |                | (221,744 | ) |                  |   | (200,959 | )
|                                                |  |                |          |   |                  |   |          |  
|Total property, plant and equipment, net        |  | $              | 89,883   |   |                  | $ | 98,616   |  
|                                                |  |                |          |   |                  |   |          |  

Depreciation expense totaled $19.4 million, $21.0 million and $21.9 million for 2009, 2008 and 2007,
respectively.

Asset Held For Sale

In the fourth quarter of 2008, the Company completed the closure of its manufacturing facility in Salisbury, Maryland as part of its 2008 Restructuring Plan. The carrying value of the building was
separately presented in the accompanying balance sheet under the caption Asset Held for Sale and this asset was no longer depreciated. During 2009, the Company recorded additional charges of $1.0 million to write the building down to its
fair value less cost to sell in accordance with FASB ASC Topic 360. The Company signed a Purchase and Sale Agreement for the building in April 2009 and the sale of the building was completed on October 8, 2009 resulting in net proceeds of
approximately $3.9 million.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities are as follows:



|                                                     |  |                |        |                  |   |       
|---------------------------------------------------- |  | -------------- | ------ | ---------------- | - | ------
|                                                     |  | January 3,2010 |        | December 28,2008
|Accrued vendor cancellation costs                    |  | $              | 5,458  |                  | $ | 10,563
|Accrued warranty costs                               |  |                | 7,038  |                  |   | 10,763
|Other accrued expenses and other current liabilities |  |                | 11,450 |                  |   | 16,064
|                                                     |  |                |        |                  |   |       
|Total accrued expenses and other current liabilities |  | $              | 23,946 |                  | $ | 37,390
|                                                     |  |                |        |                  |   |       



66



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



Warranty

Accrued warranty costs are as follows:



|                                                         |  |                    |         |   |                  |   |         |  
|-------------------------------------------------------- |  | ------------------ | ------- | - | ---------------- | - | ------- | -
|                                                         |  | Fiscal Years Ended |        
|Description                                              |  | January 3,2010     |         |   | December 28,2008 |  
|Warranty reserve beginning balance                       |  | $                  | 10,763  |   |                  | $ | 26,975  |  
|Reductions for warranty costs incurred                   |  |                    | (12,144 | ) |                  |   | (16,628 | )
|Warranty accrual related to current period sales         |  |                    | 8,387   |   |                  |   | 6,692   |  
|Settlement of previous warranty claims                   |  |                    |        |   |                  |   | (2,858  | )
|Change in estimate related to previous warranty accruals |  |                    |        |   |                  |   | (2,360  | )
|Effect of exchange rates                                 |  |                    | 32      |   |                  |   | (1,058  | )
|                                                         |  |                    |         |   |                  |   |         |  
|Warranty reserve ending balance                          |  | $                  | 7,038   |   |                  | $ | 10,763  |  
|                                                         |  |                    |         |   |                  |   |         |  

Note 4. Intangible Assets

Intangible Assets

Intangible assets, excluding goodwill, are as
follows:



|                                                                   |  |                  |      
|------------------------------------------------------------------ |  | ---------------- | -----
|Intangible Assets Subject to Amortization:                         |  | December 28,2008
|Developed technology (net of accumulated amortization of $3,206)   |  | $                | 2,494
|Customer relationships (net of accumulated amortization of $3,479) |  |                  | 1,309
|                                                                   |  |                  |      
|Intangible assets, net                                             |  | $                | 3,803
|                                                                   |  |                  |      

Amortization expense related to intangible assets
totaled $3.4 million and $29.3 million for 2009 and 2008, respectively. The remaining intangible assets were fully amortized in 2009.

Note
5. Financing Arrangements and Long-Term Debt

Long-term debt



|                                               |  |                |         |                  |   |        
|---------------------------------------------- |  | -------------- | ------- | ---------------- | - | -------
|                                               |  | January 3,2010 |         | December 28,2008
|3.875% Convertible Subordinated Notes due 2027 |  | $              | 150,000 |                  | $ | 150,000
|1.875% Convertible Subordinated Notes due 2024 |  |                | 130,887 |                  |   | 156,321
|                                               |  |                |         |                  |   |        
|Total debt                                     |  | $              | 280,887 |                  | $ | 306,321
|                                               |  |                |         |                  |   |        

During 2009, the Company repurchased $25.4 million in
aggregate par value of its outstanding 1.875% convertible subordinated notes due November 2024, resulting in a gain of $12.7 million on the purchase. After the purchase, the Company had $130.9 million remaining on the 1.875% convertible subordinated
notes.

On April 3, 2009, the Company entered into a Credit Agreement (Credit Agreement), with Wells Fargo
Capital Finance, LLC (formerly Wells Fargo Foothill, LLC), as arranger and administrative agent. Pursuant to the Credit Agreement, Wells Fargo Capital Finance made available to the Company a senior secured revolving credit facility up to a maximum
of $50.0 million. Availability under the Credit Agreement is based on the calculation of the Companys borrowing base as defined in the Credit Agreement. The Credit Agreement is secured by a first priority security interest on a majority of the
Companys assets, including without limitation, all accounts, equipment, inventory, chattel paper, records, intangibles, deposit accounts and cash and cash equivalents. The Credit Agreement expires on August 15, 2011. The Credit Agreement
contains customary affirmative and negative covenants for credit facilities of this type, including limitations on the Company with respect to indebtedness, liens, investments, distributions, mergers and acquisitions and dispositions of assets. The
Credit Agreement also includes financial covenants



67



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



including minimum EBITDA and maximum capital expenditures that are applicable only if the availability under the Companys line of credit falls below $20.0 million. On December 31,
2009, the Company entered into a Waiver, Consent, Amendment to the Credit Agreement. Under the amendment, certain immaterial technical defaults by the Company were waived by Wells Fargo. In addition, certain financial covenants were amended,
including the lowering of the minimum EBITDA thresholds. As of January 3, 2010, the Company had approximately $29.4 million of availability under the Credit Agreement, of which approximately $5 million was utilized by an outstanding letter of
credit.

On April 3, 2009, in connection with entering into the Credit Agreement referenced above, the Company terminated
its Revolving Trade Receivables Purchase Agreement with Deutsche Bank AG, New York Branch, as Administrative Agent, as amended on May 15, 2008 (the Amended Receivables Purchase Agreement). As of the date of termination, the Company
did not have any borrowings outstanding under the Amended Receivables Purchase Agreement. In addition, the Company did not incur any early termination penalties in connection with the termination of the Amended Receivables Purchase Agreement.

On September 24, 2007, the Company completed the private placement of $150.0 million aggregate principal amount of
convertible subordinated notes due October 2027 (2027 Notes). The notes are convertible into the Companys common stock at a conversion rate of $8.71 per share and accrue interest at an annual rate of 3.875%. The notes mature in
2027. The Company may redeem the notes beginning on October 8, 2013 until October 7, 2014, if the closing price of the Companys common stock is more than $11.32 for at least 20 trading days within a 30 consecutive trading day period
ending on the last trading day of the calendar month preceding the calendar month in which the notice of redemption is made. The notes may be redeemed by the Company at any time after October 8, 2014. Holders of the notes may require the
Company to repurchase all or a portion of their notes for cash on October 1, 2014, 2017 and 2022 at 100% of the principal amount of the notes, plus accrued and unpaid interest up to but not including the date of such repurchase. The Company
received net cash proceeds of approximately $145.5 million from the sale of the notes.

On November 10, 2004, the Company
completed the private placement of $200.0 million aggregate principal amount of convertible subordinated notes due November 2024 (2024 Notes). The notes are convertible into the Companys common stock at a conversion price of $11.09
per share and accrue interest at an annual rate of 1.875%. The Company may redeem the notes beginning on November 21, 2009 until November 20, 2010 and on or after November 21, 2010 until November 20, 2011, if the closing price of
the Companys common stock is more than $17.74 and $14.42, respectively, for at least 20 trading days within a 30 consecutive trading day period. The notes may be redeemed by the Company at any time after November 21, 2011. Holders of the
notes may require the Company to repurchase all or a portion of their notes for cash on November 15, 2011, 2014 and 2019 at 100% of the principal amount of the notes, plus accrued and unpaid interest up to but not including the date of such
repurchase. Holders of the notes may also require the Company to repurchase all or a portion of their notes in the case of a change in control. In addition, under certain circumstances related to a change in control, the conversion price of the
notes may be adjusted downwards, thereby increasing the number of shares issuable upon conversion, if holders of the notes elect to convert their notes at a time when the notes are not redeemable by the Company. The Company used a portion of the
proceeds of the offering to fund the repurchase of $40.0 million of its common stock (5,050,505 shares) simultaneously with the issuance of the notes. The Company received net cash proceeds of approximately $154.2 million after the deduction of the
amount used for the common stock repurchase and debt issuance costs.

The 2027 Notes and the 2024 Notes are general unsecured
obligations of the Company and are subordinate in right of payment to all of the Companys existing and future senior indebtedness. In addition, the indenture for the notes does not restrict the Company from incurring senior debt or other
indebtedness and does not impose any financial covenants on the Company.

Note 6. Restructuring and Impairment Charges and Accrued
Restructuring

2009 Restructuring Plan

In January 2009, the Company formulated and began to implement a plan to further reduce manufacturing overhead costs and operating expenses.
As part of this plan, the Company initiated personnel reductions in both its domestic and foreign locations, with primary reductions in the United States, Estonia and Sweden. These reductions were undertaken in response to current economic
conditions and the global macroeconomic slowdown that began in the fourth quarter of 2008. The Company finalized this plan in the fourth quarter of 2009; however, additional amounts may be accrued in 2010 related to actions associated with this
plan.



68



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



A summary of the activity affecting the accrued restructuring liability related to the
2009 Restructuring Plan for the fiscal year ended January 3, 2010 is as follows:



|                             |  |                     |        |   |                                         |   |     |       |  |   |        |  
|---------------------------- |  | ------------------- | ------ | - | --------------------------------------- | - | --- | ----- |  | - | ------ | -
|                             |  | WorkforceReductions |        |   | Facility Closures&
EquipmentWrite-downs |   |     | Total | 
|Balance at December 28, 2008 |  | $                   |       |   |                                         | $ |    |       |  | $ |       |  
|Amounts accrued              |  |                     | 2,769  |   |                                         |   | 78  |       |  |   | 2,847  |  
|Amounts paid/incurred        |  |                     | (2,268 | ) |                                         |   | (78 | )     |  |   | (2,346 | )
|Effects of exchange rates    |  |                     |       |   |                                         |   |    |       |  |   |       |  
|                             |  |                     |        |   |                                         |   |     |       |  |   |        |  
|Balance at January 3, 2010   |  | $                   | 501    |   |                                         |   |    |       |  |   | 501    |  
|                             |  |                     |        |   |                                         |   |     |       |  |   |        |  

The costs associated with these exit activities were recorded in accordance with the accounting guidance now
codified as FASB ASC Topic 420, Exit or Disposal Obligations. Pursuant to this guidance, a liability for a cost associated with an exit or disposal activity shall be recognized in the period in which the liability is incurred,
except for a liability for one-time employee termination benefits that is incurred over time. In the unusual circumstance in which fair value cannot be reasonably estimated, the liability shall be recognized initially in the period in which fair
value can be reasonably estimated. The restructuring and integration plan is subject to continued future refinement as additional information becomes available. The Company expects that the workforce reduction amounts will be paid through the second
quarter of 2011.

2008 Restructuring Plan

In June 2008, the Company formulated and began to implement a plan to further consolidate operations and reduce manufacturing and operating
expenses. As part of this plan, the Company closed its Salisbury, Maryland manufacturing facility and transferred most of the production to its other manufacturing operations. In addition, the Company closed its design and development center in
Bristol, UK and discontinued manufacturing operations in Kempele, Finland. These actions were finalized in the first quarter of 2009.

A summary of the activity affecting the accrued restructuring liability related to the 2008 Restructuring Plan for the fiscal year ended January 3, 2010 is as follows:



|                             |  |                     |        |   |                                         |   |      |       |  |   |        |  
|---------------------------- |  | ------------------- | ------ | - | --------------------------------------- | - | ---- | ----- |  | - | ------ | -
|                             |  | WorkforceReductions |        |   | Facility Closures&
EquipmentWrite-downs |   |      | Total | 
|Balance at December 28, 2008 |  | $                   | 3,106  |   |                                         | $ | 585  |       |  | $ | 3,691  |  
|Amounts accrued              |  |                     | 650    |   |                                         |   | 95   |       |  |   | 745    |  
|Amounts paid/incurred        |  |                     | (3,652 | ) |                                         |   | (406 | )     |  |   | (4,058 | )
|Effects of exchange rates    |  |                     | 73     |   |                                         |   | 60   |       |  |   | 133    |  
|                             |  |                     |        |   |                                         |   |      |       |  |   |        |  
|Balance at January 3, 2010   |  | $                   | 177    |   |                                         |   | 334  |       |  |   | 511    |  
|                             |  |                     |        |   |                                         |   |      |       |  |   |        |  

The costs associated with these exit activities were recorded in accordance with the accounting guidance in
FASB ASC Topic 420. The restructuring and integration plan is subject to continued future refinement as additional information becomes available. The Company expects that the workforce reductions will be paid out through the second quarter of 2010,
and the facility closure amounts will be paid out over the remaining lease term, which extends through September 2010.

2007 Restructuring Plan

In the second quarter of 2007, the Company formulated and began to implement a
plan to further consolidate operations and reduce operating costs. As part of this plan, the Company closed its design and development centers in El Dorado Hills, California and Toronto, Canada, and discontinued its design and development center in
Shipley, UK. Also as part of this plan, the Company sold its manufacturing operations located in Hungary to Sanmina-SCI, a third-party contract manufacturing supplier, and entered into a manufacturing services agreement with Sanmina-SCI. The
transaction included inventories and fixed assets and included a sublease of the existing facility, along with the assumption of certain liabilities, including all transferred employees. The Company finalized this plan in the fourth quarter of 2007.



69



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



A summary of the activity affecting the accrued restructuring liability related to the
2007 Restructuring Plan for the fiscal year ended January 3, 2010 is as follows:



|                             |  |                                         |      |  
|---------------------------- |  | --------------------------------------- | ---- | -
|                             |  | Facility Closures&
EquipmentWrite-downs |     
|Balance at December 28, 2008 |  | $                                       | 551  |  
|Amounts accrued              |  |                                         | (179 | )
|Amounts paid/incurred        |  |                                         | (375 | )
|Effects of exchange rates    |  |                                         | 3    |  
|                             |  |                                         |      |  
|Balance at January 3, 2010   |  | $                                       |     |  
|                             |  |                                         |      |  

The costs associated with these exit activities were recorded in accordance with the accounting guidance in
FASB ASC Topic 420. The remaining payments on this plan were made during 2009, and all actions associated with this plan have been completed.

2006 Plan for Consolidation of Operations

In the fourth quarter of
2006, and in connection with the Filtronic plc wireless acquisition, the Company formulated and began to implement a plan to restructure its global manufacturing operations, including the consolidation of its manufacturing facilities in Wuxi and
Shanghai, China, into the manufacturing facility located in Suzhou, China. The plan includes a reduction of workforce, impairment and disposal of inventory and equipment utilized in discontinued product lines, and facility closure costs. In
addition, the Company also ceased the production of certain product lines manufactured at these facilities to eliminate duplicative product lines.

A summary of the activity affecting the accrued restructuring liability related to the 2006 Plan for Consolidation of Operations for the fiscal year ended January 3, 2010 is as follows:



|                             |  |                                         |      |  
|---------------------------- |  | --------------------------------------- | ---- | -
|                             |  | Facility Closures&
EquipmentWrite-downs |     
|Balance at December 28, 2008 |  | $                                       | 146  |  
|Amounts accrued              |  |                                         | 175  |  
|Amounts paid/incurred        |  |                                         | (321 | )
|Effects of exchange rates    |  |                                         |     |  
|                             |  |                                         |      |  
|Balance at January 3, 2010   |  | $                                       |     |  
|                             |  |                                         |      |  

The costs associated with these exit activities were recorded in accordance with the accounting guidance in
FASB ASC Topic 420. The remaining payments on this plan were made during 2009, and all actions associated with this plan have been completed.

Integration of LGP Allgon and REMEC, Inc.s Wireless Systems Business

The Company recorded liabilities in connection with the acquisitions for estimated restructuring and integration costs related to the consolidation of REMEC, Inc.s wireless systems business and LGP Allgons operations, including
severance and future lease obligations on excess facilities. These estimated costs were included in the allocation of the purchase consideration and resulted in additional goodwill pursuant to the accounting guidance now codified as FASB ASC Topic
805, Business Combinations. The costs associated with these exit activities were recorded in accordance with the accounting guidance in FASB ASC Topic 420. The implementation of the restructuring and integration plan is complete.



70



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



A summary of the activity affecting the accrued restructuring liability related to the
integration of the REMEC, Inc.s wireless systems business and LGP Allgon for the fiscal year ended January 3, 2010 is as follows:



|                             |  |                                         |       |  
|---------------------------- |  | --------------------------------------- | ----- | -
|                             |  | Facility Closures& EquipmentWrite-downs |      
|Balance at December 28, 2008 |  | $                                       | 1,425 |  
|Amounts accrued              |  |                                         |      |  
|Amounts paid/incurred        |  |                                         | (634  | )
|Effects of exchange rates    |  |                                         |      |  
|                             |  |                                         |       |  
|Balance at January 3, 2010   |  | $                                       | 791   |  
|                             |  |                                         |       |  

The Company expects that the facility closure amounts will be paid out over the remaining lease term which
extends through January 2011.

Restructuring and Impairment Charges

In connection with the plans described above, the Company recorded various restructuring and impairment charges in 2009, 2008 and 2007. A
summary of these charges is listed below:



|                                           |                |                     |                  |  |                  |         |  |   |        
|------------------------------------------ | -------------- | ------------------- | ---------------- |  | ---------------- | ------- |  | - | -------
|                                           |                | For the Years Ended
|                                           | January 3,2010 |                     | December 28,2008 |  | December 30,2007
|Intangible asset impairment                |                | $                   |                 |  | $                | 18,306  |  | $ | 666    
|Restructuring and impairment charges:      |                |                     |                  |  |                  |         |  |   |        
|Inventory charges                          |                |                     |                 |  |                  | 9,656   |  |   | 13,327 
|Facility asset impairment                  |                |                     | 955              |  |                  | 2,604   |  |   | 10,729 
|Settlement of contractual commitments      |                |                     |                 |  |                  | 565     |  |   | 9,727  
|Severance                                  |                |                     | 977              |  |                  | 4,386   |  |   | 177    
|Other charges                              |                |                     |                 |  |                  | 713     |  |   | 544    
|                                           |                |                     |                  |  |                  |         |  |   |        
|Total cost of sales                        |                |                     | 1,932            |  |                  | 36,230  |  |   | 35,170 
|Intangible asset impairment                |                |                     |                 |  |                  | 11,219  |  |   | 2,015  
|Restructuring and impairment charges:      |                |                     |                  |  |                  |         |  |   |        
|Severance                                  |                |                     | 2,442            |  |                  | 2,299   |  |   | 5,886  
|Facility closure and impairment charges    |                |                     | 169              |  |                  | 1,729   |  |   | 2,718  
|Other charges                              |                |                     |                 |  |                  | 931     |  |   | 677    
|                                           |                |                     |                  |  |                  |         |  |   |        
|Total operating expenses                   |                |                     | 2,611            |  |                  | 16,178  |  |   | 11,296 
|Goodwill impairment                        |                |                     |                 |  |                  | 315,885 |  |   | 151,735
|                                           |                |                     |                  |  |                  |         |  |   |        
|Total restructuring and impairment charges |                | $                   | 4,543            |  | $                | 368,293 |  | $ | 198,201
|                                           |                |                     |                  |  |                  |         |  |   |        

In 2009, the Company recorded charges of approximately
$3.4 million in severance costs, of which $1.0 million and $2.4 million was recorded in cost of sales and operating expenses, respectively. In connection with these plans, the Company incurred severance costs in 2008 at various locations of $6.7
million, of which $4.4 million and $2.3 million was recorded in cost of sales and operating expenses, respectively. During 2008, the Company also incurred charges of $1.6 million for professional fees related to these restructuring plans, including
charges related to various professional fees to wind down the entities, of which $0.7 million was included in cost of goods sold and $0.9 million was included in operating expenses. The Company incurred severance costs in 2007 of $6.1 million, of
which $0.2 million and $5.9 million was recorded in cost of sales and operating expenses, respectively. During 2007, the Company also incurred charges of $1.2 million for professional fees related to these restructuring plans, including a charge
related to the Companys sale of its manufacturing facility in Hungary.

In 2009, the Company recorded a charge of
approximately $0.2 million related to facility closures costs. The Company also recorded facility closure charges of $1.7 million in 2008 consisting primarily of the remaining lease payments for its closed development facility in Bristol, UK. During
2007, the Company recorded facility closure charges of $1.7 million related primarily to the closure of its design and development centers in El Dorado Hills, California and Toronto, Canada, and the discontinuance of its design and development
center in Shipley, UK.



71



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



In 2009, the Company sold the Salisbury, Maryland building and recorded a charge of
approximately $1.0 million to write the building down to its fair value less cost to sell. In 2008, the Company recorded a net impairment charge of $1.2 million related primarily to manufacturing equipment and other assets located in closed plants
in Salisbury, Maryland, Hungary and Costa Rica. In addition, the Company recorded a charge of $0.3 million to write the Salisbury building down to its fair value less cost to sell that was classified as held for sale in 2008. Also in 2008, the
Company recorded facility closure charges of $1.1 million consisting of the remaining lease payments for its closed facility in Hungary as the cease-use date criteria in FASB ASC Topic 420 was met in 2008. In 2007, the Company also recorded a net
impairment charge of $7.4 million related to manufacturing equipment located in plants either closed or to be closed in China, Hungary and Costa Rica. During 2007, the Company recognized a $1.9 million impairment charge on its building in Costa Rica
to reflect its estimated current market value. The sale of the Costa Rica building was completed in the second quarter of 2008.

In 2008, the Company recorded a charge of approximately $9.7 million related to the impairment of inventory that either has been or will be disposed of and is not expected to generate future revenue primarily due to consolidations and
facility closures in China, Finland, Hungary, the UK and Salisbury, Maryland. In 2007, the Company recorded a charge of approximately $13.3 million for the impairment of the related inventory value that will be disposed of and not generate future
revenues at its facilities in China, Sweden, Hungary and the UK.

In 2008, the Company recorded a charge of $0.6 million
related to vendor cancellation claims for closed facilities. In 2007, the Company recorded a charge of $9.3 million related to the settlement of its revenue and margin commitments associated with the sale of its Philippines manufacturing facility in
2006, as well as an impairment charge of $1.4 million on the land at its Philippines manufacturing facility that was retained by the Company at the time of the sale. Based upon a valuation report on the land that the Company obtained when it settled
its revenue and margin commitments, the Company recorded an impairment charge of $1.4 million to write the land down to its estimated net realizable value. The Company also recorded a charge of $0.4 million related to certain other vendor
cancellation charges for purchase order commitments on closed facilities.

In 2007, the Company sold one of its facilities in
Sweden for approximately $11.8 million and realized a loss of approximately $1.0 million.

Intangible Asset Impairment

In 2008, the Company performed an analysis of the recoverability of its intangible assets in accordance with FASB ASC
Topic 350, which included a detailed review of its developed technology and customer relationship intangible assets from prior acquisitions, including its Filtronic plc, REMEC Wireless, and LGP Allgon acquisitions. The Company determined that the
developed technology and related customer relationship intangible assets had either been replaced or were at the end of life and had no future forecasted cash flows. Accordingly, the Company recorded an intangible asset impairment charge of
approximately $29.5 million in 2008, which included approximately $18.3 million for developed technology intangible assets and $11.2 million related to customer relationship intangibles. In 2007, the Company performed a similar analysis of the
recoverability of its intangible assets, and an impairment charge of $2.7 million, including $0.7 million of developed technology and $2.0 million of customer relationship intangible assets was recorded. These charges were related to intangible
assets from prior acquisitions that have either been replaced or were at the end of life and had no future forecasted cash flows. These charges were included in the caption, Restructuring and Impairment Charges in the accompanying
Consolidated Statement of Operations.

Goodwill Impairment

In the fourth quarter of 2008, the market value of the Companys common stock substantially declined. As a result of this decline, the
Company determined that it had an indicator of impairment of its goodwill, and an interim test of goodwill impairment was required. As a result, the Company reviewed its goodwill for impairment under a two-part test in accordance with FASB ASC Topic
350. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. Based upon this test, the Company determined that its goodwill was
impaired and the second step was required to measure the amount of the impairment. In the fourth quarter of 2008, the Company completed the second step to measure the goodwill and recorded a charge of $315.9 million, representing the write-off of
the remaining balance of the goodwill.



72



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



In the fourth quarter of 2007, the market value of the Companys common stock
substantially declined. As a result of this decline, the Company determined that it had an indicator of impairment of its goodwill, and an interim test of goodwill impairment was required. As a result, the Company reviewed its goodwill for
impairment in accordance with FASB ASC Topic 350 and determined that its goodwill was impaired and recorded a charge of $151.7 million.

The Company operates in a single operating segment and reporting unit, and determined the fair value of the reporting unit, which equates to the entire company, utilizing the Companys common stock
price which is quoted on the NASDAQ Global Select Market along with a control premium based upon recent transactions of comparable companies. The Company determined the fair value of its intangible assets by using a discounted cash flow method.

Note 7. Other Income (Expense), Net

Other income (expense), net, includes gains and losses on foreign currency transactions, interest income and interest expense associated with the Companys convertible subordinated notes and fees on
its revolving Credit Agreement. The components of other income (expense), net, are as follows:



|                                       |  |                    |         |   |                  |   |         |                  |  |   |         |  
|-------------------------------------- |  | ------------------ | ------- | - | ---------------- | - | ------- | ---------------- |  | - | ------- | -
|                                       |  | Fiscal Years Ended |        
|                                       |  | January 3,2010     |         |   | December 28,2008 |   |         | December 30,2007 | 
|Interest income                        |  | $                  | 572     |   |                  | $ | 682     |                  |  | $ | 2,137   |  
|Interest expense                       |  |                    | (11,070 | ) |                  |   | (11,233 | )                |  |   | (10,086 | )
|Foreign currency gain, net             |  |                    | 3,964   |   |                  |   | 11,455  |                  |  |   | 910     |  
|Gain on repurchase of convertible debt |  |                    | 12,693  |   |                  |   | 32,207  |                  |  |   | 2,101   |  
|Other income, net                      |  |                    | 2,222   |   |                  |   | 1,730   |                  |  |   | 2,872   |  
|                                       |  |                    |         |   |                  |   |         |                  |  |   |         |  
|Total other income (expense), net      |  | $                  | 8,381   |   |                  | $ | 34,841  |                  |  | $ | (2,066  | )
|                                       |  |                    |         |   |                  |   |         |                  |  |   |         |  

Other income (expense), net for 2009 includes a gain of approximately $12.7 million related to the
repurchase of approximately $25.4 million aggregate principal value of outstanding 1.875% convertible subordinated notes due 2024. Other income (expense), net for 2008 includes a gain of approximately $32.2 million related to the repurchase of
approximately $43.7 million aggregate principal value of outstanding 1.875% convertible subordinated notes due 2024. Other income (expense), net for 2007 includes a gain of approximately $2.1 million related to the repurchase of approximately $116.4
million aggregate principal value of outstanding 1.25% convertible subordinated notes due July 2008.

Note 8. Gain on Settlement of
Litigation

As part of the Companys acquisition of REMEC, Incs wireless systems business, $15 million of the
purchase price was held in escrow to cover any potential indemnification claims. In March 2009, the Company settled a dispute arising out of certain claims made against the escrow. As a result of this settlement, the Company received approximately
$2 million in cash. This payment was accounted for as an adjustment to the total consideration paid for this acquisition. As a result, the remaining net book value of the intangible assets and fixed assets acquired in this acquisition was eliminated
and the Company recorded a net gain of approximately $0.6 million. This amount is included in other income (expense), net in the accompanying consolidated statement of operations.

Note 9. Loss Per Share

In accordance with FASB ASC Topic 260, basic loss
per share is based upon the weighted average number of common shares outstanding. Diluted loss per share is based upon the weighted average number of common and potential common shares for each period presented and income available to common
stockholders is adjusted to reflect any changes in income or loss that would result from the issuance of the dilutive common shares. The Companys potential common shares include stock options under the treasury stock method and convertible
subordinated debt under the if-converted method. Potential common shares of 30,293,289, 33,341,377 and 31,753,446 related to the Companys stock option programs and convertible debt have been excluded from diluted weighted average common shares
for the years ended January 3, 2010, December 28, 2008 and December 30, 2007, as the effect would be anti-dilutive.



73



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



The following details the calculation of basic and diluted earnings (loss) per share:



|                                                 |  |                    |         |                  |   |          |                  |  |   |          |  
|------------------------------------------------ |  | ------------------ | ------- | ---------------- | - | -------- | ---------------- |  | - | -------- | -
|                                                 |  | Fiscal Years Ended |        
|                                                 |  | January 3,2010     |         | December 28,2008 |   |          | December 30,2007 | 
|Basic:                                           |  |                    |         |                  |   |          |                  |  |   |          |  
|Net income (loss)                                |  | $                  | 3,222   |                  | $ | (348,664 | )                |  | $ | (309,535 | )
|Weighted average common shares                   |  |                    | 131,803 |                  |   | 131,077  |                  |  |   | 130,396  |  
|Basic earnings (loss) per share                  |  | $                  | 0.02    |                  | $ | (2.66    | )                |  | $ | (2.37    | )
|Diluted:                                         |  |                    |         |                  |   |          |                  |  |   |          |  
|Net income (loss)                                |  | $                  | 3,222   |                  | $ | (348,664 | )                |  | $ | (309,535 | )
|Interest expense of convertible debt, net of tax |  |                    |        |                  |   |         |                  |  |   |         |  
|                                                 |  |                    |         |                  |   |          |                  |  |   |          |  
|Net income (loss), as adjusted                   |  | $                  | 3,222   |                  | $ | (348,664 | )                |  | $ | (309,535 | )
|                                                 |  |                    |         |                  |   |          |                  |  |   |          |  
|Weighted average common shares                   |  |                    | 131,803 |                  |   | 131,077  |                  |  |   | 130,396  |  
|Potential common shares                          |  |                    |         |                  |   |          |                  |  |   |          |  
|Employee stock options                           |  |                    | 1,993   |                  |   |         |                  |  |   |         |  
|Restricted stock                                 |  |                    | 210     |                  |   |         |                  |  |   |         |  
|                                                 |  |                    |         |                  |   |          |                  |  |   |          |  
|Weighted average common shares, as adjusted      |  |                    | 134,006 |                  |   | 131,077  |                  |  |   | 130,396  |  
|                                                 |  |                    |         |                  |   |          |                  |  |   |          |  
|Diluted earnings (loss) per share                |  | $                  | 0.02    |                  | $ | (2.66    | )                |  | $ | (2.37    | )
|                                                 |  |                    |         |                  |   |          |                  |  |   |          |  

Note 10. Commitments and Contingencies

Lease Agreements

The Company leases certain of its manufacturing
and office facilities and equipment under non-cancelable leases, certain of which contain renewal options. In addition to the base rent, the Company is generally required to pay insurance, real estate taxes and other operating expenses related to
these facilities. In some cases, the base rent will increase during the term of the lease based on a predetermined schedule or increases in the Consumer Price Index. The Company recognizes rent expense on a straight-line basis over the life of the
lease for leases containing stated rent escalations.

Future minimum lease payments required under all operating leases at
January 3, 2010 are payable as follows:



|            |  |       |      
|----------- |  | ----- | -----
|Fiscal Year |  | Total
|2010        |  | $     | 4,238
|2011        |  |       | 1,602
|2012        |  |       | 1,246
|2013        |  |       | 750  
|2014        |  |       | 521  
|Thereafter  |  |       | 734  
|            |  |       |      
|Total       |  | $     | 9,091
|            |  |       |      

The Company has subleased certain of its facilities.
Future minimum rentals to be received by the Company under subleases at January 3, 2010 are as follows:



|            |  |       |       
|----------- |  | ----- | ------
|Fiscal Year |  | Total
|2010        |  | $     | 2,684 
|2011        |  |       | 2,187 
|2012        |  |       | 2,160 
|2013        |  |       | 2,224 
|2014        |  |       | 1,309 
|Thereafter  |  |       | 522   
|            |  |       |       
|Total       |  | $     | 11,086
|            |  |       |       

Total rent expense was $5.0 million, $4.9 million and
$5.7 million for the years ended January 3, 2010, December 28, 2008 and December 30, 2007, respectively.



74



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



Legal Proceedings

In the first quarter of 2007, four purported shareholder class action complaints were filed in the United States District Court for the
Central District of California against the Company, its President and Chief Executive Officer, its former Executive Chairman of the Board of Directors and its Chief Financial Officer. The complaints were Jerry Crafton v. Powerwave Technologies,
Inc., et. al., Kenneth Kwan v. Powerwave Technologies, Inc., et. al., Achille Tedesco v. Powerwave Technologies, Inc., et. al. and Farokh Etemadieh v. Powerwave Technologies, Inc. et. al.and were brought under Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In June 2007, the four cases were consolidated into one action before the Honorable Judge Philip Gutierrez, and a lead plaintiff was appointed. In October 2007, the lead plaintiff filed an
amended complaint asserting the same causes of action and purporting to state claims on behalf of all persons who purchased Powerwave securities between May 2, 2005 and November 2, 2006. The essence of the allegations in the amended
complaint was that the defendants made misleading statements or omissions concerning the Companys projected and actual sales revenues, the integration of certain acquisitions and the sufficiency of the Companys internal controls. In
December 2007, the defendants filed a motion to dismiss the amended complaint. On April 17, 2008, the Court granted defendants motion to dismiss plaintiffs claims in connection with the Companys projected sales revenues, but
denied defendants motion to dismiss plaintiffs other claims. On August 29, 2008, the defendants answered the amended complaint. On May 14, 2009, the parties executed a stipulation of settlement to resolve the consolidated
action. According to the terms of the proposed settlement, the settlement payment will be funded by the Companys directors and officers liability insurance. The Court granted preliminary approval of the proposed settlement and provisionally
certified a settlement class on June 22, 2009, and on October 19, 2009 entered a judgment that granted final approval of the settlement.

In March 2007, one additional lawsuit that relates to the pending shareholder class action was filed. The lawsuit, Cucci v. Edwards, et al., filed in the Superior Court of California, is a
shareholder derivative action, purported to be brought by an individual shareholder on behalf of Powerwave, against current and former directors of Powerwave. Powerwave is also named as a nominal defendant. The allegations of the derivative
complaint closely resemble those in the class action and pertain to the time period of May 2, 2005 through October 9, 2006. Based on those allegations, the derivative complaint asserts various claims for breach of fiduciary duty, waste of
corporate assets, mismanagement, and insider trading under state law. The derivative complaint was removed to federal court, and was also pending before Judge Gutierrez. On May 15, 2009, the parties executed a stipulation of settlement to
resolve the derivative action. According to the terms of the proposed settlement, the Company will adopt certain enhancements to its corporate governance policies and procedures and counsel for the derivative plaintiff will be reimbursed its legal
fees and expenses, which will be funded by the Companys directors and officers liability insurance. The Court granted preliminary approval of the proposed settlement on June 22, 2009, and on October 19, 2009 entered a judgment that
granted final approval of the settlement.

The Company is subject to other legal proceedings and claims in the normal course
of business. The Company is currently defending these proceedings and claims, and, although the outcome of legal proceedings is inherently uncertain presently, the Company anticipates that it will be able to resolve these matters in a manner that
will not have a material adverse effect on the Companys consolidated financial position, results of operations or cash flows.

Note
11. Contractual Guarantees and Indemnities

During its normal course of business, the Company makes certain contractual
guarantees and indemnities pursuant to which the Company may be required to make future payments under specific circumstances. The Company has not recorded any liability for these contractual guarantees and indemnities in the accompanying
consolidated financial statements. A description of significant contractual guarantees and indemnities existing as of January 3, 2010 includes:

Intellectual Property Indemnities

The Company indemnifies certain
customers and its contract manufacturers against liability arising from third-party claims of intellectual property rights infringement related to the Companys products. These indemnities appear in development and supply agreements with the
Companys customers as well as manufacturing service agreements with the Companys contract manufacturers, are not limited in amount or duration and generally survive the expiration of the contract. Given that the amount of any potential
liabilities related to such indemnities cannot be determined until an infringement claim has been made, the Company is unable to determine the maximum amount of losses that it could incur related to such indemnifications. Historically, any amounts
payable pursuant to such intellectual property indemnifications have not had a material effect on the Companys business, financial condition or results of operations.



75



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



Director and Officer Indemnities and Contractual Guarantees

The Company has entered into indemnification agreements with its directors and executive officers which require the Company to indemnify such
individuals to the fullest extent permitted by Delaware law. The Companys indemnification obligations under such agreements are not limited in amount or duration. Certain costs incurred in connection with such indemnifications may be recovered
under certain circumstances under various insurance policies. Given that the amount of any potential liabilities related to such indemnities cannot be determined until a lawsuit has been filed against a director or executive officer, the Company is
unable to determine the maximum amount of losses that it could incur relating to such indemnifications. Historically, any amounts payable pursuant to such director and officer indemnifications have not had a material negative effect on the
Companys business, financial condition or results of operations.

The Company has also entered into severance agreements
and change in control agreements with certain of its executives. These agreements provide for the payment of specific compensation benefits to such executives upon the termination of their employment with the Company.

General Contractual Indemnities/Products Liability

During the normal course of business, the Company enters into contracts with customers where it has agreed to indemnify the other party for
personal injury or property damage caused by the Companys products. The Companys indemnification obligations under such agreements are not limited in duration and are generally not limited in amount. Historically, any amounts payable
pursuant to such contractual indemnities have not had a material negative effect on the Companys business, financial condition or results of operations. The Company maintains product liability insurance as well as errors and omissions
insurance which may provide a source of recovery to the Company in the event of an indemnification claim.

Other
Guarantees and Indemnities

The Company occasionally issues guarantees for certain contingent liabilities under various
contractual arrangements, including customer contracts, self-insured retentions under certain insurance policies and governmental value-added tax compliance programs. These guarantees normally take the form of standby letters of credit issued by the
Companys banks, which may be secured by cash deposits or pledges, or performance bonds issued by an insurance company. Historically, any amounts payable pursuant to such guarantees have not had a material negative effect on the Companys
business, financial condition or results of operations. In addition, the Company, as part of the agreements to register the convertible notes it issued in September 2007 and November 2004 agreed to indemnify the selling security holders against
certain liabilities, including liabilities under the Securities Act of 1933. The Companys indemnification obligations under such agreements are not limited in duration and generally not limited in amount.

Note 12. 401(k) and Profit-Sharing Plans

The Company sponsors a 401(k) and profit-sharing plan covering all eligible U.S. employees and provides for a Company match in cash on a portion of participant contributions. The Companys 401(k) and
profit sharing plan is managed by Fidelity Investments, and is an employee self-directed plan which offers a variety of investment choices via mutual funds. Employees may contribute up to 15% of their base salary, subject to IRS maximums. The
Companys matching contributions are made in cash and are invested in the same percentage among the various funds offered as selected by the employee. Effective for fiscal year 2010, the Company matches 100% of the first 3% of eligible
compensation contributed and 50% of the next 2%. For prior periods, the Company matched 100% of the eligible compensation contributed up to 6%. Employer matching contributions for the years ended January 3, 2010, December 28, 2008 and
December 30, 2007 were $1.7 million, $1.8 million and $1.4 million, respectively. There were no discretionary profit sharing contributions authorized for the years ended January 3, 2010, December 28, 2008 or December 30, 2007.

Note 13. Employee Stock Purchase Plan

The Companys Extended and Restated 1996 Employee Stock Purchase Plan (the ESPP) provides for shares of common stock that are reserved for issuance under the plan. The ESPP, which is
intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code, is implemented utilizing semi-annual offerings with purchases occurring at six-month intervals. The ESPP administration is
overseen by the Board of Directors. Employees are eligible to participate if they are employed by the Company for at least 20 hours per week and if they have been employed by the Company for at least 90 days. The ESPP permits eligible employees to
purchase common stock through payroll deductions, which may not exceed 20% of an employees compensation. The price of common stock purchased under the ESPP is 85% of the lower of the fair market value of the common stock at the beginning of
each six-month offering period or on the applicable purchase date. Employees may end their participation in an offering at any time during the offering period,



76



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



and participation ends automatically upon termination of employment. The total number of shares of common stock that may be purchased by an employee in any offering period may not exceed 5,000
shares. The Board may at any time amend or terminate the ESPP, except that no such amendment or termination may adversely affect shares previously granted under the ESPP. On August 12, 2008, the Companys shareholders approved an amendment
which increased the authorized number of common shares available for purchase under the Plan from 390,953 to 1,890,953. At January 3, 2010, there were rights to purchase approximately 340,100 shares under the ESPPs current offering
period, which concluded on January 31, 2010. There were 1,003,585 shares available for purchase at January 3, 2010 under the ESPP. The Plan has a termination date of July 31, 2017.

Note 14. Stock Plans and Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with the guidance now codified as FASB ASC Topic 718. Under the fair value recognition provision of FASB ASC Topic 718, stock-based
compensation cost is estimated at the grant date based on the fair value of the award. The Company estimates the fair value of stock options granted according to the Black-Scholes-Merton option pricing model and a multiple option award approach. The
fair value of restricted stock awards is based on the closing market price of the Companys common stock on the date of grant.

During the year ended January 3, 2010, the Company recognized total compensation expense of $4.4 million, which consists of $4.3 million for stock options and $0.1 million for employee stock purchase plan awards in its consolidated
statement of operations. During the year ended December 28, 2008, the Company recognized total compensation expense of $4.8 million, which consists of $4.4 million for stock options and $0.4 million for employee stock purchase plan awards in
its consolidated statement of operations. During the year ended December 30, 2007, the Company recognized total compensation expense of $4.9 million, which consists of $4.6 million for stock options and $0.3 million for employee stock purchase
plan awards in its consolidated statement of operations.

Stock-based compensation expense was recognized as follows in the
consolidated statement of operations:



|                                               |  |                    |       |                  |   |                  |  |   |      
|---------------------------------------------- |  | ------------------ | ----- | ---------------- | - | ---------------- |  | - | -----
|                                               |  | Fiscal Years Ended
|                                               |  | January 3,2010     |       | December 28,2008 |   | December 30,2007
|Cost of sales                                  |  | $                  | 1,047 |                  | $ | 1,007            |  | $ | 700  
|Sales and marketing expenses                   |  |                    | 354   |                  |   | 388              |  |   | 472  
|Research and development expenses              |  |                    | 979   |                  |   | 1,123            |  |   | 759  
|General and administrative expenses            |  |                    | 1,975 |                  |   | 2,236            |  |   | 2,956
|                                               |  |                    |       |                  |   |                  |  |   |      
|Increase to operating loss before income taxes |  |                    | 4,355 |                  |   | 4,754            |  |   | 4,887
|Income tax benefit recognized                  |  |                    |      |                  |   |                 |  |   |     
|                                               |  |                    |       |                  |   |                  |  |   |      
|Impact on net income (loss)                    |  | $                  | 4,355 |                  | $ | 4,754            |  | $ | 4,887
|                                               |  |                    |       |                  |   |                  |  |   |      
|Impact on earnings (loss) per share:           |  |                    |       |                  |   |                  |  |   |      
|Basic and diluted                              |  | $                  | 0.03  |                  | $ | 0.04             |  | $ | 0.04 
|                                               |  |                    |       |                  |   |                  |  |   |      

As of January 3, 2010, unrecognized compensation
expense related to the unvested portion of the Companys stock based-awards and employee stock purchase plan was approximately $2.9 million (net of estimated forfeitures of $0.3 million) which is expected to be recognized over a
weighted-average period of 1.2 years.

The Black-Scholes-Merton option valuation model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation methods require the input of highly subjective assumptions including the weighted average risk-free interest rate, the expected life and the
expected stock price volatility. The weighted average risk-free interest rate was determined based upon actual U.S. treasury rates over a one to ten year horizon, based upon the actual life of options granted. The Company grants options with either
a five year or ten year life. The expected life is based on the Companys actual historical option exercise experience. For the employee stock purchase plan, the actual life of six months is utilized in this calculation. The expected life was
determined based upon actual option grant lives over a ten year period. The Company has utilized various market sources to calculate the implied volatility factor utilized in the Black-Scholes-Merton option valuation model. These included the
implied volatility utilized in the pricing of options on the Companys common stock as well as the implied volatility utilized in determining market prices of the Companys outstanding convertible notes. Using the Black-Scholes-Merton
option valuation model, the estimated weighted average fair value of options granted during fiscal years 2009, 2008 and 2007 were $0.45 per share, $1.97 per share and $2.62 per share, respectively.



77



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



The fair value of restricted stock awards is based upon the closing market price of the
Companys common stock on the date of grant. The weighted average grant date fair value of restricted stock awards granted in 2008 and 2007 was $3.28 and $6.32, respectively. There were no restricted stock awards granted in 2009.

The fair value of options granted under the Companys stock incentive plans during fiscal years 2009, 2008 and 2007 was estimated on
the date of grant using the Black-Scholes-Merton option-pricing model utilizing the multiple option approach and the following weighted-average assumptions:



|                                         |  |                    |   |  |                  |  |     |                  |  |     |  
|---------------------------------------- |  | ------------------ | - |  | ---------------- |  | --- | ---------------- |  | --- | -
|                                         |  | Fiscal Years Ended |  
|                                         |  | January 3,2010     |   |  | December 28,2008 |  |     | December 30,2007 | 
|Weighted average risk-free interest rate |  | 1.7                | % |  |                  |  | 2.6 | %                |  | 4.2 | %
|Expected life (in years)                 |  | 5.1                |   |  |                  |  | 4.6 |                  |  | 4.5 |  
|Expected stock volatility                |  | 138                | % |  |                  |  | 58  | %                |  | 44  | %
|Dividend yield                           |  | None               |   |  | None             |  |     | None             | 

The
purposes of the Companys stock option plans are to attract and retain the best available personnel for positions of substantial responsibility with the Company and to provide participants with additional incentives in the form of options to
purchase the Companys common stock which will encourage them to acquire a proprietary interest in, and to align their financial interests with those of the Company and its shareholders. All of the Companys stock option plans have been
approved by the Companys shareholders.

1995 Stock Option Plan

The Companys 1995 Stock Option Plan (the 1995 Plan), as amended, permits executive personnel, key employees and
non-employee members of the Board of Directors of the Company to participate in ownership of the Company. Pursuant to the amended Stockholders Agreement dated as of November 8, 1996, between the Company and certain of its original
shareholders, those certain shareholders agreed that once the Company issued 3,285,000 shares of common stock under the 1995 Stock Option Plan, any additional shares issued under that Plan upon an option exercise would be coupled with a redemption
from those shareholders of an equal number of shares at a redemption price equaling the option exercise price. The Company and those certain shareholders have agreed that this share redemption agreement applies only to the exercise of options to
purchase a total of 2,530,845 shares of the Companys common stock. As of January 3, 2010, a total of 5,766,296 options have been exercised under the 1995 Plan, of which a total of 2,481,296 shares of common stock have been funded from
those shareholders party to the amended Stockholders Agreement. The effect of this transaction is to eliminate any dilution from the further exercise of options under the 1995 Plan. At January 3, 2010, there were 16,200 options
outstanding under the 1995 Plan at a weighted average exercise price of $7.07 share. The ability to grant additional shares under the 1995 Plan expired in December 2005. Therefore, there are no shares available for grant under the 1995 Plan at
January 3, 2010, and there were a total of 16,200 shares of common stock held in escrow by the Company on behalf of those shareholders party to the Stockholders Agreement to fund all future exercises under the 1995 Plan.

1996 Stock Incentive Plan

The Companys 1996 Stock Incentive Plan (the 1996 Plan), as amended, provides for the granting of incentive stock options, within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the Code), non-statutory options and restricted stock grants to directors, officers, employees and consultants of the Company, except that incentive stock options may not be granted to
non-employee directors or consultants. As of January 3, 2010, a total of 5,501,071 non-statutory options had been exercised under the 1996 Plan and there were 1,713,509 non-statutory options outstanding under the 1996 Plan at a weighted average
exercise price of $13.00 per share. The ability to grant additional shares under the 1996 Plan expired on December 5, 2006. Therefore, there were no shares available for grant under the 1996 Plan at January 3, 2010.



78



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



1996 Director Stock Option Plan

The Companys 1996 Director Stock Option Plan (the Director Plan), as amended, provides that a total of 1,200,000 shares of
the Companys common stock are reserved for issuance under the plan. On November 10, 2005, the Companys shareholders approved the Director Plan Amendment that extended the term of the Director Plan from its previous expiration date
of December 5, 2006 to December 5, 2016. Under the Director Plan, the Board of Directors has the discretion to determine the timing and amount of option grants to directors who are not employees or paid consultants to the Company. It is
the current practice of the Board to grant outside directors an option to purchase 45,000 shares upon reelection to the Board of Directors. The option vests in twelve equal monthly installments so that it is fully vested after one year. The Director
Plan provides that the exercise price per share of grants issued under the Director Plan shall be equal to 100% of the fair market value of a share of common stock on the grant date. All options expire no later than five years after the grant date.
As of January 3, 2010, a total of 208,125 options had been exercised under the Director Plan. There were 510,000 options outstanding under the Director Plan as of January 3, 2010 at a weighted average exercise price of $3.02 per share.
There were 481,875 shares available for grant under the Director Plan at January 3, 2010.

2000 Stock Option Plan

The Companys 2000 Stock Option Plan (the 2000 Plan) provides that a total of 2,640,000 shares of the
Companys common stock are reserved for issuance under the 2000 Plan. The 2000 Plan provides for the granting of only non-statutory stock options to employees, executive officers and consultants of the Company. The exercise price per share of
common stock of the Company covered by each option shall be equal to 100% of the fair market value of the common stock on the date that the option is granted. In no event shall any participant under the 2000 Plan be granted options under the 2000
Plan covering more than 300,000 shares in any one calendar year. Authority to control and manage the 2000 Plan is vested with the Companys Board of Directors, which has sole discretion and authority, consistent with the provisions of the 2000
Plan, to determine the administration of the 2000 Plan. The Board of Directors may delegate such responsibilities in whole or in part to a committee consisting of two or more members of the Board of Directors or two or more executive officers of the
Company (the Administrator). All option grants to executive officers of the Company shall be approved by the Board of Directors or the Compensation Committee of the Board of Directors. The Administrator of the 2000 Plan shall have the
authority, consistent with the provisions of the 2000 Plan and the authority granted by the Board of Directors, to determine which eligible participants will receive options, the time when options will be granted, the terms of options granted and
the number of shares which will be subject to options granted under the 2000 Plan. Notwithstanding the foregoing, the Administrator shall not have the authority to amend an Option Agreement to effect a re-pricing of the exercise price of
an option either by (i) lowering the exercise price of a previously granted option or (ii) by canceling a previously granted option and granting a new option, except that changes in the Companys capital structure or a change in
control of the Company pursuant to the terms of the 2000 Plan shall not be considered a re-pricing of such option. Options generally vest at the rate of 25% on the first anniversary of the grant date and the remaining 75% vests in equal monthly
installments over the following three years. All options expire no later than five years after the grant date. As of January 3, 2010, 837,691 shares had been exercised under the 2000 Plan. There were 1,736,583 options outstanding under the 2000
Plan as of January 3, 2010 at a weighted average exercise price of $3.42 per share. There were 65,726 shares available for grant under the 2000 Plan at January 3, 2010. The 2000 Plan has a termination date of March 17, 2010.

2002 Stock Option Plan

The Companys 2002 Stock Option Plan (the 2002 Plan) was approved by the shareholders of the Company on April 24, 2002. The 2002 Plan provides that a total of 2,000,000 shares of the
Companys common stock are reserved for issuance under the 2002 Plan. Employees and consultants or independent advisors who are in the service of the Company or its subsidiaries are eligible to participate in the 2002 Plan. The Companys
executive officers and other highly paid employees are also eligible to participate in the 2002 Plan. The 2002 Plan provides only for the granting of non-statutory stock options. The exercise price per share of common stock of the Company covered by
each option shall be equal to 100% of the fair market value of the common stock on the date that the option is granted. In no event shall any participant under the 2002 Plan be granted options under the 2002 Plan covering more than 300,000 shares in
any one calendar year. All options granted pursuant to the 2002 Plan shall have a maximum term of no more than ten years from the grant date. Authority to control and manage the 2002 Plan is vested with the Companys Board of Directors, which
has sole discretion and authority, consistent with the provisions of the 2002 Plan, to determine the administration of the 2002 Plan. The Board of Directors may delegate such responsibilities in whole or in part to a committee consisting of two or
more members of the Board of Directors or two or more officers of the Company. All option grants to executive officers of the Company shall be approved by the Board of Directors or the Compensation Committee of the Board of Directors. The
Administrator of the 2002 Plan shall have the authority, consistent with the provisions of the 2002 Plan and the authority of the Board of Directors, to determine which eligible participants will receive options, the time when options will be
granted, the terms of options granted and the number



79



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



of shares which will be subject to options granted under the 2002 Plan. Notwithstanding the foregoing, the Administrator shall not have the authority to amend an option agreement to effect a
re-pricing of the exercise price of such option either by (1) lowering the exercise price of a previously granted option or (2) by canceling a previously granted option and granting a new option except that changes in the
Companys capital structure or a change in control of the Company pursuant to the terms of the 2002 Plan shall not be considered a re-pricing of such option. As of January 3, 2010, 641,522 shares had been exercised under the 2002 Plan.
There were 1,339,856 options outstanding under the 2002 Plan as of January 3, 2010 at a weighted average exercise price of $4.09 per share. There were 18,622 shares available for grant under the 2002 Plan at January 3, 2010. The 2002 Plan
has a termination date of January 23, 2012.

2005 Stock Incentive Plan

The Companys 2005 Stock Incentive Plan (the 2005 Plan) was approved by the shareholders of the Company on November 10,
2005. The 2005 Plan provides that a total of 7,500,000 shares of the Companys common stock are reserved for issuance under the 2005 Plan. Any person who is an employee of the Company or any affiliate thereof, any person to whom an offer of
employment with the Company has been extended, as determined by either the Board of Directors or one or more committees designated by the Board (the Committee), or any person who is a non-employee director is eligible to be designated by
the Committee to receive awards and become a participant under the 2005 Plan. The 2005 Plan includes the following equity compensation awards: non-qualified stock options, restricted stock awards, unrestricted stock awards, stock appreciation rights
and restricted stock units. The exercise price per share of a stock option shall not be less than the fair market value of the Companys common stock on the date the option is granted, provided that the Committee may in its discretion specify
for any stock option an exercise price per share that is higher than the fair market value of the Companys common stock on the date the option is granted. The Committee shall determine the period during which a vested stock option may be
exercised, provided that the maximum term of a stock option shall be ten years from the date the option is granted. A maximum of 7,500,000 shares of common stock may be issued and sold under all awards, restricted and unrestricted, granted under the
2005 Plan. Of such aggregate limit, the maximum number of shares of common stock that may be issued under all awards of restricted stock, restricted stock units and stock awards, in the aggregate, shall be 3,000,000 shares. The maximum number of
shares of common stock that may be subject to stock options, stock appreciation rights, restricted stock, stock units and stock awards, in the aggregate, granted to any one participant during any single fiscal year period shall be 500,000 shares.
The foregoing limitations shall each be applied on an aggregate basis taking into account awards granted to a participant under the 2005 Plan as well as awards of the same type granted to a participant under any other equity-based compensation plan
of the Company or any affiliate thereof. The 2005 Plan is to be administered by the Committee. The Committee shall have such powers and authority as may be necessary or appropriate to carry out the functions of the Committee as described in the 2005
Plan. Subject to the express limitations of the 2005 Plan, the Committee shall have authority in its discretion to determine the persons to whom, and the time or times at which, awards may be granted, the number of shares, units or other rights
subject to each award, the exercise, base or purchase price of an award (if any), the time or times at which an award will become vested, exercisable or payable, the performance goals and other conditions of an award, the duration of the award and
all other terms of the award. The Committee may prescribe, amend and rescind rules and regulations relating to the 2005 Plan. All interpretations, determinations and actions by the Committee shall be final, conclusive and binding upon all parties.
Additionally, the Committee may delegate to one or more officers of the Company the ability to grant and determine terms and conditions of awards under the 2005 Plan to certain employees, and the Committee may delegate to any appropriate officer or
employee of the Company responsibility for performing certain ministerial functions under the 2005 Plan. Subject to anti-dilution adjustment provisions in the 2005 Plan, without the prior approval of the Companys shareholders, evidenced by a
majority of votes cast, neither the Committee nor the Board of Directors shall cause the cancellation, substitution or amendment of a stock option that would have the effect of reducing the exercise price of such a stock option previously granted
under the 2005 Plan, or otherwise approve any modification to such a stock option that would be treated as a repricing under the then applicable rules, regulations or listing requirements adopted by the NASDAQ Stock Market. As of
January 3, 2010, 895,000 shares of restricted stock had been granted under the 2005 Plan, of which there are 201,563 subject to a risk of forfeiture. There were 5,256,666 options outstanding under the 2005 Plan as of January 3, 2010 at a
weighted average exercise price of $2.76 per share. There were 1,348,334 shares available for grant under the 2005 Plan at January 3, 2010. The 2005 Plan has a termination date of September 20, 2015.



80



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



Stock Option and Awards Activity

The following table summarizes activity for outstanding options under the Companys stock option plans for the fiscal year ended
January 3, 2010:



|                                              |  |                 |   |  |                              |       |                                                   |      |                                        |   |      
|--------------------------------------------- |  | --------------- | - |  | ---------------------------- | ----- | ------------------------------------------------- | ---- | -------------------------------------- | - | -----
|                                              |  | Number ofShares |   |  | WeightedAverageExercisePrice |       | WeightedAverageRemainingContractualLife(in years) |      | AggregateIntrinsic Value(in thousands)
|Balance at December 28, 2008                  |  | 6,841           |   |  | $                            | 8.34  |                                                   |      |                                        |   |      
|Granted                                       |  | 4,714           |   |  | $                            | 0.54  |                                                   |      |                                        |   |      
|Exercised                                     |  |                |   |  | $                            |      |                                                   |      |                                        |   |      
|Forfeited                                     |  | (403            | ) |  | $                            | 3.75  |                                                   |      |                                        |   |      
|Expired                                       |  | (561            | ) |  | $                            | 14.32 |                                                   |      |                                        |   |      
|                                              |  |                 |   |  |                              |       |                                                   |      |                                        |   |      
|Balance at January 3, 2010                    |  | 10,591          |   |  | $                            | 4.73  |                                                   | 6.27 |                                        | $ | 3,358
|                                              |  |                 |   |  |                              |       |                                                   |      |                                        |   |      
|Vested or expected to vest at January 3, 2010 |  | 10,060          |   |  | $                            | 4.90  |                                                   | 6.20 |                                        | $ | 3,051
|                                              |  |                 |   |  |                              |       |                                                   |      |                                        |   |      
|Exercisable at January 3, 2010                |  | 4,394           |   |  | $                            | 8.78  |                                                   | 4.56 |                                        | $ | 14   
|                                              |  |                 |   |  |                              |       |                                                   |      |                                        |   |      

The following table summarizes information about all
stock options outstanding at January 3, 2010 under the 1995 Plan, 1996 Plan, Director Plan, 2000 Plan, 2002 Plan and 2005 Plan:



|                         |                    |                                        |                               |                                        |                                           |  |                    |  |                               |  |   |      
|------------------------ | ------------------ | -------------------------------------- | ----------------------------- | -------------------------------------- | ----------------------------------------- |  | ------------------ |  | ----------------------------- |  | - | -----
|Range of Exercise Prices |                    | Options Outstanding at January 3, 2010 |                               | Options Exercisable at January 3, 2010
|                         | OptionsOutstanding |                                        | WeightedAverageExercise Price |                                        | Weighted AverageRemainingContractual Life |  | OptionsExercisable |  | WeightedAverageExercise Price
|$0.42                    |                    | 772                                    |                               | $                                      | 0.42                                      |  | 9.10               |  |                              |  | $ |     
|$0.48                    |                    | 3,070                                  |                               | $                                      | 0.48                                      |  | 8.29               |  |                              |  | $ |     
|$0.49 - $4.88            |                    | 2,152                                  |                               | $                                      | 3.06                                      |  | 4.96               |  | 609                           |  | $ | 3.80 
|$4.96 - $6.69            |                    | 2,281                                  |                               | $                                      | 6.05                                      |  | 5.60               |  | 1,748                         |  | $ | 5.96 
|$6.80 - $67.08           |                    | 2,316                                  |                               | $                                      | 12.05                                     |  | 4.49               |  | 2,037                         |  | $ | 12.69
|                         |                    |                                        |                               |                                        |                                           |  |                    |  |                               |  |   |      
|Total                    |                    | 10,591                                 |                               | $                                      | 4.73                                      |  | 6.27               |  | 4,394                         |  | $ | 8.78 
|                         |                    |                                        |                               |                                        |                                           |  |                    |  |                               |  |   |      

The aggregate intrinsic value of stock options exercised during fiscal 2008 and 2007 was $0.1
million and $2.2 million, respectively. There were no stock options exercised during fiscal 2009.

The total fair value of
restricted stock awards vested during fiscal 2009, fiscal 2008 and fiscal 2007 was $0.2 million, $0.8 million and $1.0 million, respectively.

The following table summarizes activity for restricted stock awards for the fiscal year ended January 3, 2010:



|                             |  |                 |   |  |                                     |     
|---------------------------- |  | --------------- | - |  | ----------------------------------- | ----
|                             |  | Number ofShares |   |  | WeightedAverageGrant Date FairValue
|Balance at December 28, 2008 |  | 380             |   |  | $                                   | 4.29
|Granted                      |  |                |   |  |                                     |    
|Released                     |  | (178            | ) |  |                                     | 3.98
|Forfeited                    |  |                |   |  |                                     |    
|                             |  |                 |   |  |                                     |     
|Balance at January 3, 2010   |  | 202             |   |  | $                                   | 4.56
|                             |  |                 |   |  |                                     |     



81



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



Note 15. Income Taxes

The components of income (loss) before income taxes and income tax provision for the fiscal years ended January 3, 2010,
December 28, 2008 and December 30, 2007 consist of the following:



|                                        |  |                    |         |   |                  |   |          |                  |  |   |          |  
|--------------------------------------- |  | ------------------ | ------- | - | ---------------- | - | -------- | ---------------- |  | - | -------- | -
|                                        |  | Fiscal Years Ended |        
|                                        |  | January 3,2010     |         |   | December 28,2008 |   |          | December 30,2007 | 
|Income (loss) before income taxes:      |  |                    |         |   |                  |   |          |                  |  |   |          |  
|United States                           |  | $                  | (24,374 | ) |                  | $ | (235,392 | )                |  | $ | (148,725 | )
|Foreign                                 |  |                    | 30,878  |   |                  |   | (109,810 | )                |  |   | (153,612 | )
|                                        |  |                    |         |   |                  |   |          |                  |  |   |          |  
|Total income (loss) before income taxes |  | $                  | 6,504   |   |                  | $ | (345,202 | )                |  | $ | (302,337 | )
|                                        |  |                    |         |   |                  |   |          |                  |  |   |          |  
|Income tax provision:                   |  |                    |         |   |                  |   |          |                  |  |   |          |  
|Current                                 |  |                    |         |   |                  |   |          |                  |  |   |          |  
|Federal                                 |  |                    | (34     | ) |                  |   | 121      |                  |  |   | 715      |  
|State                                   |  |                    | 152     |   |                  |   | 134      |                  |  |   |         |  
|Foreign                                 |  |                    | 4,641   |   |                  |   | 8,638    |                  |  |   | 8,455    |  
|                                        |  |                    |         |   |                  |   |          |                  |  |   |          |  
|Total current income tax provision      |  |                    | 4,759   |   |                  |   | 8,893    |                  |  |   | 9,170    |  
|                                        |  |                    |         |   |                  |   |          |                  |  |   |          |  
|Deferred                                |  |                    |         |   |                  |   |          |                  |  |   |          |  
|Federal                                 |  |                    |        |   |                  |   |         |                  |  |   |         |  
|State                                   |  |                    |        |   |                  |   |         |                  |  |   |         |  
|Foreign                                 |  |                    | (1,477  | ) |                  |   | (5,431   | )                |  |   | (1,972   | )
|                                        |  |                    |         |   |                  |   |          |                  |  |   |          |  
|Total deferred tax provision (benefit)  |  |                    | (1,477  | ) |                  |   | (5,431   | )                |  |   | (1,972   | )
|                                        |  |                    |         |   |                  |   |          |                  |  |   |          |  
|Total income tax provision              |  | $                  | 3,282   |   |                  | $ | 3,462    |                  |  | $ | 7,198    |  
|                                        |  |                    |         |   |                  |   |          |                  |  |   |          |  

The provision for income taxes in the accompanying consolidated financial statements reconciles to the
amount computed by applying the federal statutory rate of 35% to income (loss) before income taxes for the fiscal years ended January 3, 2010, December 28, 2008 and December 30, 2007 as follows:



|                                                   |                |                   |        |                  |  |   |                  |   |  |   |          |  
|-------------------------------------------------- | -------------- | ----------------- | ------ | ---------------- |  | - | ---------------- | - |  | - | -------- | -
|                                                   |                | Fiscal Year Ended |       
|                                                   | January 3,2010 |                   |        | December 28,2008 |  |   | December 30,2007 |  
|Taxes at federal statutory rate                    |                | $                 | 2,276  |                  |  | $ | (120,820         | ) |  | $ | (105,868 | )
|State taxes, net                                   |                |                   | 152    |                  |  |   | 134              |   |  |   |         |  
|Foreign income taxed at different rates            |                |                   | (4,218 | )                |  |   | (9,757           | ) |  |   | (4,052   | )
|Goodwill impairment                                |                |                   |       |                  |  |   | 59,962           |   |  |   | 32,242   |  
|Earnings of foreign subsidiaries subject to US tax |                |                   | 11,806 |                  |  |   | 28,407           |   |  |   | 10,167   |  
|Imputed interest income                            |                |                   | 412    |                  |  |   | 857              |   |  |   | 1,727    |  
|Change in FASB ASC Topic 740 reserve               |                |                   | (2,664 | )                |  |   | 4,473            |   |  |   | 2,769    |  
|Stock compensation  Non  U.S.                    |                |                   | 1,504  |                  |  |   | 123              |   |  |   | 119      |  
|China withholding tax                              |                |                   | 738    |                  |  |   | 1,056            |   |  |   |         |  
|Other                                              |                |                   | 28     |                  |  |   | (2,168           | ) |  |   | 2,919    |  
|Change in valuation allowance                      |                |                   | (6,752 | )                |  |   | 41,195           |   |  |   | 67,175   |  
|                                                   |                |                   |        |                  |  |   |                  |   |  |   |          |  
|Income tax provision                               |                | $                 | 3,282  |                  |  | $ | 3,462            |   |  | $ | 7,198    |  
|                                                   |                |                   |        |                  |  |   |                  |   |  |   |          |  



82



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



Deferred income taxes reflect the net tax effects of tax carry-forwards and temporary
differences between the carrying amount of assets and liabilities for tax and financial reporting purposes. The Companys deferred tax assets and liabilities were comprised of the following major components:



|                                  |  |                |          |   |                  |   |          |  
|--------------------------------- |  | -------------- | -------- | - | ---------------- | - | -------- | -
|                                  |  | January 3,2010 |          |   | December 28,2008 |  
|Deferred tax assets               |  |                |          |   |                  |   |          |  
|Accruals and provisions           |  | $              | 12,882   |   |                  | $ | 25,119   |  
|Net operating loss carry-forwards |  |                | 164,777  |   |                  |   | 129,123  |  
|Property, plant and equipment     |  |                | 3,698    |   |                  |   | 10,742   |  
|Intangibles                       |  |                | 93,007   |   |                  |   | 99,827   |  
|Tax credit carry-forwards         |  |                | 19,025   |   |                  |   | 22,543   |  
|Other                             |  |                | 5,000    |   |                  |   | (472     | )
|Inventory reserve                 |  |                | (33      | ) |                  |   | 101      |  
|                                  |  |                |          |   |                  |   |          |  
|Gross deferred tax assets         |  |                | 298,356  |   |                  |   | 286,983  |  
|                                  |  |                |          |   |                  |   |          |  
|Less: valuation allowance         |  |                | (291,907 | ) |                  |   | (283,779 | )
|                                  |  |                |          |   |                  |   |          |  
|Net deferred tax assets           |  | $              | 6,449    |   |                  | $ | 3,204    |  
|                                  |  |                |          |   |                  |   |          |  

As of January 3, 2010, deferred income taxes were impacted by the change in the applicable statutory
tax rate in China as a result of a special tax incentive granted to the Company. The net effect was a decrease to deferred tax assets of $1.2 million. As of December 28, 2008, deferred income taxes were impacted by the change in the applicable
statutory tax rate mainly in Sweden as a result of legislation. The net effect was an increase to deferred tax assets of $1.2 million.

As of January 3, 2010, the Company has $1,186.5 million of United States federal and state net operating loss carry-forwards and $108.2 million of foreign net operating losses, net of uncertain tax positions, some of which will
begin to expire in 2023 if not utilized. Net operating loss carry-forwards, and the related carry-forward periods, at January 3, 2010, are summarized as follows:



|                                         |  |                   |           |                   |   |                    |  |   |                     |   |                          |   |     |  |           
|---------------------------------------- |  | ----------------- | --------- | ----------------- | - | ------------------ |  | - | ------------------- | - | ------------------------ | - | --- |  | ----------
|                                         |  | Net OperatingLoss |           | Tax BenefitAmount |   | ValuationAllowance |  |   | Expected TaxBenefit |   | Carry-forwardPeriod
Ends
|United States Federal net operating loss |  | $                 | 358,164   |                   | $ | 125,357            |  | $ | (125,357            | ) |                          | $ |    |  | 2023      
|United States State net operating loss   |  |                   | 828,336   |                   |   | 13,228             |  |   | (13,228             | ) |                          |   |    |  | 2009      
|Foreign net operating losses             |  |                   | 108,181   |                   |   | 34,176             |  |   | (33,300             | ) |                          |   | 876 |  | Indefinite
|                                         |  |                   |           |                   |   |                    |  |   |                     |   |                          |   |     |  |           
|Total                                    |  | $                 | 1,294,681 |                   | $ | 172,761            |  | $ | (171,885            | ) |                          | $ | 876 |  |           
|                                         |  |                   |           |                   |   |                    |  |   |                     |   |                          |   |     |  |           

Approximately $42.7 million of the U.S. federal net operating loss is subject to annual
limitations on utilization equal to approximately $18.5 million pursuant to Section 382 of the Internal Revenue Code.

A
valuation allowance of approximately $171.9 million has been provided for certain of the above carry-forwards. This valuation allowance reduces the deferred tax asset related to net operating loss carry-forwards of $0.9 million to an amount that is
more likely than not to be realized.

The Company also has Federal and California tax credit carry-forwards of $8.0 million
and $16.9 million, respectively. The Federal credits will begin to expire in 2021 and the California tax credits began to expire in 2009. A full valuation allowance has been provided for these tax credits.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the actual timing within which
the underlying temporary differences become taxable or deductible. Based on historical and forecasted earnings, the Company removed a valuation allowance of approximately $0.2 million, $1.1 million and $0.6 million in Brazil, Canada and Finland
during the fourth quarter of 2009. The Company continued to maintain a valuation allowance against its net deferred tax assets in the U.S. and various foreign jurisdictions in 2009 where the Company believes it is more likely than not that deferred
tax assets will not be realized.

Foreign earnings of the Company are primarily considered to be indefinitely reinvested. Upon
distribution of those earnings in the form of dividends or otherwise, some portion of the distribution would be subject to both foreign withholding taxes and U.S. income taxes, less applicable foreign tax credits. Determination of the amount of U.S.
income tax liability that would be incurred is not practicable because of the complexities associated with its hypothetical calculation, but is not expected to result in additional U.S. tax expense as a result of the Companys U.S. net
operating losses and valuation allowance.



83



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



On January 2, 2006, the Company began reporting results in accordance with FASB ASC
Topic 718 and recognized expense in 2007, 2008 and 2009 related to stock-based compensation. Some of those costs are not deductible in the U.S. or in foreign countries. In the future, approximately $3.1 million of the valuation allowance will
reverse to equity.

FASB ASC Topic 740 clarifies the accounting for uncertainties in income taxes by prescribing guidance for
the recognition, de-recognition and measurement in financial statements of income tax positions taken in previously filed tax returns or tax positions expected to be taken in tax returns, including a decision whether to file or not to file in a
particular jurisdiction. FASB ASC Topic 740 requires that any liability created for unrecognized tax benefits be disclosed. The application of FASB ASC Topic 740 may also affect the tax bases of assets and liabilities and therefore may change or
create deferred tax liabilities or assets. The tax years subject to examination for the Companys U.S. federal return are the 2007 through 2009 tax years, including adjustments to net operating loss carryovers in those years. In addition, the
Company has subsidiaries in various foreign jurisdictions that have statutes of limitations generally ranging from 3 to 6 years.

As of January 3, 2010, the liability for income taxes associated with uncertain tax positions was $14.8 million. Of this amount, $5.5 million, if recognized, would affect tax expense and would require penalties and interest of $0.4
million, $1.2 million would result in a decrease in prepaid assets, and $7.7 million would result in a decrease of deferred tax assets in jurisdictions where the deferred tax assets are currently offset by a full valuation allowance.

As of December 28, 2008, the liability for income taxes associated with uncertain tax positions was $10.6 million. Of this amount, $8.2
million, if recognized, would affect tax expense and would require penalties and interest of $0.3 million, $0.9 million would result in a decrease in prepaid assets, and $1.2 million would result in a decrease of deferred tax assets in jurisdictions
where the deferred tax assets are currently offset by a full valuation allowance.

A reconciliation of the beginning and
ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows (in millions):



|                                                    |  |                |        |   |                  |   |        |                  |  |   |        |  
|--------------------------------------------------- |  | -------------- | ------ | - | ---------------- | - | ------ | ---------------- |  | - | ------ | -
|                                                    |  | January 3,2010 |        |   | December 28,2008 |   |        | December 30,2007 | 
|Unrecognized tax benefits beginning of year balance |  | $              | 8,238  |   |                  | $ | 9,239  |                  |  | $ | 8,952  |  
|Gross increases for tax positions of prior years    |  |                | 2,034  |   |                  |   | 1,110  |                  |  |   |       |  
|Gross decreases for tax positions of prior years    |  |                | (3,514 | ) |                  |   | (529   | )                |  |   | (2,405 | )
|Gross increases for tax positions of current year   |  |                | 8,632  |   |                  |   | 3,804  |                  |  |   | 2,692  |  
|Settlements                                         |  |                |       |   |                  |   | (5,386 | )                |  |   |       |  
|Lapse of statute of limitations                     |  |                | (1,009 | ) |                  |   |       |                  |  |   |       |  
|                                                    |  |                |        |   |                  |   |        |                  |  |   |        |  
|Unrecognized tax benefits ending of year balance    |  | $              | 14,381 |   |                  | $ | 8,238  |                  |  | $ | 9,239  |  
|                                                    |  |                |        |   |                  |   |        |                  |  |   |        |  

The Company strives to resolve open matters with each tax authority at the examination level and could reach
agreement with a tax authority at anytime. While the Company has accrued for amounts it believes are the expected outcomes, the final outcome with a tax authority may result in a tax liability that is more or less than that reflected in the
financial statements. Furthermore, the Company may later decide to challenge any assessments, if made, and may exercise its right to appeal. The liability is reviewed quarterly and adjusted as events occur that affect potential liabilities for
additional taxes, such as lapsing of applicable statutes of limitations, proposed assessments by tax authorities, negotiations between tax authorities, identification of new issues, and issuance of new legislation, regulations or case law.
Management believes that adequate amounts of tax and related interest, if any, have been provided for any adjustments that may result from these examinations of uncertain tax positions.

As a result of our ongoing audits, the total liability for unrecognized tax benefits may change within the next twelve months due to either
settlement of audits or expiration of statutes of limitations. Additionally, the IRS has concluded their examination of the 2006 tax year and the Finland tax authorities have concluded their tax audit for the 2007-2008 tax years with only immaterial
adjustments. At January 3, 2010, the Company has concluded all United States federal income tax matters for years through 2006. All other material state and local, and foreign income tax matters have been concluded for years through 2005.



84



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



Note 16. Fair Value of Financial Instruments

The estimated fair value of the Companys financial instruments has been determined using available market information and valuation
methodologies. Considerable judgment is required in estimating fair values. Accordingly, the estimates may not be indicative of the amounts the Company could realize in a current market exchange.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it was
practicable to estimate that value.

Cash and Cash Equivalents and Restricted Cash

The carrying amount approximates fair value because of the short maturity (less than 90 days) and high credit quality of these instruments.

Long-Term Debt

The fair value of the Companys long-term debt is estimated based on the quoted market prices for the debt. The Companys long-term debt consists of convertible subordinated notes, which are not
actively traded as an investment instrument and therefore, the quoted market prices may not reflect actual sales prices at which these notes would be traded. The Company values these instruments at their stated par value, which represents the
principal amount due at maturity, as well as the amount upon which interest expense is based. The stated par value of these notes equals their carrying value on the Companys consolidated balance sheet.

The estimated fair values of the Companys financial instruments were as follows:



|                                               |  |                 |         |                   |         |                |   |           |  |   |       
|---------------------------------------------- |  | --------------- | ------- | ----------------- | ------- | -------------- | - | --------- |  | - | ------
|                                               |  | January 3, 2010 |         | December 28, 2008
|                                               |  | CarryingAmount  |         | FairValue         |         | CarryingAmount |   | FairValue
|Cash and cash equivalents                      |  | $               | 60,439  |                   | 60,439  |                | $ | 46,906    |  | $ | 46,906
|Restricted cash                                |  |                 | 2,600   |                   | 2,600   |                |   | 3,433     |  |   | 3,433 
|Long-term debt, including current portion      |  |                 |         |                   |         |                |   |           |  |   |       
|3.875% Convertible Subordinated Notes due 2027 |  |                 | 150,000 |                   | 99,000  |                |   | 150,000   |  |   | 35,805
|1.875% Convertible Subordinated Notes due 2024 |  |                 | 130,887 |                   | 113,544 |                |   | 156,321   |  |   | 37,189

Note 17. Supplier Concentrations

Certain of the Companys products, as well as components utilized in such products, are available in the short-term
only from a single or a limited number of sources. In addition, in order to take advantage of volume pricing discounts, the Company purchases certain customized components from single-source suppliers as well as finished products from single-source
contract manufacturers. The inability to obtain single-source components or finished products in the amounts needed on a timely basis or at commercially reasonable prices could result in delays in product introductions, interruption in product
shipments or increases in product costs, which could have a material adverse effect on the Companys business, financial condition and results of operations until alternative sources could be developed at a reasonable cost.

Note 18. Segment

The
Company operates in one reportable business segment: Wireless Communications. The Companys revenues are derived from the sale of wireless communications network products and coverage solutions, including antennas, boosters,
combiners, cabinets, shelters, filters, radio frequency power amplifiers, remote radio head transceivers, repeaters, tower-mounted amplifiers and advanced coverage solutions for use in cellular, PCS, 3G and 4G wireless communications networks
throughout the world.

Customer Information

The Company manufactures multiple product categories at its manufacturing locations and produces certain products at more than one location.
With regard to sales, the Company sells its products through two major sales channels. The largest channel is the original equipment manufacturer channel, which consists of large global companies such as Alcatel-Lucent,



85



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



Ericsson, Huawei, Motorola, Nokia Siemens, Nortel and Samsung. The other major channel is direct to wireless network operators, such as AT&T, Bouyges, Orange, Reliance, Sprint, T-Mobile,
Verizon Wireless and Vodafone. A majority of the Companys products are sold to both sales channels. The Company maintains global relationships with most of its customers. The Companys original equipment manufacturer customers normally
purchase on a global basis and the sales to these customers, while recognized in various reporting regions, are managed on a global basis. For network operator customers, where they have a global presence, the Company typically maintains a global
purchasing agreement. Individual sales are made on a regional basis.

The Company measures its success by monitoring its net
sales by product and consolidated gross margins, with a short-term goal of maintaining a positive operating cash flow while striving to achieve long-term operating profits.

Product Group Information

The following table presents an analysis of the Companys sales based upon product groups:



|                                       |                |                    |         |                  |     |   |                  |   |         |  |     |   |  |   |         |  |     |  
|-------------------------------------- | -------------- | ------------------ | ------- | ---------------- | --- | - | ---------------- | - | ------- |  | --- | - |  | - | ------- |  | --- | -
|Wireless Communications Product Groups |                | Fiscal Years Ended |        
|                                       | January 3,2010 |                    |         | December 28,2008 |     |   | December 30,2007 |  
|Antenna systems                        |                | $                  | 150,610 |                  | 27  | % |                  | $ | 233,090 |  | 26  | % |  | $ | 160,974 |  | 21  | %
|Base station systems                   |                |                    | 364,166 |                  | 64  | % |                  |   | 571,526 |  | 64  | % |  |   | 565,084 |  | 72  | %
|Coverage systems                       |                |                    | 52,710  |                  | 9   | % |                  |   | 85,618  |  | 10  | % |  |   | 54,459  |  | 7   | %
|                                       |                |                    |         |                  |     |   |                  |   |         |  |     |   |  |   |         |  |     |  
|Total net sales                        |                | $                  | 567,486 |                  | 100 | % |                  | $ | 890,234 |  | 100 | % |  | $ | 780,517 |  | 100 | %
|                                       |                |                    |         |                  |     |   |                  |   |         |  |     |   |  |   |         |  |     |  

Antenna systems consist of base station antennas and tower-mounted amplifiers. Base station subsystems
consist of products that are installed into or around the base station of wireless networks and include products such as boosters, combiners, filters, radio frequency power amplifiers and VersaFlex cabinets. Coverage systems consist primarily of
repeaters and advanced coverage solutions.

Geographic Information

The following schedule presents an analysis of the Companys sales based upon the geographic area to which a product was shipped:



|                    |  |                    |         |                  |   |                  |  |   |        
|------------------- |  | ------------------ | ------- | ---------------- | - | ---------------- |  | - | -------
|                    |  | Fiscal Years Ended
|Geographic Area     |  | January 3,2010     |         | December 28,2008 |   | December 30,2007
|United States       |  | $                  | 148,173 |                  | $ | 256,200          |  | $ | 203,843
|Asia Pacific        |  |                    | 233,463 |                  |   | 302,169          |  |   | 203,904
|Europe              |  |                    | 135,600 |                  |   | 274,977          |  |   | 334,095
|Other international |  |                    | 50,250  |                  |   | 56,888           |  |   | 38,675 
|                    |  |                    |         |                  |   |                  |  |   |        
|Total net sales     |  | $                  | 567,486 |                  | $ | 890,234          |  | $ | 780,517
|                    |  |                    |         |                  |   |                  |  |   |        

Sales to the Asia Pacific region include sales to
China, India, South Korea and other locations in Asia. Other international sales include sales to Canada, Mexico, Latin and South America and all other foreign countries. Sales to Canada were $3.8 million, $3.6 million and $7.6 million during the
years ended January 3, 2010, December 28, 2008 and December 30, 2007, respectively. Sales to Finland were $55.2 million, $74.9 million and $118.2 million during the years ended January 3, 2010, December 28, 2008 and
December 30, 2007, respectively. Sales to France were $12.3 million, $51.3 million and $48.9 million during the years ended January 3, 2010, December 28, 2008 and December 30, 2007, respectively.



86



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



The following table presents an analysis of the Companys long-lived assets based
upon geographic area to which the asset resides:



|                        |                |                    |                  |  |   |        
|----------------------- | -------------- | ------------------ | ---------------- |  | - | -------
|Geographic Area         |                | Fiscal Years Ended
|                        | January 3,2010 |                    | December 28,2008
|United States           |                | $                  | 55,782           |  | $ | 65,563 
|Asia Pacific            |                |                    | 19,788           |  |   | 20,550 
|Europe                  |                |                    | 14,008           |  |   | 17,121 
|Other international     |                |                    | 305              |  |   | 227    
|                        |                |                    |                  |  |   |        
|Total long lived assets |                | $                  | 89,883           |  | $ | 103,461
|                        |                |                    |                  |  |   |        



87



---

##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(tabular amounts in thousands, except per share data)



Note 19. Quarterly Financial Data (Unaudited)



|                                 |               |                |         |              |              |   |                   |                   |  |                |                  |   |  |   |          |  
|-------------------------------- | ------------- | -------------- | ------- | ------------ | ------------ | - | ----------------- | ----------------- |  | -------------- | ---------------- | - |  | - | -------- | -
|                                 |               | Quarters Ended |        
|                                 | March 29,2009 |                |         | June 28,2009 |              |   | September 27,2009 |                   |  | January 3,2010 |                 
|Fiscal 2009:                     |               |                |         |              |              |   |                   |                   |  |                |                  |   |  |   |          |  
|Net sales                        |               | $              | 149,745 |              |              | $ | 136,110           |                   |  | $              | 139,048          |   |  | $ | 142,583  |  
|Gross profit                     |               | $              | 32,752  |              |              | $ | 35,898            |                   |  | $              | 36,158           |   |  | $ | 37,684   |  
|Net income (loss)                |               | $              | (2,100  | )            |              | $ | 6,348             |                   |  | $              | 292              |   |  | $ | (1,318   | )
|Basic income (loss) per share    |               | $              | (0.02   | )            |              | $ | 0.05              |                   |  | $              | 0.00             |   |  | $ | (0.01    | )
|Diluted income (loss) per share  |               | $              | (0.02   | )            |              | $ | 0.05              |                   |  | $              | 0.00             |   |  | $ | (0.01    | )
|                                 |               |                |         |             
|                                 |               | March 30,2008  |         |              | June 29,2008 |   |                   | September 28,2008 |  |                | December 28,2008 |  
|Fiscal 2008:                     |               |                |         |              |              |   |                   |                   |  |                |                  |   |  |   |          |  
|Net sales                        |               | $              | 226,302 |              |              | $ | 245,642           |                   |  | $              | 237,960          |   |  | $ | 180,330  |  
|Gross profit                     |               | $              | 42,056  |              |              | $ | 49,134            |                   |  | $              | 50,865           |   |  | $ | 5,473    |  
|Net loss                         |               | $              | (14,247 | )            |              | $ | (10,224           | )                 |  | $              | (1,801           | ) |  | $ | (322,392 | )
|Basic and diluted loss per share |               | $              | (0.11   | )            |              | $ | (0.08             | )                 |  | $              | (0.01            | ) |  | $ | (2.46    | )



88



---

##### Table of Contents

|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------

None.



|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

Controls and Procedures

We have established disclosure controls and procedures to ensure that material
information relating to Powerwave and its consolidated subsidiaries is made known to the officers who certify the Companys financial reports, as well as other members of senior management and the Board of Directors, to allow timely decisions
regarding required disclosures. As of the end of the period covered by this report, Powerwave carried out an evaluation, under the supervision and with the participation of the Companys management, including the Companys Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures pursuant to Rule 13a-15 of the Securities and Exchange Act of 1934. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective in timely alerting them to material information related to the Company that is required to be included in
Powerwaves annual and periodic SEC filings.

There were no changes in our internal controls over financial reporting
during the fourth quarter of the year ended January 3, 2010 that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and
procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud, if any, within Powerwave have been detected.

Managements Report on Internal Control Over Financial Reporting

Our management is responsible for
establishing and maintaining adequate internal control over our financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Our management assessed the effectiveness of our internal controls over
financial reporting as of January 3, 2010. In making its assessment of the effectiveness of our internal controls over financial reporting, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control-Integrated Framework. Based on these criteria, our management has concluded that, as of January 3, 2010, our internal controls over financial reporting are effective. Our independent registered
public accounting firm, Deloitte & Touche LLP, has issued an audit report on our assessment of our internal control over financial reporting, which is included herein.



|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------

None.



89



---

##### Table of Contents

PART III



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|-------- | ------------------------------------------------------

(a) Identification of Directors and Executive Officers.

The
information required hereunder is incorporated by reference from the sections of our Proxy Statement filed in connection with our 2010 Annual Meeting of Stockholders under the captions Election of Directors and Executive
Compensation.

(b) Compliance with Section 16(a) of the Exchange Act.

The information required hereunder is incorporated by reference from the sections of our Proxy Statement filed in connection with our 2010
Annual Meeting of Stockholders under the caption Section 16(a) Beneficial Ownership Reporting Compliance.

(c) Code of
Ethics.

The information required hereunder is incorporated by reference from the sections of our Proxy Statement filed in
connection with our 2010 Annual Meeting of Stockholders under the caption Code of Ethics.

(d) Audit Committee and Audit
Committee Financial Expert.

The information required hereunder is incorporated by reference from the sections of our
Proxy Statement filed in connection with our 2010 Annual Meeting of Stockholders under the caption What committees has the Board established?



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------

The information required hereunder is incorporated by reference from the sections of our Proxy Statement filed in connection with its 2010 Annual Meeting of Stockholders under the heading Executive Compensation.



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------

The information required hereunder is incorporated by reference from the sections of our Proxy Statement filed in connection with its 2010
Annual Meeting of Stockholders under the caption Stock Ownership.



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
|-------- | ------------------------------------------------------------------------

The information required hereunder is incorporated by reference from the sections in our Proxy Statement filed in connection with its 2010
Annual Meeting of the Stockholders under the captions Certain Relationships and Transactions with Management and Others and Election of Directors.



|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES
|-------- | --------------------------------------

The information required hereunder is incorporated by reference from the sections in our Proxy Statement filed in connection with its 2010 Annual Meeting of the Stockholders under the captions Audit
and Non-Audit Fees.



90



---

##### Table of Contents

PART IV



|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|-------- | ------------------------------------------

(a) Documents filed as a part of this report:



| | (1) | Financial Statements
| | --- | --------------------

The
financial statements included in Part II, Item 8 of this document are filed as part of this Report.



| | (2) | Financial Statement Schedule
| | --- | ----------------------------

The financial statement schedule included in Part II, Item 8 of this document is filed as part of this Report. All other schedules are omitted as the required information is inapplicable or the information is included in the
consolidated financial statements or related notes.



| | (3) | Exhibits
| | --- | --------



91



---

##### Table of Contents

The following exhibits are filed as part of this Report:



|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|               | 
|3.1            |  | Amended and Restated Certificate of Incorporation of the Company as amended through April 27, 2004 (incorporated by reference to Exhibit 3.1 to the Companys Form 10-K filed
with the Securities and Exchange Commission on March 2, 2009).                                                                                                                                                                                                                                                        
|               | 
|3.2            |  | Amended and Restated Bylaws of the Company as amended through November 1, 2007 (incorporated by reference to Exhibit 3.2 of the Companys Form 10-K filed with the Securities
and Exchange Commission on March 2, 2009).                                                                                                                                                                                                                                                                            
|               | 
|3.3            |  | Certificate of Designation of Rights, Preferences and Privileges of Series A Junior Participating Preferred Stock of Powerwave Technologies, Inc. (incorporated herein by
reference to Exhibit 2.1 to Registrants Form 8-A dated June 4, 2001).                                                                                                                                                                                                                                                    
|               | 
|4.1            |  | Stockholders Agreement, dated October 10, 1995, among the Company and certain stockholders (incorporated by reference to Exhibit 4.1 to the Companys Registration
Statement on Form-S-1 (File No. 333-13679) as filed with the Securities and Exchange Commission on October 8, 1996).                                                                                                                                                                                                            
|               | 
|4.1.1          |  | Amendment to Stockholders Agreement (incorporated by reference to Exhibit 4.2 to the Companys Registration Statement on Form-S-1 (File No. 333-13679) as filed with the
Securities and Exchange Commission on October 8, 1996).                                                                                                                                                                                                                                                                    
|               | 
|4.2            |  | Rights Agreement, dated as of June 1, 2001 between Powerwave Technologies, Inc. and U.S. Stock Transfer Corporation, as Rights Agent, which includes as Exhibit A thereto the form of
Certificate of Designation for the Series A Junior Participating Preferred Stock, as Exhibit B thereto the Form of Rights Certificate and as Exhibit C thereto a Summary of Terms of Stockholder Rights Plan (incorporated herein by reference
to Exhibit 2.1 to Registrants Form 8-A12G dated June 4, 2001).
|               | 
|4.2.1          |  | First Amendment to Rights Agreement, dated June 19, 2003, between Powerwave Technologies, Inc. and U.S. Stock Transfer Corporation, as Rights Agent (incorporated by reference to
Exhibit 2 of the Companys Form 8-A12G/A as filed with the Securities and Exchange Commission on July 10, 2003).                                                                                                                                                                                                  
|               | 
|4.2.2          |  | Second Amendment to Rights Agreement, dated September 29, 2006, between Powerwave Technologies, Inc. and U.S. Stock Transfer Corporation, as Rights Agent (incorporated by
reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on September 29, 2006).                                                                                                                                                                           
|               | 
|4.3            |  | Indenture, dated as of November 10, 2004, by and between Powerwave Technologies, Inc. and Deutsche Bank Trust Company Americas, as trustee (incorporated by reference to Exhibit 4.1
of the Companys Current Report on Form 8-K dated November 4, 2004 filed with the Securities and Exchange Commission on November 10, 2004).                                                                                                                                                                    
|               | 
|4.4            |  | Registration Rights Agreement, dated as of November 10, 2004, by and between Powerwave Technologies, Inc. and Deutsche Bank Securities Inc. (incorporated by reference to Exhibit 4.2
of the Companys Current Report on Form 8-K dated November 4, 2004 filed with the Securities and Exchange Commission on November 10, 2004).                                                                                                                                                                   
|               | 
|4.5            |  | Form of Global 1.875% Convertible Subordinated Note due 2024 (included in Exhibit 4.7).                                                                                                                                                                                                                                                                                                                                                                                                             
|               | 
|4.6            |  | Indenture, dated September 24, 2007, by and between Powerwave Technologies, Inc. and Deutsche Bank Trust Company America (incorporated by reference to Exhibit 4.1 of the
Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on September 24, 2007).                                                                                                                                                                                                            



92



---

##### Table of Contents

|               |  |                                                                                                                                                                                                                                                                                        
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                                                                                            
|               | 
|4.7            |  | Registration Rights Agreement, dated September 24, 2007 by and between the Company and Deutsche Bank Securities, Inc. (incorporated by reference to Exhibit 4.2 of the Companys
Current Report on Form 8-K filed with the Securities and Exchange Commission on September 24, 2007).  
|               | 
|4.8            |  | Form of Global 3.875% Convertible Subordinated Note due 2027 (incorporated by reference to Exhibit 4.3 of the Companys Current Report on Form 8-K filed with the Securities and
Exchange Commission on September 24, 2007).                                                           
|               | 
|10.1           |  | Powerwave Technologies, Inc. 1996 Stock Incentive Plan (the 1996 Plan) (incorporated by reference to Exhibit 10.4 to the Companys Registration Statement on
Form-S-1 (File No. 333-13679) as filed with the Securities and Exchange Commission on October 8, 1996).*                
|               | 
|10.1.1         |  | Amendment No. 1 to 1996 Plan (incorporated by reference to Exhibit 10.6.1 to the Companys Registration Statement on Form-S-1 (File No. 333-28463) as filed with the Securities
and Exchange Commission on June 4, 1997).*                                                             
|               | 
|10.1.2         |  | Amendment No. 2 to 1996 Plan (incorporated by reference to Exhibit 4.6 to the Companys Registration Statement on Form S-8 (File No. 333-20549) as filed with the Securities and
Exchange Commission on October 8, 1998).*                                                             
|               | 
|10.2           |  | Form of Stock Option Agreement for 1996 Plan (incorporated by reference to Exhibit 10.5 to the Companys Registration Statement on Form-S-1 (File No. 333-13679) as filed with
the Securities and Exchange Commission on October 8, 1996).*                                            
|               | 
|10.3           |  | Form of Restricted Stock Purchase Agreement for 1996 Plan (incorporated by reference to Exhibit 10.6 to the Companys Registration Statement on Form-S-1 (File No. 333-13679) as
filed with the Securities and Exchange Commission on October 8, 1996).*                               
|               | 
|10.4           |  | Powerwave Technologies, Inc. Amended and Restated 1996 Director Stock Option Plan (the Director Plan) as amended through August 12, 2009.*                                                                                                                                           
|               | 
|10.5           |  | Form of Stock Option Agreement for the Director Plan (incorporated by reference to Exhibit 10.8 to the Companys Registration Statement on Form-S-1 (File No. 333-13679) as
filed with the Securities and Exchange Commission on October 8, 1996).*                                    
|               | 
|10.6           |  | Redemption Agreement, dated October 10, 1995, among the Company and certain stockholders (incorporated by reference to Exhibit 10.11 to the Companys Registration Statement on
Form-S-1 (File No. 333-13679) as filed with the Securities and Exchange Commission on October 8, 1996).
|               | 
|10.7           |  | Form of Indemnification Agreement (incorporated by reference to Exhibit 10.14 to the Companys Registration Statement on Form-S-1 (File No. 333-13679) as filed with the
Securities and Exchange Commission on October 8, 1996).*                                                      
|               | 
|10.8           |  | Powerwave Technologies, Inc. 2000 Stock Option Plan (the 2000 Plan) (incorporated by reference to Exhibit 4.1 to the Companys Form S-8 (File No. 333-38568) as
filed with the Securities and Exchange Commission on June 5, 2000).*                                                 
|               | 
|10.9           |  | Form of Stock Option Agreement for the 2000 Plan (incorporated by reference to Exhibit 4.2 to the Companys Form S-8 (File No. 333-38568) as filed with the Securities and
Exchange Commission on June 5, 2000).*                                                                      
|               | 
|10.10          |  | Powerwave Technologies, Inc. 2002 Stock Option Plan (2002 Plan) (incorporated by reference to Exhibit 4.1 to the Companys Form S-8 (File No. 333-88836) as filed
with the Securities and Exchange Commission on May 22, 2002).*                                                     
|               | 
|10.11          |  | Form of Stock Option Agreement for the 2002 Plan (incorporated by reference to Exhibit 4.2 to the Companys Form S-8 (File No. 333-88836) as filed with the Securities and
Exchange Commission May 22, 2002).*                                                                         
|               | 
|10.12          |  | Powerwave Technologies, Inc. 2005 Stock Incentive Plan (the 2005 Plan) (incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form 8-K as
filed with the Securities and Exchange Commission on November 17, 2005).*                                           
|               | 
|10.13          |  | Form of Stock Option Agreement under the 2005 Plan (incorporated by reference to Exhibit 10.3 of the Companys Current Report on Form 8-K as filed with the Securities and
Exchange Commission on November 17, 2005).*                                                                 
|               | 
|10.14          |  | Form of Restricted Stock Award Agreement under the 2005 (incorporated by reference to Exhibit 10.4 of the Companys Current Report on Form 8-K as filed with the Securities and
Exchange Commission on November 17, 2005).*                                                            



93



---

##### Table of Contents

|               |  |                                                                                                                                                                                                                                                                     
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                                                                         
|               | 
|10.15          |  | Form of Stock Appreciation Rights Award Agreement under the 2005 Plan (incorporated by reference to Exhibit 10.5 of the Companys Current Report on Form 8-K as filed with the
Securities and Exchange Commission on November 17, 2005).*                           
|               | 
|10.16          |  | Form of Restricted Stock Unit Award Agreement under the 2005 Plan (incorporated by reference to Exhibit 10.6 of the Companys Current Report on Form 8-K as filed with the
Securities and Exchange Commission on November 17, 2005).*                               
|               | 
|10.17          |  | Form of Stock Award Agreement under the 2005 Plan (incorporated by reference to Exhibit 10.7 of the Companys Current Report on Form 8-K as filed with the Securities and
Exchange Commission on November 17, 2005).*                                               
|               | 
|10.18          |  | Powerwave Technologies Executive Officer Cash Compensation Plan (incorporated by reference to Exhibit 10.58 of the Companys Current Report on Form 8-K as filed with the
Securities and Exchange Commission on November 16, 2006).*                                
|               | 
|10.19          |  | Extended and Restated Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed with the Securities and Exchange
Commission on December 7, 2007).*                                                  
|               | 
|10.19.1        |  | Amendment to the Powerwave Technologies, Inc. Extended and Restated 1996 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 of the Companys Current Report
on Form 8-K filed with the Securities and Exchange Commission on August 13, 2008). 
|               | 
|10.20          |  | Amended and Restated Change in Control Agreement dated as of August 13, 2008, between the Company and Ronald J. Buschur (incorporated by reference to Exhibit 10.25 of the
Companys Form 10-K filed with the Securities and Exchange Commission on March 2, 2009).*
|               | 
|10.21          |  | Amended and Restated Change in Control Agreement dated as of August 13, 2008, between the Company and Kevin T. Michaels (incorporated by reference to Exhibit 10.26 of the
Companys Form 10-K filed with the Securities and Exchange Commission on March 2, 2009).*
|               | 
|10.22          |  | Amended and Restated Severance Agreement dated as of August 13 2008, between the Company and Ronald J. Buschur (incorporated by reference to Exhibit 10.27 of the Companys Form
10-K filed with the Securities and Exchange Commission on March 2, 2009).*         
|               | 
|10.23          |  | Amended and Restated Severance Agreement dated as of August 13, 2008, between the Company and Kevin T. Michaels (incorporated by reference to Exhibit 10.28 of the Companys
Form 10-K filed with the Securities and Exchange Commission on March 2, 2009).*        
|               | 
|10.24          |  | Letter Agreement regarding Change of Control Benefits between the Company and J. Marvin MaGee dated December 17, 2008 (incorporated by reference to Exhibit 10.29 of the
Companys Form 10-K filed with the Securities and Exchange Commission on March 2, 2009).*  
|               | 
|10.25          |  | Letter Agreement Regarding Change of Control Benefits between the Company and Khurram Sheikh dated December 17, 2008 (incorporated by reference to Exhibit 10.30 of the
Companys Form 10-K filed with the Securities and Exchange Commission on March 2, 2009).*   
|               | 
|10.26          |  | Letter Agreement Regarding Change of Control Benefits between the Company and Basem Anshasi dated December 17, 2008 (incorporated by reference to Exhibit 10.33 of the Companys
Form 10-K filed with the Securities and Exchange Commission on March 2, 2009).*    
|               | 
|10.27          |  | Credit Agreement dated April 3, 2009 by and among Powerwave Technologies, Inc., as borrower, the lenders that are signatories and Wells Fargo Foothill, LLC, as arranger and
administrative agent.                                                                  
|               | 
|10.28          |  | Waiver, Consent, Amendment Number One to Credit Agreement and Amendment Number One to Security Agreement dated December 31, 2009 with the lenders named therein and Wells Fargo
Foothill, LLC, as arranger and administrative agent.                                
|               | 
|14             |  | Code of Ethics (incorporated by reference to Exhibit 14 to the Companys Form 10-K for the fiscal year ended December 28, 2003 as filed with the Securities and Exchange Commission on February 13, 2004).                                                          
|               | 
|21.1           |  | Subsidiaries of the registrant.                                                                                                                                                                                                                                     
|               | 
|23.1           |  | Consent of Independent Registered Public Accounting Firm.                                                                                                                                                                                                           



94



---

##### Table of Contents

|               |  |                                                                                                                                   
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                       
|               | 
|24.1           |  | Power of Attorney (included in signature page.)                                                                                   
|               | 
|31.1           |  | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.                
|               | 
|31.2           |  | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.                
|               | 
|32.1           |  | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.***
|               | 
|32.2           |  | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.***



|* | Indicates Item 15(a)(3) exhibit (management contract or compensation plan or arrangement).
|- | ------------------------------------------------------------------------------------------

|** | Registrant has sought confidential treatment pursuant to Rule 24b-2 of the Exchange Act for a portion of the referenced exhibit.
|-- | --------------------------------------------------------------------------------------------------------------------------------

|*** | In accordance with Item 601(b)(32)(ii) of Regulation S-K, this exhibit shall not be deemed filed for the purposes of Section 18 of the Securities
and Exchange Act of 1934 or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



95



---

##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Santa Ana, State of California, on the 19th day of February 2010.



POWERWAVE TECHNOLOGIES, INC.By:

/s/    RONALD J. BUSCHURRonald J. BuschurChief Executive Officer


We, the undersigned directors and officers of Powerwave Technologies, Inc., do hereby constitute and appoint Ronald J. Buschur and Kevin T. Michaels as our true and lawful attorney-in-fact and agents with
power of substitution, to do any and all acts and things in our name and behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorney-in-fact
and agent may deem necessary or advisable to enable said corporation to comply with the Securities and Exchange Act of 1934, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this
Annual Report on Form 10-K, including specifically but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorney-in-fact and agent, shall do or cause to be done by virtue hereof.

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.



|                                           |  |                                                                               |  |                  
|------------------------------------------ |  | ----------------------------------------------------------------------------- |  | -----------------
|Signature                                  |  | Title                                                                         |  | Date             
|                                           |  |                                                                              
|/s/    RONALD J.
BUSCHUR Ronald J. Buschur |  | President, Chief Executive Officer and Director (Principal Executive Officer) |  | February 19, 2010
|                                           |  |                                                                              
|/s/    KEVIN T.
MICHAELS Kevin T. Michaels |  | Chief Financial Officer (Principal Financial and Accounting Officer)          |  | February 19, 2010
|                                           |  |                                                                              
|/s/    CARL W.
NEUN Carl W. Neun           |  | Chairman of the Board of Directors                                            |  | February 19, 2010
|                                           |  |                                                                              
|/s/    JOHN L.
CLENDENIN John L. Clendenin |  | Director                                                                      |  | February 19, 2010
|                                           |  |                                                                              
|/s/    MOIZ M.
BEGUWALA Moiz M. Beguwala   |  | Director                                                                      |  | February 19, 2010
|                                           |  |                                                                              
|/s/    DAVID L.
GEORGE David L. George     |  | Director                                                                      |  | February 19, 2010
|                                           |  |                                                                              
|/s/    EUGENE L.
GODA Eugene L. Goda       |  | Director                                                                      |  | February 19, 2010
|                                           |  |                                                                              
|/s/    KEN J.
BRADLEY Ken J. Bradley       |  | Director                                                                      |  | February 19, 2010



96



---

##### Table of Contents

SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS

(in thousands)



|                                                  |  |                              |        |                             |        |            |         |   |                        |   |       
|------------------------------------------------- |  | ---------------------------- | ------ | --------------------------- | ------ | ---------- | ------- | - | ---------------------- | - | ------
|Description                                       |  | Balance atBeginningof Period |        | Charges toCosts andExpenses |        | Deductions |         |   | Balance atEnd
ofPeriod
|Year ended January 3, 2010:                       |  |                              |        |                             |        |            |         |   |                        |   |       
|Allowance for doubtful accounts and sales returns |  | $                            | 9,478  |                             | 1,860  |            | (2,989  | ) |                        | $ | 8,349 
|Allowance for excess and obsolete inventory       |  | $                            | 43,377 |                             | 9,057  |            | (29,809 | ) |                        | $ | 22,625
|Year ended December 28, 2008:                     |  |                              |        |                             |        |            |         |   |                        |   |       
|Allowance for doubtful accounts and sales returns |  | $                            | 11,897 |                             | 966    |            | (3,385  | ) |                        | $ | 9,478 
|Allowance for excess and obsolete inventory       |  | $                            | 47,251 |                             | 15,435 |            | (19,309 | ) |                        | $ | 43,377
|Year ended December 30, 2007:                     |  |                              |        |                             |        |            |         |   |                        |   |       
|Allowance for doubtful accounts and sales returns |  | $                            | 9,074  |                             | 5,245  |            | (2,422  | ) |                        | $ | 11,897
|Allowance for excess and obsolete inventory       |  | $                            | 48,938 |                             | 31,823 |            | (33,510 | ) |                        | $ | 47,251



97