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                      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 December 31, 2000

                                       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                              (I.R.S. Employer
 incorporation or organization)                             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:

                                      None

          Securities registered pursuant to Section 12(g) of the Act:

                             Title of each class:
                             -------------------
                        Common Stock, Par Value $.0001

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

  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 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 [_]

  As of February 28, 2001, the aggregate market value of the voting stock of the
Registrant held by non-affiliates of the Registrant was $988,845,841 computed
using the closing price of $15.6406 per share of Common Stock on February 28,
2001 as reported by Nasdaq, based on the assumption that directors and officers
and more than 10% stockholders are affiliates.  As of February 28, 2001 the
number of outstanding shares of Common Stock, par value $.0001 per share, of the
Registrant was 63,779,314.

  Information required by Part III is incorporated by reference to portions of
the Registrant's Proxy Statement for the 2000 Annual Meeting of Stockholders,
which will be filed with the Securities and Exchange Commission within 120 days
after the close of the 2000 fiscal year.

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This Annual Report on Form 10-K includes certain forward-looking statements as
defined within Section 27A of the Securities Act of 1933, as amended and Section
21E of the Securities Exchange Act of 1934, as amended, relating to revenue,
revenue composition, demand and pricing trends, future expense levels, trends in
average selling prices and gross margins, the timing for the Company's
facilities consolidation, the level of expected capital expenditures and 3G
product trends.  Such forward-looking statements are based on the beliefs of,
and estimates made by and information currently available to, the Company's
management  and are subject to certain risks, uncertainties and assumptions.
Any statements contained herein (including without limitation statements to the
effect that the Company or management "estimates," "expects," "anticipates,"
"plans," "believes," "projects," "continues," "may," or "will," or statements
concerning "potential" or "opportunity" or variations thereof or comparable
terminology or the negative thereof) that are not statements of historical fact
should be construed as forward looking statements. The actual results of
Powerwave Technologies, Inc. may vary materially from those expected or
anticipated in these forward-looking statements. The realization of such
forward-looking statements may be impacted by certain important factors which
are discussed in "Additional Factors That May Affect Future Results" under Item
7, "Management's Discussion and Analysis of Financial Condition and Results of
Operations" at pages 12-30. Because of these and other factors that may affect
Powerwave's operating results, past performance should not be considered as an
indicator of future performance and investors should not use historical results
to anticipate results or trends in future periods.  Powerwave undertakes no
obligation to publicly release the result of any revisions to these forward-
looking statements which may be made to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events. Readers
should carefully review the risk factors described in this and other documents
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.


                                     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 we changed our name to Powerwave Technologies, Inc. in
June 1996.  Powerwave designs, manufactures and markets ultra-linear radio
frequency ("RF") power amplifiers for use in the wireless communications market.
RF power amplifiers, which are key components of wireless communications
networks, increase the signal strength of wireless transmissions from the base
station to the handset while reducing interference, or "noise." Less noise
enables wireless service providers to deliver clearer call connections and
reduces the number of interrupted or dropped calls.

  Powerwave manufactures both single and multi-carrier RF power amplifiers for a
variety of frequency ranges and transmission protocols.  Single carrier RF power
amplifiers ("SCPA") typically amplify a specific radio channel.  Multi-carrier
RF power amplifiers ("MCPA") are capable of amplifying several  radio channels
at one time by integrating the functions of several SCPA units and cavity
filters within a single MCPA unit. Powerwave's products are currently being
utilized in wireless networks operating in the 800-1000 megahertz (MHz) and the
1800-2000 MHz frequency ranges.  We have developed and sold a limited number of
products for use in networks that will operate in the 2100 MHz frequency range.
Our products support a wide range of transmission protocols including analog
protocols such as AMPS and TACS and digital protocols such as CDMA, TDMA, and
GSM. We have also developed and introduced RF power amplifiers for third
generation ("3G') transmission protocols such as UMTS, W-CDMA and cdma2000.

  We believe that our future success depends upon our ability to broaden our
customer base and continued growth in demand for wireless services.  For the
fiscal year ended December 31, 2000, our largest customer was Nortel Networks
Corporation and related entities ("Nortel"), which accounted for approximately
47% of our net sales.  Also, for fiscal year 2000, our next three largest
customers (in alphabetical order), Cingular Wireless, LM Ericsson Telephone
Company ("Ericsson"), and Verizon Wireless, each accounted for more than 5% of
our net sales.  The loss of any one of these customers, or a significant loss,
reduction or rescheduling of orders from any of our customers would have a
material adverse effect on our business, results of operations and financial
condition.

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See "Additional Factors That May Affect Future Results--A Significant Amount of
Our Revenues Comes from a Few Customers; --Our Success is Tied to the Growth of
the Wireless Service Market; and --There are Many Risks Associated With
International Operations" under Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations".

  A limited number of large original equipment manufacturers ("OEMs") account
for a majority of RF power amplifier purchasers 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.  Such action
would have a material adverse effect on our business, results of operations and
financial condition.  See "Additional Factors That May Affect Future Results--A
Significant Amount of Our Revenues Comes from a Few Customers" under Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

  We have experienced, and expect to continue to experience, declining average
sales prices for both our multi-carrier and single carrier amplifier products.
Consolidation among wireless service providers has enabled such companies to
place increased pricing pressure on wireless infrastructure manufacturers, which
in turn has resulted in downward pricing pressure on our products. In addition,
ongoing competitive pressures in the RF power amplifier market have put
continued pressure on us to continually reduce the sales price of our products.
Consequently, we believe that our gross margins will decline over time and that
in order to maintain or improve our gross margin we must achieve manufacturing
cost reductions and we must develop new products that incorporate advanced
features that may generate higher gross margins.   See "Additional Factors That
May Affect Future Results--A Significant Amount of Our Revenues Comes from a
Few Customers; --Our Success is Tied to the Growth of the Wireless Service
Market; --Declining Average Sales Prices; and --There are Many Risks Associated
With International Operations" under Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

Significant Business Developments in Fiscal 2000

  In February 2000, Carl W. Neun and Safi U. Qureshey joined Powerwave's Board
of Directors, increasing the total number of directors to eight.

  On May 31, 2000, we paid $35.3 million for a 360,000 square foot facility
located on approximately 22 acres of land in Santa Ana, California, which we are
planning to utilize as our Southern California headquarters and manufacturing
facility. Approximately 85,000 square feet is being sublet to an unrelated third
party, with the remaining 275,000 square feet available for us.   Approximately
$20.5 million of the purchase price was allocated to the building, with the
remaining $14.8 million allocated to land, which includes approximately three
acres of undeveloped land.  We began the retrofitting of this facility in the
third quarter of 2000 and we currently expect to have our Southern California
operations relocated to this facility by the end of the first quarter of fiscal
2001.

  On April 26, 2000, Powerwave's shareholders approved an amendment to the
Company's Amended and Restated Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 40,000,000 to 135,000,000 and
effect a three-for-one stock split of Powerwave's Common Stock.  The effective
date of the three-for-one stock split was May 15, 2000.

  On August 23, 2000 we sold a total of 1.5 million shares of our Common Stock
at a price per share of $41.1875 to Deutsche Banc Alex.Brown pursuant to a
previously filed shelf registration.  Total net proceeds after offering expenses
were approximately $61.7 million.


Industry Segments and Geographic Information

  Powerwave operates in one industry segment: the design, manufacture and
marketing of RF power amplifiers for use in wireless communications networks. We
currently market our products through our own internal sales

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force as well as independent sales representatives. For the purposes of
Statement of Financial Accounting Standards ("SFAS") No. 131, Disclosures About
Segments of an Enterprise and Related Information, we have provided a breakdown
of our business utilizing the management approach in Note 14 of the "Notes to
Consolidated Financial Statements" under Item 8, "Financial Statements and
Supplementary Data." Utilizing the management approach, we have broken down our
business based upon the RF frequency in which the product is utilized in, i.e.
800-1000 MHz commonly referred to as "Cellular", 1800-2000 MHz, commonly
referred to as "PCS" and 2000+ MHz, which includes third generation frequency
bands. A summary of our sales by geographic region is incorporated herein by
reference from Note 14 of the "Notes to Consolidated Financial Statements" under
Item 8, "Financial Statements and Supplementary Data."


Business Strategy

  Powerwave's strategy is to become the leading supplier of advanced RF power
amplifier solutions to the wireless communications industry and includes the
following key elements:

 .  provide leading technology to the RF power amplifier industry through
   research and development that continues to improve our product's technical
   performance and establishes new levels of technical performance;

 .  utilize our research and development efforts to raise our productivity and to
   lower costs;

 .  leverage our position as a leading supplier of both single carrier and multi-
   carrier RF power amplifiers to increase our market share and expand our
   relationships with our existing customers;

 .  continue to expand our customer base of wireless network OEMs and leading
   wireless network operators; and

 .  maintain our focus on the quality, reliability and manufacturability of our
   RF power amplifier products.

  Our focus on RF power amplifier 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
both multi-carrier and single carrier RF power amplifier technology.  We intend
to continue to research and develop new methods to improve RF power amplifier
performance, including efforts to support third generation transmission
standards known as 3G.  We believe that both our existing products and new
products in development will enable us to continue to expand our customer base
by offering a broad range of products to meet the diverse requirements of
wireless OEMs and network operators.  We also intend to leverage our product
lines in an attempt to expand our relationships with our existing customers and
to add new customers.  Powerwave has developed the ability to manufacture both
multi-carrier and single carrier RF power amplifiers in a standard, repeatable
manner, which allows for increased production levels.  We believe that we are
able to respond quickly and cost-effectively to new transmission protocols and
design specifications by obtaining components from numerous leading technology
companies.  We also believe that our focus on the manufacturability of our RF
power amplifier designs should help us to increase our manufacturing
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 RF power amplifiers.

  If we are unsuccessful in designing new products or improving and reducing the
costs of our products, such inability to fulfill these objectives would have a
negative effect on our gross profit margins, business, results of operations and
financial condition.  In addition, if our outstanding customer orders were to be
significantly reduced, the resulting loss of volume purchasing could also
adversely effect our cost competitive advantage, which would negatively affect
our gross profit margins, business, results of operations and financial
condition.  See "Additional Factors That May Affect Future Results--Our Average
Sales Prices are Declining; and --We May Fail to Develop Products that are
Sufficiently Manufacturable or of Adequate Quality and Reliability" under Item
7, "Management's Discussion and Analysis of Financial Condition and Results of
Operations."


Markets

  We sell our RF power amplifier products into various segments of the wireless
communications market.  We have defined these segments based upon the RF
frequency in which the product is utilized.  The majority of our

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sales are to the 800-1000 MHz and the 1800-2000 MHz markets. We have also begun
to sell products for use in the 2000+ MHz markets.

  Wireless networks typically utilize a number of base stations with high power
antennas to serve a geographical region.  Each region is broken down into a
number of smaller geographical areas, or "cells." Each cell has its own base
station which uses wireless technology to receive and transmit calls via base
stations (BTS) and the wireline public switched telephone network ("PSTN").
Cellular networks typically operate within the 800 and 900 MHz bandwidths of the
radio spectrum and utilize either analog or digital protocols. PCS networks
operate in a substantially similar manner as cellular networks, except that PCS
networks typically operate at 1800 and 1900 MHz bandwidths and utilize only
digital transmission protocols. Third generation ("3G") networks are expected to
primarily operate in the 2100 MHz range. Transmissions at the higher frequencies
utilized by PCS and 3G networks have shorter transmission waves as compared to
cellular frequency transmissions, which tends to limit the distances
transmissions can travel without significant degradation.  Lower frequency
signals penetrate into buildings and other obstacles better than higher
frequency signals.  Therefore, wireless networks operating at high frequency
ranges may require smaller operating cells and more base stations than existing
cellular networks to cover the same total geographic area.

  In analog cellular networks, each base station is allocated a certain number
of frequency channels, each of which can carry only one call at a time.
Originally, cellular base stations in analog networks used single carrier RF
power amplifiers for each frequency channel allocated to the cell. With the use
of MCPA technology, transmission signals can now be amplified simultaneously
through a single multi-carrier RF power amplifier which allows for the
simultaneous amplification of all channels within a base station.  Multi-carrier
RF power amplifiers require significantly higher linearity than do single
carrier designs, but do not require separate, high-maintenance, tunable cavity
filters.  By eliminating the need for cavity filters for each channel, multi-
carrier RF power amplifiers reduce overall deployment and maintenance costs
associated with base stations. Many service providers still require additional
capacity to serve the increased flow of transmissions through their networks.
This has led many service providers to move from analog networks to digital
networks.

  In digital networks, calls are segmented into time slots or codes and
transmitted across the entire bandwidth of allocated spectrum, rather than in
single channels of that spectrum.  The calls are then reassembled when received
at the base station or cellular phone. While using the entire bandwidth of
allocated spectrum results in greater system capacity, there is a greater
likelihood that even minimal background noise will result in interrupted or
dropped calls.  Accordingly, ultra-linear amplification is even more critical in
digital networks than in their analog counterparts.

  Powerwave provides ultra-linear multi-carrier RF power amplifiers which are
located in base stations and work to increase the signal strength of outgoing
transmissions.  Our single carrier and multi-carrier RF power amplifiers work in
base stations with a variety of other sophisticated electronic equipment,
including receivers, radios and oscillators.


Products

  Powerwave offers both single and multi-carrier RF power amplifiers for use in
cellular networks, including ultra-linear multi-carrier RF power amplifiers for
CDMA, cdma2000, TDMA and GSM digital cellular systems as well as analog systems
utilizing AMPS and TACS protocols.  We also offer both single and multi-carrier
RF power amplifiers for use in PCS networks that operate in the international
DCS-1800 frequency (1800 MHz) and the United States PCS band at 1900 MHz.
Typical system applications include CDMA, TDMA, and GSM protocols with output
power ranging from 5W to 100W.

  Our ultra-linear multi-carrier RF power amplifiers utilize feedforward
technology, and typically pre-distortion.  Our multi-carrier designs also
utilize an actively switched output combiner (3 or 4 way), which allows any
number of RF power amplifiers to be "hot-swapped", or interchanged, without a
significant loss of power.  This design also allows for true cold standby
switching of a standby RF power amplifier, thereby providing network operators
with a backup redundancy solution for even greater reliability.  These RF power
amplifiers are designed to be installed in racks of three or four RF power
amplifiers.  Smart combiner paralleling units allow for both higher power as
well as

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system redundancy, which is the ability of the system to remain operational in
the event of the failure of one or more of the paralleled RF power amplifiers.

  We offer various versions of our multi-carrier RF power amplifiers providing
from 25 to 140 Watts (W) or more of average power with maximum distortion of up
to -65dBc or better.  Up to 4 units can be combined in parallel utilizing our
fully redundant smart combiner racks for various effective average power
ratings.

  We also offer single carrier RF power amplifiers for GSM, CDMA and TDMA
operating systems.  Products are available in a wide range of RF output levels.
These products are available in versions ranging from complete stand-alone units
to highly integrated RF power amplifiers for tower-top applications.

  3G UMTS networks (which will initially operate in the 2100 MHz spectrum) will
generally utilize the W-CDMA 3G transmission protocol. The buildout of these
networks is expected to begin in different parts of the world, primarily in Asia
and Europe.  OEMs have or are in the process of developing base stations to
support these 3G networks.  We have developed and are continuing to develop RF
power amplifiers for use in 3G base stations.  We have produced and sold a
limited number of these 3G RF power amplifiers to certain of our OEM customers.

  Our multi-carrier RF power amplifiers range in price from $3,500 to over
$15,000 per RF power amplifier, based upon the specification requirements.  Our
single carrier RF power amplifiers range in price from $500 to $4,500 per RF
power amplifier depending upon product type and specifications.  We also sells
racks, cabinets and combiners for multiple RF power amplifiers, ranging in price
from $1,000 to over $7,500, depending upon specifications.


Customers

  We sell our products to customers worldwide, including a variety of wireless
OEMs, such as Ericsson, LG Electronics ("LG") formerly LG Information &
Communications, Ltd., Lucent Technologies, Inc. ("Lucent"), Metawave
Communications Corporation ("Metawave"), Nokia Telecommunications Inc.
("Nokia"), Nortel and Samsung Electronics Co. Ltd. ("Samsung").  We also sell
our products to operators of wireless networks, such as AT&T Wireless Services
("AT&T Wireless"), Cingular Wireless and Verizon Wireless.

  For the fiscal year ended December 31, 2000, our largest customer was Nortel,
which accounted for approximately 47% of our net sales.  Also, for fiscal year
2000, our next three largest customers (in alphabetical order), Cingular
Wireless, Ericsson and Verizon Wireless each accounted for more than 5% of our
net sales.  The loss of any one of these customers, or a significant loss,
reduction or rescheduling of orders from any of our customers, would have a
material adverse effect on our business, results of operations and financial
condition.  See "Additional Factors That May Affect Future Results--A
Significant Amount of Our Revenues Comes from a Few Customers; --Our Success is
Tied to the Growth of the Wireless Service Market; and --There are Many Risks
Associated With International Operations" under Item 7, "Management's Discussion
and Analysis of Financial Condition and Results of Operations."


Marketing and Distribution, International Sales

  We sell our products through a highly technical direct sales force and through
independent sales representatives.  Direct sales personnel are assigned to
geographic territories and, in addition to sales responsibilities, manage
networks of independent sales representatives.  We also utilize a network of
independent sales representatives selected for their familiarity with our
potential customers and their knowledge of the wireless infrastructure equipment
market.  Both the direct sales personnel and independent sales representatives
generate product sales, provide product and customer service, and provide
customer feedback for product development.  In addition, the sales personnel and
independent sales representatives receive support from our marketing, product
support and customer service departments.

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  Our marketing efforts are focused on establishing and developing long-term
relationships with potential customers.  Sales cycles for certain of our
products, particularly our base station RF power amplifiers, are 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 which can be subject to cancellation,
postponement or other types of delays.  While certain customers provide us with
forecasted needs, they are typically not bound by such forecasts.

  International sales (excluding North American sales) of our products amounted
to approximately 21%, 33%, and 41% of net sales for the years ended December 31,
2000, January 2, 2000, and January 3, 1999, 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 material difficulty in obtaining required permits or licenses.
Foreign sales also subject us to risks related to political upheaval and
economic downturns in foreign nations and regions, such as the economic downturn
in the South Korean and Asian markets in fiscal 1998 and the Brazilian market
during 1999.  In addition, historically our foreign customers typically pay for
our products with U.S. Dollars.  As such, a strengthening of the U.S. Dollar as
compared to a foreign customer's local currency effectively increases the cost
of our products for that customer, thereby making our products less attractive
to such customers.  See "Additional Factors That May Affect Future Results--
There are Many Risks Associated With International Operations" under Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."


Service and Warranty

  Our warranties vary by customer and product type and typically cover defects
in materials and workmanship.  We perform warranty obligations and other
maintenance services for our products at our facilities in Southern California
and Seoul, South Korea.  We currently have service employees located in South
Korea and utilize our South Korean sales representative location to provide
service and support for the Asian region.


Product Development

  We invest significant resources in the research and development of new methods
to improve amplifier performance, including reduced noise and increased power in
the RF amplification process.  We also invest significant resources in the
development of new amplifier products to support new transmission protocols,
including EDGE and third generation protocols such as W-CDMA and cdma2000.  Our
development efforts also seek to reduce the cost and increase the manufacturing
efficiency of both new and existing products.  Our research and development
staff consisted of 204 people as of December 31, 2000.  Expenditures for
research and development amounted to approximately $41.1 million in 2000, $26.3
million in 1999 and $13.5 million in 1998.  See "Additional Factors That May
Affect Future Results--We Must Develop and Sell New Products in Order to Keep Up
With Rapid Technological Change" under Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations."


Competition

  The wireless communications infrastructure equipment industry is extremely
competitive and is characterized by rapid technological change, new product
development and 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 the
foregoing characteristics, there can be no assurance that we will be able to
continue to do so.

  Our current domestic competitors include AML Communications, Inc. and
Spectrian Corporation. We also compete with a number of foreign and privately
held companies throughout the world, the subsidiaries of certain

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multinational corporations and the amplifier manufacturing operations captive
within certain of the leading wireless infrastructure OEMs such as Ericsson,
Lucent, Motorola Corporation ("Motorola"), Nokia and Samsung. Some competitors
have significantly greater financial, technical, manufacturing, sales, marketing
and other resources than Powerwave and have achieved greater name recognition
for their existing products and technologies than we have. We cannot guarantee
that we will be able to successfully increase our market penetration or our
overall share of the RF amplifier marketplace. Our results of operations could
be adversely impacted if we are unable to effectively increase our share of the
RF amplifier marketplace.

  Powerwave's success depends in large part upon the rate at which wireless
infrastructure OEMs incorporate our products into their systems.  We believe
that a substantial portion of the present worldwide production of RF power
amplifiers is captive within the internal manufacturing operations of a small
number of leading wireless infrastructure manufacturers such as Ericsson,
Lucent, Motorola, Nokia and Samsung.  Some of these companies regularly evaluate
whether to manufacture their own RF power amplifiers rather than purchase them
from third-party vendors such as Powerwave.  Recently, Ericsson purchased
Microwave Power Devices, Inc., one of our competitors.  We cannot predict the
ultimate impact this purchase will have on our business with Ericsson.  Any
potential reduction in business from Ericsson could have a negative impact on
our business, financial condition and results of operations.  In addition,
various companies could also directly compete with Powerwave by selling their RF
power amplifiers to other manufacturers and operators, including our customers.
If we are not successful in increasing the use of our products by the leading
wireless infrastructure OEMs, there will be a material adverse effect on our
business, financial condition and results of operations.  See "Additional
Factors That May Affect Future Results--Many Wireless Infrastructure
Manufacturers have Internal RF Power Amplifier Production Capabilities; and
--The Market in Which We Operate is Highly Competitive" under Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

  We have experienced significant price competition and we expect price
competition in the sale of RF power amplifiers to increase.  No assurance can be
given that our competitors will not 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.
There can be no assurance that we will be able to compete successfully in the
pricing of our products, or otherwise, in the future.  See "Additional Factors
That May Affect Future Results--Our Average Sales Prices are Declining" under
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations."


Backlog

  Our backlog of orders was approximately $84.5 million on December 31, 2000,
compared to approximately $98.2 million on January 2, 2000.  We include in our
reported backlog only the accepted product purchase orders with respect to which
a delivery schedule has been specified for product shipment within six months.
Product orders in our backlog are frequently subject to changes in delivery
schedules or to cancellation at the option of the purchaser without significant
penalty.  We regularly review our backlog of orders to ensure that it adequately
reflects product orders expected to be shipped within a six-month period.  We
make adjustments as customer delivery schedules change and in response to
changes in our production schedule.  Accordingly, we stress that although useful
for scheduling production, backlog as of any particular date may not be a
reliable indicator of sales for any future period.


Manufacturing and Suppliers

  Our headquarters and our manufacturing facility are located in Irvine,
California.  We have purchased a facility in Santa Ana, California and expect to
complete the relocation of our operations to this facility during the first
quarter of 2001.  Our manufacturing process involves the assembly of numerous
individual components and precise fine-tuning by production technicians.  The
parts and materials used by us consist primarily of printed circuit

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boards, specialized subassemblies, fabricated housings, relays, and small
electric circuit components, such as integrated circuits, semiconductors,
resistors and capacitors.

  We currently procure, and expect to continue to procure, certain components
from single source manufacturers due to unique component designs as well as
certain quality and performance requirements.  In addition, in order to take
advantage of volume pricing discounts, we purchase certain customized components
from single sources.  We have experienced, and may in the future experience,
shortages of single-source components.  In such event, we may have to make
adjustments to both product designs and production schedules which could result
in delays in production and delivery of products.  Such delays could have an
adverse effect on our operating results and financial condition.  See
"Additional Factors That May Affect Future Results--We Depend on Single Sources
for Key Components" under Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

  We have been ISO 9001 certified since 1996.  Numerous customers and potential
customers throughout the world, particularly in Europe, require that their
suppliers be ISO certified.  In addition, many such customers require that their
suppliers purchase components only from subcontractors that are ISO certified.


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.
In 1998, we were granted our first U.S. patent for an aspect of our multi-
carrier technology.  We have an on-going program to identify and file
applications for both U.S. and international patents for various aspects of our
technology.  We have been granted a total of 10 U.S. patents, and as of December
31, 2000 we have 15 separate U.S. patent applications filed, with multiple
additional international patents filed.  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 and technical personnel, the breach of their
confidentiality and non-disclosure obligations to Powerwave 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 and our ability to market our existing
products and to develop new products.   We do not have non-compete agreements
with our employees who are employed on an "at-will" basis.  Therefore, employees
may leave us and go to work for a competitor.  We have had employees leave us
and go to work for competitors.  While we believe that we have adequately
protected our proprietary technology, and we will take all legal measures to
protect it, 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 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.  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 companies in our industry may face more frequent
infringement claims.  We may in the future be notified that we are infringing
upon certain patent or other intellectual property rights of others.  Although
we are not aware of any pending or threatened intellectual property lawsuits
against us, we cannot guarantee that such litigation or infringement claims will
not occur in the future.  Such litigation or claims could result in substantial
costs and diversion of resources and could have a material adverse effect on our
business, results of operations and financial condition.  A third party claiming
infringement

                                       8
<PAGE>

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. No assurance can be given, however, 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 December 31, 2000, Powerwave had 1,295 full and part-time employees,
including 960 in manufacturing, 204 in research and development, 50 in sales and
marketing and 81 in general and administration.  None of our employees are
represented by a union.  We believe that our relations with our employees are
good.


Contract Personnel

  Powerwave also utilizes contract personnel hired from third party agencies.
As of December 31, 2000, Powerwave was utilizing approximately 510 contract
personnel, primarily in our manufacturing operations.


ITEM 2.  PROPERTIES

  Our Irvine, California headquarters and manufacturing facility occupy a
105,000 square foot building under a lease expiring in July 2006.  Our sales and
research and development departments occupy a 34,000 square foot building
adjacent to our headquarters and manufacturing facility under a lease also
expiring in July 2006.  We have entered into an agreement to terminate the
leases of these two facilities as of June 30, 2001.  We lease a 61,300 square
foot warehouse space in Irvine, California under a lease expiring in March 2002.
We plan to vacate this facility during the first quarter of 2001.

   In May 2000, we purchased our new Southern California headquarters and
manufacturing facility located in Santa Ana, California.  This new facility has
approximately 360,000 square feet, of which 275,000 will be available to us.
The remaining 85,000 square feet is being sublet to an unrelated third party.
We have also entered into an agreement to lease a 115,000 square foot warehouse
facility in Santa Ana, California.  The lease on this warehouse facility
commences on April 15, 2001 and has a expiration date of March 31, 2007.

   We lease 20,000 square feet in El Dorado Hills, California under a lease
expiring in January 2005 for our Northern California research and development
staff and we have entered into an agreement to lease an additional 11,500 square
feet in another facility, also in El Dorado Hills.

  We believe that our new headquarters and manufacturing facility as well as our
remaining leased facilities provide adequate space for our operations.


ITEM 3.  LEGAL PROCEEDINGS

We are subject to various legal proceedings from time to time as part of our
business. In September 1999, a former customer filed a lawsuit against us.  The
lawsuit alleged, among other things, that we sold defective LMR products to this
customer from 1994 to 1998. We denied these allegations of wrongdoing. In
December 2000, the parties settled this lawsuit.  The settlement did not have a
material adverse effect on the Company.

  Powerwave is not currently party to any other legal proceedings, the adverse
outcome of which, individually or in the aggregate, we believe would have a
material adverse effect on our business, financial condition and results of
operations. However, any potential future litigation, regardless of its merits,
could result in substantial costs to us and divert management's attention from
our operations.

                                       9
<PAGE>

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

  No matters were submitted to a vote of security holders during the fourth
quarter of 2000.



                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

  (a) Powerwave's Common Stock is quoted on the Nasdaq National Market System
under the symbol PWAV.  Set forth below are the high and low sales prices as
reported by Nasdaq for Powerwave's Common Stock for the periods indicated.

<TABLE>
<CAPTION>
                                                    High            Low
                                                  ---------      ---------
<S>                                               <C>             <C>
Fiscal Year 2000
     First Quarter Ended April 2, 2000...........  $68.3333       $15.2917
     Second Quarter Ended July 2, 2000...........  $74.0000       $27.1667
     Third Quarter Ended October 1, 2000.........  $52.0000       $27.1875
     Fourth Quarter Ended December 31, 2000......  $75.3750       $30.3750

  Fiscal Year 1999
     First Quarter Ended April 4, 1999...........  $10.3958       $ 5.6042
     Second Quarter Ended July 4, 1999...........  $12.2917       $ 7.2083
     Third Quarter Ended October 3, 1999.........  $16.5833       $10.1250
     Fourth Quarter Ended January 2, 2000........  $26.6875       $15.9375
</TABLE>

  There were approximately 90 stockholders of record as of February 28, 2001.
We believe there are approximately 32,000 stockholders of Powerwave's Common
Stock held in street name.  We have not paid any dividends to date and do not
anticipate paying any dividends on the Common Stock in the foreseeable future.
We anticipate that all future earnings will be retained to finance future
growth.

  During fiscal 2000, Powerwave issued an aggregate total of 2,913,100
nonqualified stock options to purchase Common Stock pursuant to Powerwave's 1995
Plan, 1996 Plan, 2000 Plan and Director Plan to officers, directors and
employees of Powerwave at prices ranging from $15.42 to $73.56 per share.  Of
this total, 3,450 options were granted pursuant to the 1995 Plan, 2,162,150
options were granted pursuant to the 1996 Plan, 537,500 options were granted
pursuant to the 2000 Plan and 210,000 options were granted pursuant to the 1996
Director Plan.  Exemption from the registration provisions of the Securities Act
of 1933 (the "Act") is claimed, among other exemptions, with respect to the
grant of options referred to above, on the basis that the grant of options did
not involve a "sale" of securities and, therefore, registration thereof was not
required and, with respect to the exercise of options referred to above, on the
basis that such transactions met the requirements of Rule 701 as promulgated
under Section 3(b) of the Act.

  On August 23, 2000 we sold a total of 1.5 million shares of our Common Stock
at a price per share of $41.1875 to Deutsche Banc Alex.Brown pursuant to a
previously filed shelf registration.  Total net proceeds after expenses were
approximately $61.7 million.

                                       10
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

  The following selected financial data have been derived from Powerwave's
consolidated statements of operations for the fiscal years ended December 31,
2000, January 2, 2000 and January 3, 1999, and consolidated balance sheets as of
December 31, 2000, and January 2, 2000, and have been audited by Deloitte &
Touche LLP, independent auditors.  Powerwave's consolidated statements of
operations for the fiscal years ended December 28, 1997 and December 29, 1996
and consolidated balance sheets as of January 3, 1999, December 28, 1997 and
December 29, 1996 which are not included herein, have also been audited by
Deloitte & Touche LLP, independent auditors.  The information set forth below is
not necessarily indicative of the expectations of results for future operations
and should be read in conjunction with the consolidated financial statements and
notes thereto appearing elsewhere in this Annual Report on Form 10-K.


<TABLE>
<CAPTION>
                                                                        Fiscal Years Ended
                                             -------------------------------------------------------------------
                                             December 31,   January 2,    January 3,   December 28  December 29,
                                                 2000          2000          1999          1997        1996
                                             -------------------------------------------------------------------
                                                             (in thousands, except per share data)
<S>                                          <C>            <C>           <C>          <C>          <C>
Consolidated Statements of Operations Data:
Net sales ..................................   $447,422      $292,547      $100,231      $119,709     $60,331
Operating income (loss).....................   $ 64,717      $ 28,725      $ (7,001)     $ 23,257     $12,435
Net income (loss)...........................   $ 45,653      $ 20,265      $ (2,966)     $ 16,191     $ 7,622
Basic earnings (loss) per share (1).........   $   0.75      $   0.34      $  (0.06)     $   0.32     $  0.22
Diluted earnings (loss) per share (2).......   $   0.71      $   0.33      $  (0.06)     $   0.31     $  0.17
Basic weighted average common shares (1)....     61,953        58,480        51,534        50,874      34,380
Diluted weighted average common shares (2)..     65,313        60,671        51,534        52,308      43,818

Consolidated Balance Sheet Data:
Cash and cash equivalents...................   $128,733      $ 76,671      $ 13,307      $ 67,433     $32,386
Working capital.............................   $196,733      $118,566      $ 35,210      $ 67,512     $33,243
Total assets................................   $393,797      $223,038      $131,985      $101,683     $46,932
Long-term debt..............................   $     42            --      $ 17,621      $    659     $   520
Total shareholders' equity..................   $316,272      $169,779      $ 71,070      $ 75,480     $36,843
</TABLE>

(1)  The 1996 shares outstanding for basic earnings per share includes the
     weighted average common shares outstanding for the year and the conversion
     of 3,375,900 shares of Series A Convertible Preferred Stock into 15,191,550
     shares of Common Stock for the period from December 6, 1996 to December 29,
     1996.  Giving effect to our initial public offering in December 1996,
     conversion of Series A Convertible Preferred Stock into shares of Common
     Stock for all of 1996 would have resulted in basic earnings per share of
     $0.18 and weighted average shares outstanding of 42,543,537.

(2)  1996 shares outstanding give effect to the conversion of 3,375,900 shares
     of Series A Convertible Preferred Stock into 15,191,550 shares of Common
     Stock and the reversal of accrued dividends payable thereon which occurred
     upon the completion of our initial public offering of Common Stock on
     December 6, 1996.

                                       11
<PAGE>

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.


Results of Operations

  The following table summarizes Powerwave's results of operations as a
percentage of net sales for the fiscal years ended December 31, 2000, January 2,
2000 and January 3, 1999.

<TABLE>
<CAPTION>
                                                   As a Percentage of Net Sales
                                           -------------------------------------------
                                                        Fiscal Years Ended
                                           -------------------------------------------
                                           December 31,     January 2,      January 3,
                                               2000            2000            1999
                                           ------------     ----------      ----------
<S>                                        <C>              <C>             <C>
Net sales..............................       100.0%           100.0%         100.0%
Cost of sales..........................        68.2             71.9           65.9
                                              -----            -----          -----
Gross profit...........................        31.8             28.1           34.1
Operating expenses:
  Sales and marketing..................         4.7              5.2            9.5
  Research and development.............         9.2              9.0           13.4
  General and administrative...........         3.4              4.1            5.8
  In-process research and development..          --               --           12.4
                                              -----            -----          -----
Total operating expenses...............        17.3             18.3           41.1
                                              -----            -----          -----
Operating income (loss)................        14.5              9.8           (7.0)
Other income, net......................         1.3              1.0            2.3
                                              -----            -----          -----
Income (loss) before income taxes......        15.8             10.8           (4.7)
                                              -----            -----          -----
Provision (benefit) for income taxes...         5.6              3.9           (1.7)
                                              -----            -----          -----
Net income (loss)......................        10.2%             6.9%          (3.0)%
                                              =====            =====          =====
</TABLE>

Years ended December 31, 2000 and January 2, 2000

 Net Sales

  Our net sales are derived primarily from the sale of RF power amplifiers for
use in wireless communications networks.  Sales increased by 53% to $447.4
million for the year ended December 31, 2000 from $292.5 million for the year
ended January 2, 2000.  The increase in revenue was primarily attributable to
increased demand for our products.  For the year ended December 31, 2000, total
sales of products for networks in the 800-1000 MHz range (including both single
and multi-carrier RF power amplifiers and associated equipment) accounted for
approximately 78% of revenues or $348.3 million, compared to approximately 74%
or $215.0 million for the year ended January 2, 2000.  Sales of RF power
amplifiers and associated products for networks in the 1800-2000 MHz range
(consisting mainly of single carrier RF power amplifiers) accounted for
approximately 21% of revenues or $96.1 million for the year ended December 31,
2000, compared to approximately 26% or $76.8 million for the year ended January
2, 2000.  Sales of amplifiers for use in networks over 2100 MHz accounted for
approximately 1% of sales or $3.0 million for the year ended December 31, 2000
and no revenue for the prior year.  We currently expect that sales of amplifiers
for use in networks over 2100 MHz will account for a significantly larger
percentage of sales in the future.

  We track the geographic location of our sales based upon the location to which
we ship products.  Since many of our customers receive products from us at
central locations and then reship the product with other base station equipment
to locations throughout the world, we are not able to identify the final
installation location of our products.  Based upon the location to which we ship
our products, North America has accounted for the majority of

                                       12
<PAGE>

our sales. Sales to customers in North America accounted for approximately 79%
of revenue or $352.7 million for the year ended December 31, 2000 compared with
approximately 67% of revenue or $195.3 million for the year ended January 2,
2000. Our total international sales (excluding North American sales) accounted
for approximately 21% of revenues or $94.7 million for the year ended December
31, 2000, compared with approximately 33% or $97.3 million for the year ended
January 2, 2000. Total Asian sales accounted for approximately 10% of revenues
or $44.6 million for the year ended December 31, 2000 compared to approximately
21% of revenues or $62.2 million for the year ended January 2, 2000. See
"Additional Factors That May Affect Future Results--A Significant Amount of Our
Revenues Comes from a Few Customers; --Our Success is tied to the Growth of the
Wireless Service Market: and --There are Many Risks Associated With
International Operations."

  For fiscal 2000, total sales to Nortel accounted for approximately 47% of
revenues and sales to the following customers (in alphabetical order), Cingular
Wireless, Ericsson and Verizon Wireless each accounted for over 5% of revenues
for the year.  We cannot guarantee that we will continue to be successful in
attracting new customers or retaining or increasing business with our existing
customers.  In addition, we believe that a significant portion of our business
with OEMs, such as Ericsson, Lucent, Nokia and Nortel, is dependent upon the
deployment schedules of wireless network operators who are purchasing
infrastructure equipment from such OEMs and on such OEMs' strategy concerning
the outsourcing of RF power amplifiers.  A number of factors may cause delays in
wireless infrastructure deployment schedules for both North American and
international deployments, including deployments in Europe, Brazil, Asia, South
America and other areas.  Such factors include economic or political problems in
the wireless operator's operating region, delays in government approvals
required for system deployment, delays in the development of new network
architecture, reduced subscriber demand for wireless services and high costs of
wireless spectrum licenses and network infrastructure.   In addition, a number
of factors may cause OEMs to alter their outsourcing strategy concerning RF
power amplifiers, which could cause such OEMs to reduce or eliminate their
demand for external supplies of RF power amplifiers.   Such factors include
lower perceived internal manufacturing costs and competitive reasons to remain
vertically integrated.  Some OEMs such as Ericsson, have acquired our
competitors to strengthen their vertical integration.  Due to the possible
uncertainties associated with wireless infrastructure deployments and OEM
demand, we have experienced and expect to continue to experience significant
fluctuations in demand from our OEM customers.  Such fluctuations can cause a
significant reduction in revenues or reduction in operating income which could
have a material adverse effect on our business, financial condition and results
of operations.  See "Additional Factors That May Affect Future Results --A
Significant Amount of Our Revenues Comes from a Few Customers; --There are Many
Risks Associated With International Operations; and --Our Quarterly Results
Fluctuate Significantly."

 Gross Profit

  Cost of sales consists primarily of raw materials, assembly and test labor,
overhead and warranty costs. Gross profit margins for fiscal 2000 and 1999 were
31.8% and 28.1%, respectively.  The increase in gross margins during  fiscal
2000 as compared to fiscal 1999 was primarily due to the final closure of the
acquired Folsom manufacturing facility in the fourth quarter of 1999 and the
resulting improvements in manufacturing operating costs in fiscal 2000 as
compared to fiscal 1999.  Also during fiscal 2000, sales of multi-carrier RF
power amplifier products accounted for a greater percentage of product sales
when compared to fiscal 1999.  Our multi-carrier RF power amplifier products
have traditionally carried higher margins than our single carrier RF power
amplifier products.  While we continue to strive for manufacturing and
engineering cost reductions to offset pricing pressures on our products, we
currently expect that our next generation multi-carrier products will not obtain
the level of gross margins that our multi-carrier products have historically
obtained.  There can be no assurance that our cost reduction or redesign efforts
will keep pace with price declines and cost increases. If we are unable to
obtain cost reductions through our manufacturing and or engineering efforts, our
gross margins and profitability will continue to be adversely affected. See
"Additional Factors That May Affect Future Results--Our Average Sales Prices are
Declining."

  As part of our acquisition in October 1998 of Hewlett-Packard Company's ("HP")
RF power amplifier business for approximately $65.9 million (the "HP
Acquisition") we completed an allocation of the purchase price of the
acquisition to both the tangible and intangible assets and liabilities acquired
in the acquisition.  The purchase price allocation is included in our financial
statements for the year ended January 3, 1999, and includes an allocation of
$11.5 million to developed technology acquired and $0.2 million to workforce.
These amounts were capitalized and are being amortized on a straight-line basis
over five and ten years, respectively, and such amortization is included

                                       13
<PAGE>

in cost of sales. For both fiscal 2000 and 1999, approximately $2.3 million was
amortized and included in cost of sales. See Note 17 of the Notes to
Consolidated Financial Statements for more information concerning the purchase
price allocation associated with the HP Acquisition. As an additional part of
the HP Acquisition, we assumed certain specific liabilities from HP related to
the acquired business, including certain warranty obligations. During fiscal
2000 and 1999, we incurred warranty expenses of approximately $0.4 million and
$0.7 million respectively, which were offset against specific liabilities
assumed in the acquisition.

  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.  Due to these competitive
pressures, we expect that average sales prices of our products will continue to
decrease.  We have introduced new products at lower sales prices.  These lower
sales prices have impacted the average sales prices of our products.  Future
pricing actions by us and our competitors may also adversely impact our gross
profit margins and profitability, which could also result in decreased liquidity
and adversely affect our business, financial condition and results of
operations.  See "Additional Factors That May Affect Future Results--We Must
Develop and Sell New Products in Order to Keep Up With Rapid Technological
Change."

 Operating Expenses

  Sales and marketing expenses consist primarily of sales commissions, salaries,
other expenses for sales and marketing personnel, travel expenses, charges for
customer demonstration units, reserves for credit losses and trade show
expenses.  Sales and marketing expenses increased by 40% to $21.2 million for
the year ended December 31, 2000 from $15.2 million for the year ended January
2, 2000.  As a percentage of sales, sales and marketing expenses were 4.7% and
5.2% for the years ended December 31, 2000 and January 2, 2000, respectively.
The increase in sales and marketing expenses in absolute dollars was primarily
attributable to increases in sales commission costs and increased staffing
levels associated with our increased revenues. For both fiscal 2000 and fiscal
1999, a total of approximately $0.8 million related to the customer list and
non-compete agreement acquired in the HP Acquisition has been amortized and
included in sales and marketing expenses.   See Note 17 of the Notes to
Consolidated Financial Statements for more information concerning the purchase
price allocation associated with the HP Acquisition.

  Research and development expenses include ongoing RF power amplifier design
and development expenses, as well as those design expenses associated with
reducing the cost and improving the manufacturability of existing RF power
amplifiers.  Current programs include PCS, cellular and third generation "3G"
products.  Research and development expenses increased by 56% to $41.1 million
for the year ended December 31, 2000 from $26.3 million for the year ended
January 2, 2000.  Research and development expenses as a percentage of sales for
the years ended December 31, 2000 and January 2, 2000 were 9.2% and 9.0%,
respectively.  The increase in actual research and development expenses was
primarily due to increased staffing and associated engineering costs related to
continued new product development and existing product enhancement efforts.

  General and administrative expenses consist primarily of salaries and other
expenses for management, finance, information systems, facilities maintenance
and human resources.  General and administrative expenses increased by 27% to
$15.3 million for the year ended December 31, 2000 from $12.1 million for the
year ended January 2, 2000.  General and administrative expenses as a percentage
of sales for the years ended December 31, 2000 and January 2, 2000 were 3.4% and
4.1%, respectively.  The increase in general and administrative expenses in
absolute dollars is primarily attributable to increased staffing costs
associated with supporting our increased revenues and personnel.

  As part of the purchase price allocation of the HP Acquisition, an allocation
of approximately $4.6 million, reflecting the value of goodwill acquired was
capitalized on our balance sheet. This amount is being amortized over ten years
and is included in general and administrative expenses.  For both the year ended
December 31, 2000 and the year ended January 2, 2000, approximately $0.5 million
was amortized and included in general and administrative expenses. For more
information concerning the purchase price allocation associated with the HP
Acquisition, see Note 17 of the Notes to Consolidated Financial Statements.

                                       14
<PAGE>

 Other Income

  The Company earned other income, net, of $6.1 million in fiscal 2000 compared
to $2.8 million for fiscal 1999.  Other income consists primarily of interest
income, net of any interest expense and net tenant rental income from a tenant
in the building we purchased in May 2000.   The increase in other income is
primarily due to increased net interest income as a result of higher average
cash balances during fiscal 2000 as compared to fiscal 1999 as well as the
addition of net tenant rental income of approximately $0.5 million.

 Provision (Benefit) for Income Taxes

  Our effective tax rate was 35.5% and 35.8% for the years ended December 31,
2000 and January 2, 2000, respectively.  The slight decrease in our effective
tax rate was due to tax benefits from international sales and research and
development tax credits.


Years ended January 2, 2000 and January 3, 1999

 Net Sales

  Sales increased by 192% to $292.5 million for the year ended January 2, 2000
from $100.2 million for the year ended January 3, 1999.  The increase in revenue
was primarily attributable to increased demand for our products.  Fiscal 1999
includes revenues from the sales of products acquired in the HP Acquisition,
which are only included in the results for the fourth quarter of fiscal 1998.
For the year ended January 2, 2000, total sales of products for networks on the
800-1000 MHz range (including both single and multi-carrier RF power amplifiers
and associated equipment) accounted for approximately 74% of revenues or $215.0
million, compared to approximately 77% or $77.3 million for the year ended
January 3, 1999.  Sales of RF power amplifiers and associated products for
networks in the 1800-2000 MHz range  (consisting mainly of single carrier RF
power amplifiers) accounted for approximately 26% of revenues or $76.8 million
for the year ended January 2, 2000, compared to approximately 20% or $19.6
million for the year ended January 2, 1999.  Sales of RF power amplifiers for
use in 400-450 MHz networks accounted for less than 1% of revenues or $0.7
million for the year ended January 2, 2000, compared to approximately 3% of
revenues or $3.1 million for the year ended January 3, 1999.   The reduction of
sales of these products is due to both our divestiture of certain of these
products and our strategic decision to no longer focus resources on this area.

  Total North American sales accounted for approximately 67% of revenues or
$195.3 million for the year ended January 2, 2000 compared with approximately
59% of revenue or $59.0 million for the year ended January 3, 1999.  Total
international sales (excluding North American sales), accounted for
approximately 33% of revenues or $97.3 million for the year ended January 2,
2000, compared with approximately 41% or $41.2 million for the year ended
January 3, 1999.  Total Asian sales accounted for approximately 21% of revenues
or $62.2 million for the year ended January 2, 2000 compared to approximately
30% of revenues or $30.2 million for the year ended January 3, 1999.  For fiscal
1999, total sales to Nortel accounted for approximately 41% of our revenues.  In
addition, sales to the following customers (in alphabetical order), Ericsson,
LG, Lucent and Samsung, each accounted for over 5% of revenues for fiscal 1999.
For fiscal 1998 four customers (in alphabetical order), Cingular Wireless, LG,
Nortel and Samsung each accounted for more than 10% of our sales.

 Gross Profit

  Gross profit margins for fiscal 1999 and 1998 were 28.1% and 34.1%,
respectively.  The decrease in gross margins compared to the prior year period
was a result of several factors, including increased labor and overhead costs
associated with the significant ramp-up of production personnel and facilities
at our Southern California manufacturing facility due to increased demand for
our products and the transition of the acquired Folsom manufacturing activities
to Southern California during fiscal 1999.  The final transition of the Folsom
manufacturing activities was completed in the fourth quarter of fiscal 1999.  In
addition, our sales during fiscal 1999 as compared to fiscal 1998 also included
a larger percentage of single carrier RF power amplifiers, which traditionally
carry lower gross margins than multi-carrier RF power amplifiers.

                                       15
<PAGE>

  For fiscal 1999 and 1998, approximately $2.3 million and $0.7 million,
respectively, related to developed technology and workforce assets acquired in
the HP Acquisition were amortized and included in cost of sales.  During fiscal
1999 and 1998, we incurred warranty expenses of approximately $0.7 million and
$0.2 million respectively, which were offset against specific liabilities
assumed in the HP Acquisition.  See Note 17 of the Notes to the Consolidated
Financial Statements for more information concerning the purchase price
allocation associated with the HP Acquisition.

 Operating Expenses

  Sales and marketing expenses increased by 59% to $15.2 million for the year
ended January 2, 2000 from $9.5 million for the year ended January 3, 1999.  As
a percentage of sales, sales and marketing expenses were 5.2% and 9.5% for the
years ended January 2, 2000 and January 3, 1999, respectively.  The increase in
sales and marketing expenses in absolute dollars was primarily attributable to
increases in sales commission costs and increased staffing levels associated
with our increased revenues. For fiscal 1999 and 1998, approximately $0.8
million and $0.2 million, respectively, related to a customer list and a non-
compete agreement acquired in the HP Acquisition were amortized and included in
sales and marketing expenses.   See Note 17 of the Notes to Consolidated
Financial Statements for more information concerning the purchase price
allocation associated with the HP Acquisition.

  Research and development programs included PCS, cellular and wireless local
loop products and 3G products.  Research and development expenses increased by
95% to $26.3 million for the year ended January 2, 2000 from $13.5 million for
the year ended January 3, 1999.  Research and development expenses as a
percentage of sales for the years ended January 2, 2000 and January 3, 1999 were
9.0% and 13.4%, respectively.  The increase in actual research and development
expenses was primarily due to increased staffing and associated engineering
costs related to continued new product development and existing product
enhancement efforts.

  General and administrative expenses increased by 109% to $12.1 million for the
year ended January 2, 2000 from $5.8 million for the year ended January 3, 1999.
General and administrative expenses as a percentage of sales for the years ended
January 2, 2000 and January 3, 1999 were 4.1% and 5.8%, respectively.  The
increase in general and administrative expenses in absolute dollars is primarily
attributable to increased staffing costs associated with supporting our
increased revenues and personnel.  In addition, as part of the purchase price
allocation of the HP Acquisition, an allocation of approximately $4.6 million,
reflecting the value of goodwill acquired, was capitalized on our balance sheet.
This amount is amortized over ten years and included in general and
administrative expenses.

  As part of the purchase price allocation of the HP Acquisition, our financial
statements for the year ended January 3, 1999 include the one-time charge of
$12.4 million for the write-off of acquired in-process research and development
expenses associated with the HP Acquisition.  The in-process research and
development expenses arose from new product projects that were under development
at the date of the acquisition and expected to eventually lead to new products
but had not yet established technological feasibility and for which no future
alternative use was identified.  The valuation of the in-process research and
development projects was based upon the discounted expected future net cash
flows of the products over the products expected life, reflecting the estimated
stage of completion of the projects and the estimate of the costs to complete
the projects.

 Other Income

  The Company earned other income, net, of $2.8 million in fiscal 1999 compared
to $2.3 million for fiscal 1998. Other income consists primarily of interest
income, net of any interest expense.   To fund a portion of the HP Acquisition,
we borrowed $25.0 million under a secured bank credit facility in October 1998.
We repaid this facility in full in March 1999.  We had total interest expense of
approximately $0.6 million for fiscal 1999 and fiscal 1998.

                                       16
<PAGE>

 Provision (Benefit) for Income Taxes

  Our effective tax rate was 35.8% and 36.5% for the years ended January 2, 2000
and January 3, 1999, respectively.  The decrease in our effective tax rate was
due to tax benefits from international sales and research and development tax
credits.


Liquidity and Capital Resources

  We have historically financed our operations primarily through a combination
of cash on hand, cash provided from operations, equipment lease financings,
available borrowings under bank lines of credit and both private and public
equity offerings.  As of December 31, 2000, we had working capital of $196.7
million, including $128.7 million in cash and cash equivalents as compared with
working capital of $118.6 million at January 2, 2000, which included $76.7
million in cash and cash equivalents.

  Our net accounts receivable increased to $80.0 million at December 31, 2000
from $47.5 million at January 2, 2000, consistent with the significant increase
in our revenues during fiscal 2000 as compared to fiscal 1999.  Net inventory
increased to $51.3 million at December 31, 2000, from $31.7 million at January
2, 2000.  Cash provided by operations was approximately $57.6 million in fiscal
2000, compared with cash provided by operations of $39.6 million in fiscal 1999
and cash used in operations of $8.7 million in fiscal 1998.   The increase in
cash provided by operations in fiscal 2000 as compared to fiscal 1999 is
primarily due to increased net income, as well as increased depreciation and
amortization, offset by cash flow effects due to changes in operating assets and
liabilities.

  On May 31, 2000, we paid $35.3 million for a 360,000 square foot facility
located on approximately 22 acres of land in Santa Ana, California, which we
plan to use as our Southern California headquarters and manufacturing facility.
We have begun the process of consolidating our Southern California manufacturing
operations, engineering, sales and headquarters facility to this facility and we
anticipate completing this process by the end of the first quarter of fiscal
2001. As of December 31, 2000 we had spent approximately $8.0 million on capital
improvements to this facility.  The majority of the remaining amount of capital
spending during fiscal 2000 represents spending on electronic test equipment
utilized in our manufacturing and research and development areas.  Total capital
spending for fiscal 2000 was approximately $84.1 million.  The majority of
spending during fiscal 1999 represented spending on electronic test equipment
utilized in our manufacturing and research and development areas.   In addition,
capital spending for fiscal 1999 included a total of $3.5 million in leasehold
improvement costs.  These leasehold improvements related to the expansion of our
manufacturing facility in Irvine, California, the relocation of our engineering
and sales departments to an adjacent leased building in Irvine, California, and
the relocation of our Northern California based engineering staff to a leased
facility in El Dorado Hills, California.

  As part of the HP Acquisition, we acquired HP's manufacturing and research and
development facility in Folsom, California.  We transferred production from the
Folsom manufacturing facility to our Irvine facility.  On July 15, 1999, we sold
the Folsom facility for approximately $8.4 million.  We received a consideration
of approximately $0.925 million in cash (before expenses) and an interest-free
note for $7.475 million due December 31, 1999.  The note was secured by the
land, land improvements and building.  In exchange for the interest-free note,
we entered into a rent-free lease with the buyer of the Folsom facility through
December 31, 1999.  In December 1999, the note receivable on the Folsom facility
was amended to extend the maturity date to January 27, 2000 and to apply an
annual interest rate of 8% beginning December 31, 1999.  The buyer of the Folsom
facility made an additional principal payment of $500,000 on December 30, 1999.
The remaining balance of $6.975 million was paid on January 27, 2000 along with
all accrued interest.

  On April 28, 1998 we purchased $2.5 million of 13.75% Senior Secured Bridge
Notes due April 28, 2000 (the "Notes") from Metawave Communications Corporation
("Metawave"), a supplier of "smart" antennas to the wireless communications
market and a customer, in a private offering.  The total amount raised in this
private offering was $29.0 million.  The Notes initially accrued interest at a
rate of 13.75% per annum and interest was payable semi-annually.  The Notes
contained provisions to increase the rate of interest during the life of the
Notes if the Notes were not repaid prior to maturity.  The Notes were secured by
certain assets of Metawave and were redeemed in full on April 28, 1999. Upon the
issuance of the Notes, we received related warrants to purchase

                                       17
<PAGE>

53,576 shares of Metawave Series D Preferred Stock at a price of $.01 per share.
We exercised these warrants in April 1999. These shares of Series D Preferred
Stock were converted into 51,420 shares of Metawave Common Stock upon Metawave's
initial public offering in May 2000. The market value of these securities is
approximately $0.5 million at December 31, 2000, and is included in prepaid
expenses and other current assets in the accompanying consolidated balance
sheets.

  Net cash provided by financing activities was $71.5 million for fiscal 2000,
compared with $39.9 million for fiscal 1999.  On August 23, 2000 we sold 1.5
million shares of our Common Stock at a price per share of $41.1875 to Deutsche
Banc Alex.Brown pursuant to a previously filed shelf registration.  Total net
proceeds after expenses were approximately $61.7 million. During the first
quarter of 1999 we received net proceeds of approximately $57.8 million from a
public offering of 6.9 million shares (adjusted to reflect a three-for-one stock
split on May 15, 2000) of our Common Stock. In addition, in March 1999 we
utilized approximately $22.8 million of the 1999 proceeds to retire all
outstanding bank debt associated with the HP Acquisition.

  On June 16, 2000 we entered into a revolving credit agreement with Comerica
Bank-California, dated as of May 26, 2000.  The credit facility provides for a
revolving line of credit up to a maximum principal amount outstanding at any one
time of $20 million (the "Revolving Commitment Amount"). We are required to pay
a commitment fee of 0.25% per annum on the unused portion of the Revolving
Commitment Amount.  The commitment fee is payable quarterly in arrears.  The
revolving credit facility allows for borrowings based either upon the bank's
prime rate (9.5% at December 31, 2000) or the bank's LIBOR rate plus an
applicable LIBOR Margin of 1.25% or 1.50%, based upon our debt leverage ratio.
There were no amounts outstanding as of December 31, 2000.  The revolving credit
facility terminates on May 31, 2001.  The revolving credit facility contains
certain standard affirmative and negative covenants, including limitations on
future indebtedness, restricted payments, transactions with affiliates, liens,
dividends, mergers, transfers of assets and leverage ratios.  We were in
compliance with all covenants contained in the revolving credit facility at
December 31, 2000.  The full $20 million of the Revolving Commitment Amount was
available to us at December 31, 2000.

  We had cash and cash equivalents of $128.7 million at December 31, 2000,
compared with $76.7 million at January 2, 2000.  We regularly review our cash
funding requirements and attempt to meet those requirements through a
combination of cash on hand, cash provided by operations, available borrowings
under any credit facilities, financing through equipment lease transactions, and
possible future public or private debt and/or equity offerings.  We invest our
excess cash in short-term, investment-grade money market instruments.

  We currently believe that our existing cash balances and funds expected to be
generated from operations will provide us with sufficient funds to finance our
operations for at least the next 12 months.   For fiscal 2001, we currently
anticipate capital spending on equipment to be in the range of $30 million to
$45 million.  In addition to property and equipment purchases, during the first
quarter of 2001 we plan to spend approximately $10 million to make capital
improvements to our new Southern California manufacturing and headquarters
facility.  Currently, we plan to fund these expenditures from our existing cash
balances.  However, in the past, we have utilized both operating and capital
lease financing for certain equipment purchases used in our manufacturing and
research and development operations and expect to continue to selectively do so
in the future.  We may in the future require additional funds to support our
working capital requirements or for other purposes, and may seek to raise such
additional funds through the sale of public or private equity and/or debt
financings or from other sources.  No assurance can be given that additional
financing will be available in the future or that if available, such financing
will be obtainable on terms favorable to us or our stockholders when we may
require it.


Disclosure About Foreign Currency Risk

  A significant portion of our revenues have been derived from international
sources, with our international customers accounting for approximately 21% of
fiscal 2000 net sales, 33% of our fiscal 1999 net sales and 41% of our fiscal
1998 net sales. We regularly pursue new customers in various domestic and
international locations where new deployments or upgrades to existing wireless
communication networks are planned.  Such international locations include Europe
and South America, where there has been instability in several of the region's
currencies, including the Brazilian Real.  Although we currently invoice all of
our customers in U.S. Dollars, changes in the

                                       18
<PAGE>

value of the U.S. Dollar versus the local currency in which our products are
sold, along with the economic and political conditions of such foreign
countries, could adversely affect our business, financial condition and results
of operations. In addition, 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. Although we currently believe that our
international customers have the ability to meet all of their obligations to us,
there can be no assurance that they will continue to be able meet such
obligations. We regularly monitor the credit worthiness of our international
customers and make credit decisions based on both prior sales experience with
such customers as well as current financial performance and overall economic
conditions. We may decide in the future to offer certain foreign customers
extended payment terms and/or sell certain products or services in the local
currency of such customers. If we sell products or services in a foreign
currency, our results of operations and gross margins may be affected by changes
in currency exchange rates.

  Several of the international markets in which we sell our products have
experienced significant weaknesses in their currencies, banking systems and
equity markets in the last few years.   Such weaknesses could negatively impact
demand for wireless services and thereby reduce demand for our products.  Such a
reduction in demand for our products could have a negative impact on our future
sales and gross margins.  Our foreign customers currently pay for our products
with U.S. Dollars.  The past strengthening of the U.S. Dollar as compared to the
Brazilian Real or the South Korean Won, effectively increased the cost of our
products by as much as 100% or more for our Brazilian and South Korean
customers.   Such a significant increase in the local currency based cost of
such products makes them less attractive to such customers.   Accordingly,
changes in exchange rates, and in particular a strengthening of the U.S. Dollar,
may negatively impact our future sales and gross margins.  For further
discussion of the risks associated with our international sales, see "Additional
Factors That May Affect Future Results--There are Many Risks Associated With
International Operations."


European Monetary Union

  Within Europe, the European Economic and Monetary Union (the "EMU") introduced
a new currency, the euro, on January 1, 1999.  The new currency is in response
to the EMU's policy of economic convergence to harmonize trade policy, eliminate
business costs associated with currency exchange and to promote the free flow of
capital, goods and services.

  On January 1, 1999, the participating countries adopted the euro as their
local currency, initially available for currency trading on currency exchanges
and non-cash transactions such as banking.  The existing local currencies, or
legacy currencies, will remain legal tender through January 1, 2002.  Beginning
on January 1, 2002, euro-denominated bills and coins will be issued for cash
transactions.  For a period of up to six months from this date, both legacy
currencies and the euro will be legal tender.  On or before July 1, 2002, the
participating countries will withdraw all legacy currencies and exclusively use
the euro.

  Currently all of our transactions are recorded in U.S. Dollars and we do not
currently anticipate future sales transactions being recorded in the euro.
Based on the lack of transactions recorded in the euro, we do not believe that
the euro will have a material effect on our financial position, results of
operations or cash flows.   In addition, we have not incurred and do not expect
to incur any significant costs from the continued implementation of the

                                       19
<PAGE>

euro, including any currency risk, which could materially affect our business,
financial condition and results of operations.

  We have not experienced any significant operational disruptions to date due to
the euro and do not currently expect the continued implementation of the euro to
cause any significant operational disruptions.


New Accounting Pronouncements

  Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities is effective for all fiscal years
beginning after June 15, 2000.  SFAS No. 133 as amended, establishes accounting
and reporting standards for derivative instruments including certain derivative
instruments embedded in other contracts and for hedging activities.  Under SFAS
No. 133, certain contracts that were not previously considered derivatives may
now meet the definition of a derivative.  We will adopt SFAS No. 133 effective
January 1, 2001 and we believe that such adoption will not have a material
impact on our consolidated financial statements.

  In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial
Statements, which we adopted in the fourth fiscal quarter of 2000.  Adoption of
SAB No. 101 did not have a material impact on the our consolidated financial
statements.

  In March 2000, the FASB issued FASB Interpretation No. 44, Accounting for
Certain Transactions Involving Stock Compensation, an Interpretation of
Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued
to Employees ("FIN 44"). FIN 44 clarifies the application of APB No. 25 for the
following: the definition of employee for purposes of applying APB No. 25; the
criteria for determining whether a plan qualifies as a non-compensatory plan;
the accounting consequence for various modifications to the terms of a
previously fixed stock option or award; and the accounting for an exchange of
stock compensation awards in a business combination. We adopted FIN 44 effective
July 1, 2000 and such adoption did not have a material impact on our
consolidated financial statements.


Additional Factors That May Affect Our Future Results

  Our future operating results may be impacted by a number of factors that could
cause our actual results to differ materially from those stated herein, which
reflect our current expectations.  These factors include the following:

  . the ability to add new customers to reduce our dependence on any one
    customer while maintaining our existing customers;
  . the ability to increase demand for our products from major wireless
    infrastructure OEMs;
  . the ability to produce both new and existing products which meet the quality
    standards of both our existing and potential new customers;
  . the ability to ramp-up production of new products in both a timely and cost
    effective manner;
  . industry specific factors, including slowdown in demand for wireless
    communications and RF power amplifiers;
  . the impact of any reduction in demand for our products;
  . the ability to timely develop and produce commercially viable products at
    competitive prices;
  . the ability to maintain a stable and reliable source of electricity to
    support our operations at a reasonable cost;
  . the ability to manage rapid change in demand for our products;
  . the availability and cost of components;
  . the ability to finance our activities and maintain our financial liquidity;
  . the ability of our products to operate and be compatible with various OEMs'
    base station equipment;
  . worldwide and regional economic downturns and unfavorable political
    conditions;

                                       20
<PAGE>

  . the ability to manage expense levels;
  . the ability to manage future product repairs; and
  . the ability to accurately anticipate customer demand.


 A Significant Amount of Our Revenues Comes from a Few Customers

  We sell most of our products to a small number of customers, and we expect
that this will continue.  We believe that our future success depends upon our
ability to broaden our customer base and maintain relationships with major
wireless original equipment manufacturers, or OEMs, such as Ericsson, LG,
Lucent, Motorola, Nokia, Nortel and Samsung as well as major operators of
wireless networks, such as AT&T Wireless, Cingular Wireless and Verizon
Wireless.

  Our dependence on a small number of major customers exposes us to numerous
risks, including:

  . slowdowns or delays in deployment of wireless networks that reduce customer
    demand for our products;
  . changes in customer forecasts and demand;
  . customers leveraging their buying power to change the terms of pricing,
    payment and product delivery schedules; and
  . direct competition should a customer decide to manufacture RF power
    amplifiers internally.

  For fiscal 2000, our largest customer was Nortel, which accounted for
approximately 47% of our net sales.  Also, for fiscal 2000, our next three
largest customers (in alphabetical order), Cingular Wireless, Ericsson and
Verizon Wireless, each accounted for more than 5% of our net sales.  The loss of
any one of these customers, or a significant loss, reduction or rescheduling of
orders from any of our customers, would have a material adverse effect on our
business, results of operations and financial condition.  In February 2001,
Nortel announced that it was lowering its expectations for wireless
infrastructure demand for the year 2001.  Any significant reduction in demand by
Nortel will have an adverse effect on our business, results of operations and
financial condition.

  The risks related to our customer concentration were magnified in 1998 due
certain of our customer's geographic concentration in South Korea which
experienced an economic and financial crisis during 1998.  For fiscal 1998, our
South Korean customers accounted for $30.2 million, or approximately 30% of
total net sales.  This was a significant drop from 1997, when our South Korean
customers accounted for $99.3 million, or approximately 83% of our total net
sales.  During fiscal 2000 our South Korean customers accounted for
approximately 8% of total sales or $34.1 million and in fiscal 1999 they
accounted for approximately 21% of our total net sales or $62.2 million.

  We believe that continued purchases of our products by OEMs is dependent upon
many factors, including the OEMs' view of utilizing third party suppliers of RF
power amplifiers.  During fiscal 2000, Ericsson purchased Microwave Power
Devices, one of our competitors.  Any shift in demand by an OEM away from
utilizing third party suppliers of RF amplifiers could have a negative impact on
our business, results of operations and financial condition.  Additionally, OEM
purchases are impacted by their current view of wireless infrastructure
deployments and could be significantly reduced due to any delays of such
deployments.  A number of factors may cause delays in wireless infrastructure
deployments, including the following factors:

  . economic or political problems in the wireless operator's operating region;
  . delays in government approvals required for system deployment;
  . higher than anticipated network infrastructure costs;
  . technical delays in the development of new wireless protocols, such as 3G,
    and;
  . reduced subscriber demand for wireless services.

  In addition, from time to time OEMs may purchase products from us on a large
quantity basis over a short period of time which may cause demand for our
products to change rapidly.  Due to these and other possible

                                       21
<PAGE>

uncertainties associated with wireless infrastructure deployments and OEMs'
purchasing strategies, we may experience significant fluctuations in demand from
our OEM customers. Such fluctuations could cause a significant increase in
demand which could exceed our production capacity and could negatively impact
our ability to meet customers' demands as well as could potentially impact
product quality. Alternatively, such fluctuations could cause a significant
reduction in revenues which could have a material adverse effect on our
business, results of operations and financial condition. We cannot guarantee
that a major customer will not reduce, delay or eliminate purchases from us,
which could have a material adverse effect on our business, results of
operations and financial condition.

 Our Quarterly Results Fluctuate Significantly

  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, any of which could have a material adverse
effect on our business, results of operations and financial condition.  Factors
that could cause our results of operations to vary include the following:

  . variations in the timing, cancellation, or rescheduling of customer orders
    and shipments;
  . variations in manufacturing costs, capacities and efficiencies;
  . capacity and production constraints, including constraints associated with
    single-source component suppliers;
  . delays in qualification by customers of new products or redesigns or delays
    in qualification of new production facilities;
  . product failures and associated in-field service support costs;
  . cancellations or reductions of customer orders and shipments due to economic
    slowdowns in the  customers' operating regions;
  . cancellations or rescheduling of customer orders and shipments due to excess
    inventory levels caused by changes in demand or deployment schedules at the
    customer;
  . competitive factors, including pricing, availability and demand for
    competing amplification products;
  . warranty expenses;
  . the availability and cost of components;
  . the timing, availability and sale of new products by us or our competitors;
  . changes in the mix of products having differing gross margins;
  . changes in average sales prices;
  . long sales cycles associated with our products;
  . variations in product development and other operating expenses;
  . discounts given to certain customers for large volume purchases;
  . interruptions in the supply of electricity and significant increases in the
    cost of electricity; and
  . high fixed expenses that increase operating expenses, especially during a
    quarter with a sales shortfall.

  In addition, while we periodically receive order forecasts from our major
customers, such customers generally have no binding obligation to purchase the
forecasted amounts.  See "--A Significant Amount of Our Revenues Comes From a
Few Customers." 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 in the past adversely affected our quarterly results of
operations.  We cannot guarantee that our quarterly results of operations will
not be similarly adversely affected in the future.

  Our sales to customers are usually made under purchase orders with short
delivery requirements.  While we receive periodic order forecasts, customers
generally have no obligation to purchase the forecasted amounts and may cancel
orders, change delivery schedules or change the mix of products ordered with
minimal notice.  In spite of these limitations, we maintain significant work-in-
progress and raw materials inventory as well as increased levels of technical
production staff to meet estimated order forecasts.  If customers purchase less
than the forecasted amounts or cancel or delay existing purchase orders, we will
have higher levels of inventory that face a greater risk

                                       22
<PAGE>

of obsolescence and excess production staff. If our customers desire to purchase
products in excess of the forecasted amounts or in a different product mix, we
may lack the inventory or manufacturing capacity to fill their orders. Either
situation could have a material adverse effect upon our business, financial
condition and results of operations and future business with such customers.

  Due to these factors, our past results are not reliable indicators of our
future performance.  Current operating profitability may fall, and future
revenues and operating results may not meet the expectations of public market
analysts and investors.  In either case, the price of our Common Stock could be
materially adversely affected.  See "--Our Stock Price Has Been and May Continue
to Be Volatile."

 Our Average Sales Prices are Declining

  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 placing increasing price
pressure on wireless infrastructure manufacturers, which in turn has resulted in
downward pricing pressure on our products.  Competition among third-party
suppliers also has increased the downward price pressure on our products.  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.  In
addition, average sales prices are affected by price discounts negotiated 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 product improvements, our gross margins will continue to decline.

  Sales of single carrier RF power amplifiers have been subject to intense price
competition and historically have carried lower gross profit margins than our
multi-carrier RF power amplifier products.  If we cannot reduce manufacturing
costs on our single carrier RF power amplifiers and such RF power amplifiers
continue to account for a significant percentage of our net sales, our overall
gross profit margins will fall.  In addition, we currently expect that 3G multi-
carrier RF power amplifiers will have lower gross margins than our 2G multi-
carrier products.  If we are unable to continue to reduce our manufacturing
costs on all of our products, our gross margins will decline.

 Our Failure to Manage Future Growth Could Have Adverse Effects

  Our ability to compete effectively and manage future growth depends on our
ability to:

  . effectively expand, train and manage our work force, particularly in
    response to fluctuations in demand for various products;
  . manage production and inventory levels to meet product demand and new
    product introductions;
  . manage and improve production quality;
  . expand both the range of customers and the geographic scope of our customer
    base;
  . reduce product costs; and
  . improve financial and management controls, reporting systems and procedures.

  Any failure to manage growth effectively could have a material adverse effect
on our business, financial condition and results of operations.

  Our Facilities are Located in the State of California Which is Experiencing an
Electricity Shortage

  The two largest investor owned electric utility companies in California,
Pacific Gas & Electric and Southern California Edison, have been experiencing
electricity generation shortages due to the collapse of California's
deregulation strategy.  The inability of these companies to continue purchasing
electricity has resulted in rolling blackouts in certain parts of the state.
Our Southern California operation is wholly dependent on Southern California
Edison and our Northern California engineering center is wholly dependent upon
Pacific Gas and Electric.  As of February 28, 2001 we have not experienced any
interruption in electrical service to our facilities.

                                       23
<PAGE>

We currently do not have backup power generators or alternate sources of power
in the extent of a blackout and our current insurance does not provide coverage
for any damages we or our customers may suffer as a result of interruptions of
power supply. We are not able to guarantee that we will not experience any
interruptions in electrical service to our facilities in the future. The loss of
electrical service would cause a temporary shutdown of our operations resulting
in lost production and may cause us to re-calibrate our production equipment,
resulting in potentially significant unanticipated costs. In addition, many of
our suppliers are located in California and could be similarly affected.
Frequent and continuing shutdowns of our operations and those of our suppliers
could cause us to be unable to manufacture the products required by our
customers in a timely manner. Shipments to our customers could be delayed,
resulting in the delay or loss of product revenues. Such delay or loss of
product revenues could have a material adverse effect on our business, financial
condition and results of operations.

  Furthermore, the deregulation of the energy industry instituted in 1996 by the
California government has caused power prices to increase.  Under deregulation,
utilities were encouraged to sell their plants, which traditionally had produced
most of California's power, to independent energy companies that were expected
to compete aggressively on price.   Instead, due in part to a shortage of
supply, wholesale prices have skyrocketed over the past year.  If wholesale
prices continue to increase and these increases are passed on to end users, the
operating expenses associated with our facilities will likely increase, which
could harm our results of operations.

  We Recently Acquired a New Facility and are Currently Consolidating our
Manufacturing Operations, Engineering, Sales and Headquarters Facility to This
New Location

  On May 31, 2000 we acquired a 360,000 square foot facility located in Santa
Ana, California.  Approximately 85,000 square feet are being sublet to an
unrelated third party, with the remaining 275,000 square feet available for us.
This facility has required substantial re-design and building improvements
before we can relocate our operations to it.  We began the capital improvements
to this facility and the initial transition of certain manufacturing operations
to this new facility in fiscal 2000, and we currently expect to have our
operations relocated to this facility by the end of the first quarter of 2001.
Moving our manufacturing operations to a new facility entails numerous risks to
our business operations, including the risk that:

  .  we will not complete the moves on schedule;
  .  we will not obtain requalification of our production lines in a timely
     manner from our customers who require production line qualifications;
  .  the costs to re-design and improve the facility will escalate and exceed
     our current expectations;
  .  the new facility will not function properly and that we will not achieve
     the desired benefits from consolidating our operations at one facility; and
  .  the move will result in manufacturing downtime, resulting in the inability
     to produce products in the time frame demanded by our customers.

   If any of these or other risks occur, they could have a material adverse
affect on our business, financial condition and results of operations.

 Our Success is Tied to the Growth of the Wireless Services Market

  Almost all of our revenues come from the sale of RF power amplifiers for
wireless communications networks.  Our future success depends to a considerable
extent upon the continued growth and increased availability of wireless
communications services.  Wireless communications services may not continue to
grow and create demand for our products.  We believe that continued growth in
the use of wireless communications services depends, in part, on lowering the
cost per subscriber by reducing the costs of the infrastructure capital
equipment and thereby enabling reductions in wireless service pricing.
Although FCC regulations require local phone companies to reduce the rates
charged to wireless carriers for connection to their wireline networks, wireless
service rates will probably remain higher than rates charged by traditional
wireline companies.

                                       24
<PAGE>

  The expansion of wireless communications services depends on developed
countries, such as the United States, continuing to allow deployment of new
networks and upgrades to existing networks, and on less developed countries
deploying wireless communications networks.

  Our performance could be adversely affected by any of the following risks:

  . failure of local governments or foreign countries to allow construction of
    new wireless communications systems;
  . lack of demand for new wireless services;
  . termination or delays by local governments or foreign countries of existing
    construction of wireless communications systems;
  . imposition of moratoriums by local governments or foreign countries on
    building new base stations for existing wireless communications systems; and
  . foreign authorities may disfavor wireless communications systems because of
    environmental concerns, political unrest, economic downturns, favorable
    prices for other communications services or delays in implementing wireless
    communications systems.

 We Depend on Single Sources for Key Components

  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 also purchase certain customized components from single
sources.  We have experienced, and expect to continue to experience, shortages
of single-sourced components.  Shortages have compelled us to adjust our product
designs and production schedules.  If single-sourced components become
unavailable in sufficient quantities or available only on unsatisfactory terms,
we would be required to purchase comparable components from other sources and
"retune" our products to function with the replacement components, or we may be
required to redesign our products to use other components, either of which could
delay production and delivery of our products.  In addition, our reliance on
certain single-sourced components exposes us to quality control issues if such
suppliers experience a failure in their production process.  A failure in a
single-sourced component could force us to repair or replace a product utilizing
replacement components.  Such a requirement could have a material adverse effect
on our business, results of operations and financial condition.  In addition, if
we can not obtain comparable replacements or effectively retune or redesign our
products, there could be a material adverse effect on our business, results of
operations and financial condition.

  Due to our reliance on certain single-sourced customized components, if we
experience an abrupt reduction in customer demand, we may end up with excess
inventories of such components due to the nature of the volume purchasing
agreements that we enter to obtain component cost reductions.  If we are unable
to utilize such components in a timely manner and are unable to sell such
components due to their customized nature, the resulting negative impact on our
liquidity and resulting increased inventory levels could have a material adverse
effect on our business, results of operations and financial condition.

 The Market in Which We Operate is Highly Competitive

  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.  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;

                                       25
<PAGE>

  . time-to-market delivery capabilities; and
  . compliance with industry standards.

  While we believe that we compete favorably with respect to these
characteristics at present, this may change.  If we fail to address our
competitive challenges, there could be a material adverse effect on our
business, financial condition and results of operations.

  Our current competitors include AML Communications, Inc., and Spectrian
Corporation, in addition to a number of privately held companies throughout the
world, subsidiaries of certain multinational corporations and the RF power
amplifier manufacturing operations of the leading wireless infrastructure
manufacturers such as Ericsson, Lucent, Motorola, Nokia and Samsung.  Some
competitors have significantly greater financial, technical, manufacturing,
sales, marketing and other resources than we do and have achieved greater name
recognition for their products and technologies than we have.  We may not be
able to successfully increase our market penetration or our overall share of the
RF power amplifier market.  Our results of operations could be adversely
impacted if we are unable to effectively increase our share of the RF power
amplifier market.

  Our future success depends largely upon the rate at which wireless
infrastructure manufacturers incorporate our products into their systems.  A
substantial portion of the present worldwide production of RF power amplifiers
is captive within the internal manufacturing operations of leading wireless
infrastructure manufacturers such as Ericsson, Lucent, Motorola, Nokia and
Samsung.  These companies regularly evaluate whether to manufacture their own RF
power amplifiers rather than purchase them from us.  During 2000, Ericsson
purchased Microwave Power Devices, one of our competitors.  We cannot predict
the ultimate impact this purchase will have on our business with Ericsson.  Any
potential reduction in our business with Ericsson could have a negative impact
on our business, financial condition and results of operations.  In addition,
various  companies could also directly compete with us by selling their RF power
amplifiers to other manufacturers and operators, including our customers.  If we
are not successful in increasing the use of our products by the leading wireless
infrastructure manufacturers, there would be a material adverse effect on our
business, financial condition and results of operations.

 We Must Develop and Sell New Products in Order to Keep Up With Rapid
 Technological Change

  The markets in which we compete are characterized by:

  . rapidly changing technology;
  . constant pricing pressure;
  . evolving industry standards and communications protocols; and
  . frequent improvements in products and services.

  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 RF power
amplifiers for wireless communications networks.  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 third generation networks as well as
development projects for products requested by our customers.  In spite of our
efforts, the deployment of a wireless network may be delayed which could cause a
particular research or development effort to not generate a revenue producing
product. Additionally, the new products we develop may not achieve market
acceptance or may not be manufacturable at competitive prices in sufficient
volumes.  We cannot guarantee the success of our research and development
efforts.

  We also continue efforts to improve our existing cellular and PCS lines of RF
power amplifier products.  Any delays in the shipment of these products may
cause customer dissatisfaction and delay or loss of product revenues.  In
addition, it is possible that a significant number of development projects will
not result in manufacturable new products or product improvements.

                                       26
<PAGE>

  If we fail to develop new products or improve existing products in a timely
manner, there will be a material adverse effect on our business, financial
condition and results of operations.

 We May Fail to Develop Products that are Sufficiently Manufacturable or of
 Adequate Quality and Reliability

  Manufacturing our products is a complex process and requires significant time
and expertise to meet customers' specifications.  Successful manufacturing is
substantially dependent upon our ability to tune these products to meet
specifications in an efficient manner.  In this regard, we depend on our staff
of trained technicians.  If we cannot design our products to minimize the manual
tuning process or if we are unable to attract additional trained technicians, or
we lose a number of our trained technicians, it would have a material adverse
effect on our business, financial condition and results of operations.

  We have had quality problems with our products in the past and may have
similar problems in the future.  We have replaced components in some products in
accordance with our product warranties.  We believe that our overall
relationship with our customers is good and that they consider our products to
be of good quality.  We also believe that our customers will demand increasingly
stringent product performance and reliability.  We cannot provide any assurance
that our product designs will remain successful or that they will keep pace with
technological developments, evolving industry standards and new communications
protocols.  We may fail to adequately improve product quality and meet the
quality standards of our customers, which could cause us to lose such customers.
Design problems could 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, high quality RF
power amplifiers and have stringent quality control standards.  See "--Many
Wireless Infrastructure Manufacturers have Internal RF Power Amplifier
Production Capabilities."

 We Must Retain Key Executives and Personnel

  We need to hire and retain highly qualified technical, marketing and
managerial personnel.  Competition for personnel, particularly qualified
engineers, is intense, and the loss of a significant number of such persons, 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, results of
operations and financial condition.  The departure of any of our management and
technical personnel, the breach of their confidentiality and non-disclosure
obligations to Powerwave 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 and our ability to market our existing
products and to develop new products.  We do not have non-compete agreements
with our employees who are employed on an at-will-basis.  Therefore, employees
may leave us and go to work for a competitor.  We have had employees leave us
and go to work for competitors.  While we believe that we have adequately
protected our proprietary technology, and we will take all legal measures to
protect it, the use of our processes by a competitor could have a material
adverse effect on our business, financial condition and results of operations.

 There are Many Risks Associated With International Operations

  For fiscal years 2000, 1999 and 1998, international revenues (excluding North
American sales) accounted for approximately 21%, 33% and 41% respectively, of
our net sales.  We currently expect that international revenues will continue to
account for a significant percentage of our revenues for the foreseeable future.
Therefore, the following risks associated with international operations could
have a material adverse effect on our performance:

  . compliance with multiple and potentially conflicting regulations, including
    export requirements, tariffs, import duties and other barriers, and health
    and safety requirements;
  . differences in intellectual property protections;
  . difficulties in staffing and managing foreign operations;

                                       27
<PAGE>

  . longer accounts receivable collection cycles;
  . currency fluctuations;
  . economic instability, including inflation and interest rate fluctuations,
    such as those previously seen in South Korea and Brazil;
  . competition from foreign based suppliers;
  . restrictions against the repatriation of earnings from a foreign country;
  . overlapping or differing tax structures; and
  . political or civil turmoil.

  We have traditionally invoiced all of our foreign sales in U.S. Dollars.
Accordingly, we do not currently engage in foreign currency hedging
transactions.  However, as we continue to expand our international operations,
we may be paid in foreign currencies and, therefore, would become exposed to
possible losses in foreign currency transactions.  Since we sell our products in
many countries, when the U.S. Dollar becomes more expensive relative to the
currency of our foreign customers, the price of our products in those countries
rises and our sales into those countries may fall.  This happened to us in South
Korea during 1998.  In addition, as we sell our products into foreign countries,
our products can become subject to tariffs and import duties which raise the
overall price of our products to such a level that our products are no longer
competitive in price to locally based suppliers.  If any of the above risks
actually occurs, there may be a material adverse effect on our business,
financial condition and results of operations.

 The Sales Cycle for Our Products is Lengthy

  The sales cycle associated with our products is typically lengthy, often
lasting from six to eighteen months.  Our customers normally conduct significant
technical evaluations of our products and our competitors' products before
making purchase commitments.  Our OEM customers typically require extensive
technical qualification of our products before they are integrated into each
OEM's products.  This qualification process involves a significant investment of
time and resources from us and the OEMs to ensure that our product designs are
fully qualified to perform with each OEM's equipment.  Also, individual wireless
network operators can subject our products to field and evaluation trials, which
can last anywhere from one to nine months, before making a purchase.  The
qualification and evaluation process and the customer field trials may delay the
shipment of sales forecasted for a specific customer for a particular quarter
and our operating results for that quarter could be materially adversely
affected.

 Many Wireless Infrastructure Manufacturers have Internal RF Power Amplifier
 Production Capabilities

  Many of the leading wireless infrastructure equipment manufacturers internally
manufacture their own RF power amplifiers.  We believe that our existing
customers continuously evaluate whether to manufacture their own RF power
amplifiers.  Certain of our customers regularly produce RF power amplifiers in
an attempt to replace products manufactured by us.  We believe that this
practice will continue.  Recently, Ericsson, one of our OEM customers, purchased
Microwave Power Devices, Inc., one of our competitors.  In the event that our
customers manufacture their own RF power amplifiers, such customers could reduce
or eliminate their purchases of our products.  We cannot guarantee that our
current customers will continue to rely, or expand their reliance, on us as an
external source of supply for their RF power amplifiers.

  Wireless infrastructure equipment manufacturers with internal manufacturing
capabilities could also sell RF power amplifiers externally to other
manufacturers, thereby competing directly with us.  In addition, even if we are
successful in selling our products to these customers, we believe that such
customers will demand price and other concessions based on their ability to
manufacture RF power amplifiers internally.  If, for any reason, our major
customers decide to produce their RF power amplifiers internally or through
joint ventures with other competitors, or require us to participate in joint
venture manufacturing with them, our business, results of operations and
financial condition could be materially adversely affected.

                                       28
<PAGE>

 Protection of Our Intellectual Property is Limited; Risk of Third-Party Claims
 of Infringement

  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
international patents for various aspects of our technology.  We have been
granted a total of 10 U.S. patents, and we currently have 15 separate U.S.
patent applications filed.  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 and 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 do not have non-compete agreements with our employees who are employed on
an "at-will" basis.  Therefore, employees may leave us and go to work for a
competitor.  We have had employees leave us and go to work for competitors.
While we believe that we have adequately protected our proprietary technology,
and we will take all legal measures to protect it, 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 the rights of others.  We may fail to do so.  In
addition, the laws of certain countries in which our products are or may be sold
may not protect our products and intellectual property rights to the same extent
as the laws of the United States.

  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
companies in our industry may face more frequent infringement claims.  Although
there are no pending or threatened intellectual property lawsuits against us, we
may face litigation or infringement claims in the future.  Such claims could
result in substantial costs 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.  Although we may seek licenses from third parties
covering intellectual property that we are allegedly infringing, we cannot
guarantee that any such licenses could be obtained on acceptable terms, if at
all.

  Certain of our customers and other wireless communications infrastructure
equipment manufacturers may decide to protect their intellectual property by
deciding not to purchase RF power amplifiers from external sources.  The
appearance of a close working relationship with a particular customer may
adversely affect our ability to establish or maintain a relationship with, or
sell products to, competitors of that particular customer.  The failure of our
major customers to purchase products from us due to our relationship with other
customers could have a material adverse effect on our business, financial
condition and results of operations.

 Actual or Alleged Defects in Our Products May Create Liability to Those
 Claiming Injury

  Any of the following could have a material adverse effect on our business,
financial condition and results of operations:

  . if systems or devices relying on or incorporating our products are
    determined or alleged to create a health risk, causing us to be named as a
    defendant, and held liable, in a product liability lawsuit;
  . delays or prohibitions on the installation of wireless communications
    networks due to alleged health or environmental risks; and
  . our inability to maintain insurance at an acceptable cost or to otherwise
    protect against potential product liability lawsuits.

                                       29
<PAGE>

 Government Regulation of the Communications Industry

  The products that we manufacture are regulated.  We must obtain regulatory
approvals to manufacture and sell our products and our customers must obtain
approvals to operate our products.  The FCC has adopted regulations that impose
stringent RF emissions standards on the communications industry.  These
regulations may require that we alter the manner in which radio signals are
transmitted or otherwise alter the equipment transmitting such signals.  We are
also subject to regulatory requirements in international markets where prominent
local competitors may have the ability to influence regulations in situations
where we do not.

  The enactment by governments of new laws or regulations or a change in the
interpretation of existing regulations could adversely affect the market for our
products.  Deregulation of international communications industries along with RF
spectrum allocations made by the FCC have increased the potential demand for our
products.  We cannot guarantee that the trend toward deregulation and current
regulatory developments favorable to the promotion of new and expanded wireless
services will continue or that other future regulatory changes will have a
positive impact on us.  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.  In the past, the delays inherent in this governmental
approval process have caused, and may in the future cause, the cancellation,
postponement or rescheduling of the installation of communications systems by
our customers.  These delays could have a material adverse effect on our
business, results of operations and financial condition.

 Our Stock Price Has Been and May Continue to Be Volatile

  The price of our Common Stock has exhibited high levels of volatility with
significant volume and price fluctuations, which makes our Common Stock not
suitable for all investors.  In addition, the stock market has from time to time
experienced significant price and volume fluctuations.  The fluctuations in the
stock market are often unrelated to the operating performance of particular
companies, and the market prices for securities of technology companies have
been especially volatile.  These broad market fluctuations may adversely affect
the market price of our Common Stock.  Our stock price may be affected by the
factors discussed above as well as:

  . fluctuations in our results of operations or the operations of our
    competitors;
  . failure of such results of operations to meet the expectations of stock
    market analysts and investors;
  . reductions in demand or expectations of future demand by our customers;
  . delays or postponement of wireless infrastructure deployments, including new
    3G deployments;
  . changes in the political or economic outlook of the markets into which we
    sell our products;
  . changes in stock market analyst recommendations regarding us, our
    competitors or our customers;
  . the timing and announcements of technological innovations or new products by
    us or our competitors;
  . changes in the wireless communications industry; and
  . general market conditions.

 Risk of Litigation

  We are subject to various legal proceedings from time to time as part of our
business. In September 1999, a former customer filed a lawsuit against us.  The
lawsuit alleged, among other things, that we sold defective LMR products to this
customer from 1994 to 1998. We denied these allegations of wrongdoing.  In
December 2000, the parties settled this lawsuit.  The settlement did not have a
material adverse effect on the Company.

  Powerwave is not currently party to any other legal proceedings, the adverse
outcome of which, individually or in the aggregate, we believe would have a
material adverse effect on our business, financial condition and results of
operations.  In addition, any potential litigation, regardless of its merits,
could result in substantial costs to us and divert management's attention from
our operations.  Such diversion could have an adverse impact on our business,
results of operations and financial condition.

                                       30
<PAGE>

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    Our financial instruments include cash and cash equivalents and long-term
debt.  At December 31, 2000, the carrying values of our financial instruments
approximated their fair values based on current market prices and rates.

    It is our current policy to not enter into derivative financial instruments.
We do not currently have any significant direct foreign currency exposure since
aside from operating costs of our South Korean repair operation, we do not
transact business in foreign currencies.  Due to this, we do not have any
significant direct foreign currency exposure at December 31, 2000.

    We are exposed to a number of market risks in the ordinary course of
business. These risks, which include interest rate risk, foreign currency
exchange risk and commodity price risk, arise in the normal course of business
rather than from trading. We have examined our exposures to these risks and
concluded that none of our exposures in these areas is material to fair values,
cash flows or earnings. We regularly review these risks to determine if we
should enter into active strategies, such as hedging, to help manage the risks.
At the present time, we do not have any hedging programs in place and we are not
trading in any financial or derivative instruments.

    We currently do not have any material debt outstanding, so we do not have
interest rate risk from a liability perspective.  We do have a significant
amount of cash and short-term investments with maturities less than three
months.  This cash portfolio exposes us to interest rate risk as short-term
investment rates can be volatile.  Given the short-term maturity structure of
our investment portfolio, and the high-grade investment quality of our
portfolio, we believe that we are not subject to principal fluctuations and the
effective interest rate of our portfolio tracks closely to various short-term
money market interest rate benchmarks.

    Our international sales expose us to foreign currency risk in the ordinary
course of our business.  Please review our  "Disclosure About Foreign Currency
Risk" in this Form 10-K for a more detailed description of the various risks
involved in our international sales.

    We require significant quantities of RF transistors or semiconductors, and
various metals for use in the manufacture of our products.  We therefore are
exposed to certain commodity price risk associated with variations in the market
prices for these electronic components.  We attempt to manage this risk by
entering into supply agreements with various suppliers of these components.
These supply agreements are not long-term supply agreements so if we become
subject to a significant increase in the price of one of these components, we
would likely be forced to pay such higher prices and we may not be able to pass
such costs onto our customers.  In such an event, our business, results of
operations and financial condition could be adversely affected.   In addition,
we require specialized electronic test equipment, which is utilized in both the
design and manufacture of our products.  Such 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 such 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.  Such delays and any potential additional costs
could adversely effect our business, results of operations and financial
condition.

                                       31
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

  Index to Financial Statements/Schedule:

<TABLE>
<CAPTION>

Consolidated Financial Statements                                                                 Page
---------------------------------                                                                 ----
<S>                                                                                               <C>
Independent Auditors' Report...................................................................... 33
Consolidated Balance Sheets--December 31, 2000 and January 2, 2000................................ 34
Consolidated Statements of Operations--Three years ended December 31, 2000........................ 35
Consolidated Statements of Comprehensive Operations--Three years ended December 31, 2000.......... 36
Consolidated Statements of Shareholders' Equity--Three years ended December 31, 2000.............. 37
Consolidated Statements of Cash Flows--Three years ended December 31, 2000........................ 38
Notes to Consolidated Financial Statements........................................................ 40

Financial Statement Schedule
Schedule II--Valuation and Qualifying Accounts--Three years ended December 31, 2000............... 63
</TABLE>

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

  None.

                                       32
<PAGE>

                          INDEPENDENT AUDITORS' REPORT


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 December 31, 2000 and
January 2, 2000, and the related consolidated statements of operations,
comprehensive operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 2000.  Our audits also included the
financial statement schedule listed in Item 8.  These financial statements and
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.

  We conducted our audits in accordance with auditing standards generally
accepted in the United States of America.  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 as of December 31, 2000 and January 2, 2000, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America.  Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.


DELOITTE & TOUCHE LLP

Costa Mesa, California
January 23, 2001

                                       33
<PAGE>

                          POWERWAVE TECHNOLOGIES, INC.
                          CONSOLIDATED BALANCE SHEETS
                     (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                              December 31,    January 2,
                                                                                  2000           2000
                                                                              ------------    ----------
<S>                                                                           <C>             <C>
                                     ASSETS
Current Assets:
  Cash and cash equivalents................................................     $128,733       $ 76,671
  Accounts receivable, net of allowance for doubtful accounts of $3,021 and
   $2,988 at December 31, 2000 and January 2, 2000, respectively...........       80,006         47,476

  Inventories, net.........................................................       51,275         31,696
  Prepaid expenses and other current assets................................        5,387          2,449
  Notes receivable.........................................................           26          7,045
  Deferred tax assets......................................................        8,553          5,888
                                                                                --------       --------
     Total current assets..................................................      273,980        171,225

Property and equipment.....................................................      128,638         45,286
Less accumulated depreciation and amortization.............................      (26,980)       (12,354)
                                                                                --------       --------
  Property and equipment, net..............................................      101,658         32,932
                                                                                --------       --------
Intangible assets, net.....................................................       10,777         14,344
Deferred tax assets........................................................        5,436          4,507
Other non-current assets...................................................        1,946             30
                                                                                --------       --------
     Total assets..........................................................     $393,797       $223,038
                                                                                ========       ========

                    LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Accounts payable.........................................................     $ 50,829       $ 30,128
  Accrued expenses and other current liabilities...........................       24,023         19,399
  Current portion of long-term debt........................................           96            125
  Income taxes payable.....................................................        2,299          3,007
                                                                                --------       --------
     Total current liabilities.............................................       77,247         52,659

Long-term debt, net of current portion.....................................           42             --
Other non-current liabilities..............................................          236            600
                                                                                --------       --------
     Total liabilities.....................................................       77,525         53,259
                                                                                --------       --------

Commitments and contingencies (Note 12)....................................           --             --

Shareholders' Equity:
  Preferred Stock, $.0001 par value, 5,000 shares authorized and no shares
    issued and outstanding.................................................           --             --
  Common Stock, $.0001 par value, 135,000 shares authorized, 63,509 shares
    issued and outstanding at December 31, 2000 and  60,489 shares issued
    and outstanding at January 2, 2000.....................................      221,349        120,785
  Accumulated other comprehensive income...................................          276             --
  Retained earnings........................................................       94,647         48,994
                                                                                --------       --------
     Total shareholders' equity............................................      316,272        169,779
                                                                                --------       --------
     Total liabilities and shareholders' equity............................     $393,797       $223,038
                                                                                ========       ========
</TABLE>

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

                                       34
<PAGE>

                          POWERWAVE TECHNOLOGIES, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (in thousands, except per share data)
<TABLE>
<CAPTION>
                                                           Years Ended
                                             --------------------------------------
                                             December 31,   January 2,   January 3,
                                                 2000          2000         1999
                                             ------------   ----------   ----------
<S>                                          <C>            <C>          <C>

Net sales...................................   $447,422      $292,547     $100,231
Cost of sales...............................    305,095       210,305       66,056
                                               --------      --------     --------
Gross profit................................    142,327        82,242       34,175
Operating expenses:
  Sales and marketing.......................     21,217        15,179        9,533
  Research and development..................     41,054        26,250       13,472
  General and administrative................     15,339        12,088        5,771
  In-process research and development.......         --            --       12,400
                                               --------      --------     --------
     Total operating expenses...............     77,610        53,517       41,176
                                               --------      --------     --------
Operating income (loss).....................     64,717        28,725       (7,001)
Other income, net...........................      6,063         2,846        2,330
                                               --------      --------     --------
Income (loss) before income taxes...........     70,780        31,571       (4,671)
Provision (benefit) for income taxes........     25,127        11,306       (1,705)
                                               --------      --------     --------
Net income (loss)...........................   $ 45,653      $ 20,265     $ (2,966)
                                               ========      ========     ========

Basic earnings (loss) per share.............    $   0.75     $   0.34     $  (0.06)
                                                ========     ========     ========
Diluted earnings (loss) per share...........    $   0.71     $   0.33     $  (0.06)
                                                ========     ========     ========
Basic weighted average common shares........      61,953       58,480       51,534
                                                ========     ========     ========
Diluted weighted average common shares......      65,313       60,671       51,534
                                                ========     ========     ========
</TABLE>

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


                                       35
<PAGE>

                          POWERWAVE TECHNOLOGIES, INC.
              CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                   Years Ended
                                                     --------------------------------------
                                                     December 31,   January 2,   January 3,
                                                         2000          2000         1999
                                                     ------------   ----------   ----------
<S>                                                  <C>            <C>          <C>
Net income (loss)..................................     $45,653       $20,265     $(2,966)
Other comprehensive income net of tax:
Unrealized gain on available-for-sale securities...         276            --          --
                                                        -------       -------     -------
Comprehensive income (loss)........................     $45,929       $20,265     $(2,966)
                                                        =======       =======     =======
</TABLE>

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

                                       36
<PAGE>

                          POWERWAVE TECHNOLOGIES, INC.
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                         Accumulated
                                                                       Treasury             Other                        Total
                                              Common Stock              Stock           Comprehensive    Retained    Shareholders'
                                           Shares     Amount      Shares     Amount        Income        Earnings        Equity
                                           ------    --------    --------   --------       ------        --------        ------
<S>                                        <C>       <C>         <C>        <C>         <C>             <C>          <C>
Balance at December 28, 1997.............  51,792     $64,801      16,722   $(21,016)      $      --     $ 31,695      $ 75,480

Issuance of Common Stock related to the
exercise of stock options................     687        (728)       (210)     1,392              --           --           664

Tax benefit related to stock option
exercises................................      --         893          --         --              --           --           893

Compensation expense related to stock
option grants............................      --          33          --         --              --           --            33

Issuance of Common Stock related to the
Employee Stock Purchase Plan.............     171         (27)       (102)       679              --           --           652

Tax benefit related to the sale of shares
purchased under the Employee Stock
Purchase Plan............................      --          --          55         --              --           --            55

Repurchases of Common Stock..............    (900)         --         900     (3,741)             --           --        (3,741)

Net loss.................................      --          --          --         --              --       (2,966)       (2,966)
                                           ------    --------    --------   --------       ---------     --------      --------
Balance at January 3, 1999...............  51,750     $65,027      17,310   $(22,686)      $      --     $ 28,729      $ 71,070

Issuance of Common Stock related to the
exercise of stock options................   1,665       1,685        (576)     3,495              --           --         5,180

Tax benefit related to stock option
exercises................................      --      14,258          --         --              --           --        14,258

Compensation expense related to stock
option grants............................      --          52          --         --              --           --            52

Issuance of Common Stock related to the
Employee Stock Purchase Plan.............     174         369         (96)       551              --           --           920

Tax benefit related to the sale of
shares purchased under the Employee
Stock Purchase Plan......................      --         229          --         --              --           --           229

Issuance of Common Stock related to the
third offering, net......................   6,900      51,396      (1,446)     6,409              --           --        57,805

Retirement of treasury shares............      --     (12,231)    (15,192)    12,231              --           --            --

Net income...............................      --          --          --         --              --       20,265        20,265
                                           ------    --------    --------   --------       ---------     --------      --------
Balance at January 2, 2000...............  60,489    $120,785          --   $     --       $      --     $ 48,994      $169,779

Issuance of Common Stock related to the
exercise of stock options................   1,417       8,403          --         --              --           --         8,403

Tax benefit related to stock option
exercises................................      --      28,454          --         --              --           --        28,454

Compensation expense related to stock
option grants............................      --          78          --         --              --           --            78

Issuance of Common Stock related to the
Employee Stock Purchase Plan.............     103       1,647          --         --              --           --         1,647

Tax benefit related to the sale of
shares purchased under the Employee
Stock Purchase Plan......................      --         297          --         --              --           --           297

Issuance of Common Stock, net............   1,500      61,685          --         --              --           --        61,685

Net income...............................      --          --          --         --              --       45,653        45,653

Unrealized gain on available-for-sale
securities...............................      --          --          --         --             276           --           276
                                           ------   ---------    --------   --------       ---------     --------      --------
Balance at December  31, 2000............  63,509    $221,349          --   $     --       $     276     $ 94,647      $316,272
                                           ======   =========    ========   ========       =========     ========      ========
</TABLE>

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

                                       37
<PAGE>

                         POWERWAVE TECHNOLOGIES, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (in thousands)
<TABLE>
<CAPTION>
                                                                                  Years Ended
                                                               ----------------------------------------------
                                                                  December 31,     January 2,     January 3,
                                                                      2000           2000             1999
                                                               ----------------------------------------------
<S>                                                            <C>                <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)..........................................      $ 45,653       $ 20,265         $ (2,966)
  Adjustments to reconcile net income (loss) to net cash
   provided by (used in) operating activities:

    Depreciation and amortization............................        19,009         10,331            4,106
    Write off of in-process research and development.........           --             --            12,400
    Provision for doubtful accounts..........................           256          1,756              525
    Provision  for excess and obsolete inventory.............         4,211          2,432              829
    Deferred income taxes....................................        (3,786)        (2,838)          (4,763)
    Compensation expense related to stock options............            78             52               33
    Loss on disposal of property, plant and equipment........            99            422              --

  Changes in operating assets and liabilities (net of effects
   of the acquisition for the year ended January 3, 1999):

    Accounts receivable......................................       (32,786)       (18,020)         (19,770)
    Inventories..............................................       (23,791)        (5,545)          (4,065)
    Prepaid expenses and other current assets................        (2,468)          (816)            (411)
    Accounts payable.........................................        20,701         11,461            9,060
    Accrued expenses and other current liabilities...........         4,624          5,481           (3,982)
    Income taxes payable.....................................        28,043         13,779              (11)
    Other non-current assets.................................        (1,916)           677               50
    Other non-current liabilities............................          (364)           134              248
                                                                   --------       --------         --------
      Net cash provided by (used in) operating activities....        57,563         39,571           (8,717)

CASH FLOWS FROM INVESTING ACTIVITIES:

  Purchase of property and equipment.........................       (84,060)       (20,632)          (4,933)
  Payment received on notes receivable.......................         7,019            500              --
  Proceeds from sale of property and equipment...............           --           1,544              --
  Cash paid for business acquisition and related costs.......           --             --           (58,534)
  Redemption (purchase) of long-term investments.............           --           2,500           (2,500)
                                                                   --------       --------         --------
      Net cash used in investing activities..................       (77,041)       (16,088)         (65,967)

CASH FLOW FROM FINANCING ACTIVITIES:

  Proceeds from issuance of long-term debt...................           --             --            25,000
  Principal payments on long-term debt.......................          (195)       (24,024)          (2,017)
  Proceeds from issuance of Common Stock, net................        63,332         58,725              652
  Repurchase of Common Stock.................................           --             --            (3,741)
  Proceeds from exercise of stock options....................         8,403          5,180              664
                                                                   --------       --------         --------
      Net cash provided by financing activities..............        71,540         39,881           20,558
                                                                   --------       --------         --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.........        52,062         63,364          (54,126)

CASH AND CASH EQUIVALENTS, beginning of year.................        76,671         13,307           67,433
                                                                   --------       --------         --------
CASH AND CASH EQUIVALENTS, end of year.......................      $128,733       $ 76,671         $ 13,307
                                                                   ========       ========         ========
</TABLE>

                                       38
<PAGE>

                         POWERWAVE TECHNOLOGIES, INC.
              CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
                                (in thousands)

<TABLE>
<CAPTION>
                                                                                  Years Ended
                                                                  -----------------------------------------
                                                                   December 31,    January 2,   January 3,
                                                                       2000          2000         1999
                                                                  -----------------------------------------
<S>                                                              <C>              <C>            <C>
SUPPLEMENTAL CASH FLOW INFORMATION:

  Cash paid for:
    Interest.....................................................   $     47      $    999      $    218
                                                                    ========      ========      ========
    Income taxes.................................................   $    869      $    367      $  3,069
                                                                    ========      ========      ========

NON CASH ITEMS:

  Acquisition of property and equipment through capital lease....   $    208      $     --      $     --
                                                                    ========      ========      ========
  Tax benefit related to stock option exercises..................   $ 28,454      $ 14,258      $    893
                                                                    ========      ========      ========
  Tax benefit related to sale of shares purchased under the
   Employee Stock Purchase Plan..................................   $    297      $    229      $     55
                                                                    ========      ========      ========
  Notes received in conjunction with sale of property, plant
   and equipment.................................................   $     --      $  7,545      $     --
                                                                    ========      ========      ========
  Unrealized gain on available-for-sale securities, net of
   tax of $192...................................................   $    276      $     --      $
                                                                    ========      ========      ========

DETAIL OF HP BUSINESS ACQUIRED IN PURCHASE BUSINESS COMBINATION:

  Tangible assets acquired.......................................                               $ 34,711
  Intangible assets acquired.....................................                                 31,133
  Cash paid for acquisition and related costs....................                                (58,534)
                                                                                                --------
  Liabilities assumed............................................                               $  7,310
                                                                                                ========
</TABLE>



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




                                       39
<PAGE>

                         POWERWAVE TECHNOLOGIES, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (in thousands, except share and per share data)

Note 1.  Nature of Operations

  Powerwave Technologies, Inc. ("Powerwave" or the "Company") is a Delaware
corporation engaged in the design, manufacture and marketing of radio frequency
("RF") power amplifiers and related equipment for use in the wireless
communications market.  The Company manufactures both single and multi-carrier
RF power amplifiers for a variety of frequency ranges and a wide range of
digital and analog transmission protocols.  The Company's products are currently
being utilized in both cellular and personal communication services ("PCS") base
stations in both digital and analog-based networks.


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 Powerwave Technologies, Inc. and its wholly owned
subsidiaries.  All intercompany balances and transactions have been eliminated
in the accompanying consolidated financial statements.

 Fiscal Year

  The Company's fiscal year ends on the Sunday closest to December 31.  Fiscal
year 1998 ended on January 3, 1999, fiscal year 1999 ended on January 2, 2000
and fiscal year 2000 ended on December 31, 2000.  Fiscal year 2001 will end on
December 30, 2001.

 Foreign Currency Translation

  In accordance with Statement of Financial Accounting Standards ("SFAS") No.
52, Foreign Currency Translation, the United States Dollar is considered to be
the functional currency for the Company's foreign subsidiaries and translation
adjustments are included in other income, net in the Company's consolidated
statements of operations.

 Cash and Cash Equivalents

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

 Accounts Receivable

  The Company performs ongoing credit evaluations of its customers and generally
does not require collateral.  The Company maintains reserves for estimated
credit losses and such losses have been within management's expectations.

 Inventories

  Inventories are stated at the lower of cost, determined on a first-in, first-
out basis, or market.  The Company periodically reviews inventory quantities on
hand and provides reserves for slow moving and obsolete inventory based
primarily on current production requirements and forecasted product demand.

                                       40
<PAGE>

                         POWERWAVE TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Property and Equipment

  Property and equipment are stated at cost.  The Company depreciates these
assets using the straight-line method over the estimated useful lives of the
various classes of assets, as follows:

<TABLE>
<CAPTION>
<S>                                                <C>
   Machinery and equipment.....................           2 to 5 years
   Office furniture and equipment..............           3 to 5 years
   Leasehold improvements......................           Life of lease
   Property under capital leases...............           3 to 5 years
   Buildings...................................             30 years
   Building improvements.......................    Remaining life of building
</TABLE>

 Goodwill

  Goodwill arising from the HP Acquisition (See Notes 6 and 17) is amortized
over ten years on a straight-line basis.  The Company annually evaluates the
carrying value of goodwill for any impairment of value based on an undiscounted
cash flow analysis.  At December 31, 2000, the Company believes there has been
no impairment of the value of goodwill.

 Other Intangible Assets

  Other intangible assets arising from the HP Acquisition (See Notes 6 and 17)
are amortized on a straight-line basis over periods ranging from three to ten
years.

 Long-Lived Assets

  The Company accounts for the impairment and disposition of long-lived assets
in accordance with  SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of.  In accordance with SFAS No.
121, long-lived assets to be held are reviewed for events or changes in
circumstances which indicate that their carrying value may not be recoverable.
The Company periodically reviews the carrying value of long-lived assets to
determine whether or not an impairment to such value has occurred based on an
undiscounted cash flow analysis.  As of December 31, 2000, no such impairment
was noted.

 Accounting for Stock-Based Compensation

  SFAS No. 123, Accounting for Stock-Based Compensation, requires the fair value
method of accounting for stock options and other equity instruments and requires
certain disclosures.  Under the fair value method, compensation cost is measured
at the grant date based on the fair value of the award and is recognized over
the service period which is usually the vesting period.  The Company has chosen,
under the provisions of SFAS No. 123, to continue to account for employee stock-
based transactions under Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees.  The Company has disclosed in Note 11
to the consolidated financial statements pro forma basic and diluted earnings
(loss) per share as if the Company had applied the fair value method of
accounting.

 Income Taxes

  The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for 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.

                                       41
<PAGE>

                         POWERWAVE TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 Revenue Recognition

  The Company recognizes revenue from product sales at the time of shipment and
passage of title.  The Company also offers certain of its customers, on a
limited basis, a right of return on sales and records an estimate of such
returns at the time of product delivery based on historical experience.

 Warranties

  The Company offers warranties of various lengths depending on the product and
negotiated terms of purchase agreements with its customers.  An estimate for
warranty related costs based on historical experience is recorded at the time of
sale.

 Stock Split

  On April 26, 2000, Powerwave's shareholders approved an amendment to the
Company's Amended and Restated Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 40,000,000 to 135,000,000 and
effect a three-for-one stock split of Powerwave's Common Stock.  The effective
date of the three-for-one stock split was May 15, 2000. All share and per share
amounts included in the accompanying consolidated financial statements and
footnotes have been restated for all periods presented to reflect the stock
split.

 Earnings (Loss) Per Share

  In accordance with SFAS No. 128, Earnings per Share, basic earnings (loss) per
share amounts are based upon the weighted average number of common shares
outstanding.  Diluted earnings per share amounts are 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.
Outstanding stock options were excluded from the calculation of diluted earnings
per share for the year ended January 3, 1999, as they were anti-dilutive.

 Use of Estimates

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

 Customer Concentrations

  The Company's product sales have historically been concentrated in a small
number of customers.  During the years ended December 31, 2000, January 2, 2000
and January 3, 1999, sales to four customers totaled approximately $347.6
million, $212.6 million and $68.7 million, respectively.  Those same four
customers for fiscal 2000 accounted for approximately 82% of the Company's
accounts receivable at December 31, 2000.  For fiscal 2000, two customers each
accounted for over 10% of total revenue, with one of those customers accounting
for approximately 47% of total revenue.  This same customer accounted for
approximately 41% of total revenue for fiscal 1999 while two other customers
each accounted for over 10% of total revenue.  For fiscal 1998, four customers
each accounted for over 10% of total revenue. The loss of, or reduction in sales
to any of these customers could have a material adverse effect on the Company's
business, financial condition and results of operations.

                                       42
<PAGE>

                         POWERWAVE TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 Supplier Concentrations

  Certain of the Company's products utilize components that 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 for its RF power amplifiers from single sources.
Any inability to obtain single sourced components in the amounts needed on a
timely basis or at commercially reasonable prices could result in delays in
product introductions or 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.

 Comprehensive Income

  The Company has adopted SFAS No. 130, Reporting Comprehensive Income.  For the
years ended December 31, 2000, January 2, 2000 and January 3, 1999, the Company
had other comprehensive income of $276, $0 and $0, respectively, all of which
reflects the change in unrealized gains on available-for-sale securities, net of
tax.

 New Accounting Pronouncements

  SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities is
effective for all fiscal years beginning after June 15, 2000.  SFAS No. 133 as
amended, establishes accounting and reporting standards for derivative
instruments including certain derivative instruments embedded in other contracts
and for hedging activities.  Under SFAS No. 133, certain contracts that were not
previously considered derivatives may now meet the definition of a derivative.
The Company will adopt SFAS No. 133 effective January 1, 2001 and such adoption
will not have a material impact on the Company's consolidated financial
statements.

  In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial
Statements, which the Company adopted in the fourth fiscal quarter of 2000.
Adoption of SAB No. 101 did not have a material impact on the Company's
consolidated financial statements.

  In March 2000, the FASB issued FASB Interpretation No. 44, Accounting for
Certain Transactions Involving Stock Compensation, an Interpretation of
Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued
to Employees ("FIN 44"). FIN 44 clarifies the application of APB No. 25 for the
following: the definition of employee for purposes of applying APB No. 25; the
criteria for determining whether a plan qualifies as a non-compensatory plan;
the accounting consequence for various modifications to the terms of a
previously fixed stock option or award; and the accounting for an exchange of
stock compensation awards in a business combination. The Company adopted FIN 44
effective July 1, 2000 and such adoption did not have a material impact on the
Company's consolidated financial statements.


Note 3.  Inventories

  Inventories, net, consist of the following:

<TABLE>
<CAPTION>
                                                   December 31,   January 2,
                                                      2000           2000
                                                   ------------   ----------
<S>                                                <C>            <C>
   Parts and components......................         $29,023       $16,816
   Work-in-process...........................          12,824         6,278
   Finished goods............................           9,428         8,602
                                                      -------       -------
   Total.....................................         $51,275       $31,696
                                                      =======       =======
</TABLE>

  Inventories are net of an allowance for excess and obsolete inventory of
$9,449 and $6,192 as of December 31, 2000 and January 2, 2000, respectively.

                                       43
<PAGE>

                         POWERWAVE TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Note 4.  Notes Receivable

  On July 15, 1999 the Company sold the Folsom facility acquired in the HP
Acquisition for $8.4 million.  The Company received $0.925 million in cash
(before expenses) and an interest free note for $7.475 million due December 31,
1999.  The note was secured by the land, land improvements and building.  In
exchange for the interest free note, the buyer entered into a rent-free lease
with the Company covering the Folsom facility through December 31, 1999.  The
buyer of the Folsom facility made a principal payment of $0.5 million on this
interest-free note on December 30, 1999.  On December 31, 1999, the terms of
this interest-free note were amended to extend the maturity date to January 27,
2000 and to apply an annual interest rate of 8% beginning December 31, 1999.
The remaining balance of $6.975 million was repaid on January 27, 2000 along
with all accrued interest.


Note 5.  Property and Equipment

  Net property and equipment consist of the following:

<TABLE>
<CAPTION>
                                                        December 31,  January 2,
                                                           2000          2000
                                                        ------------  ----------
<S>                                                     <C>           <C>
   Machinery and equipment.............................   $ 70,766     $ 34,793
   Buildings and improvements..........................     20,516           --
   Land................................................     14,838           --
   Office furniture and equipment......................      8,480        4,639
   Leasehold improvements..............................      6,027        5,854
   Construction in progress............................      8,011           --
                                                         ---------     --------
                                                           128,638       45,286
   Less accumulated depreciation and amortization......    (26,980)     (12,354)
                                                         ---------     --------
   Net property and equipment..........................   $101,658     $ 32,932
                                                         =========     ========
</TABLE>

  In May 2000, the company purchased a 360,000 square foot facility located on
approximately 22 acres of land for $35.3 million. Based on an independent
appraisal, approximately $20.5 million of the purchase price was allocated to
the building, with the remaining $14.8 million allocated to land. Construction
in progress at December 31, 2000 represents capital improvements to this
facility that have not been placed into service as of December 31, 2000.
Included in property and equipment are assets under capital lease of $219 and
$805 at December 31, 2000 and January 2, 2000, respectively. Accumulated
amortization of assets under capital lease was $23 and $482 at December 31, 2000
and January 2, 2000, respectively.


Note 6.  Intangible Assets

  Intangible assets consist of the following:

<TABLE>
<CAPTION>
                                                         December 31,    January 2,
                                                             2000          2000
                                                         ------------    ----------
<S>                                                      <C>             <C>
     Developed technology, net of accumulated
      amortization of $5,143 and $2,843, respectively...    $ 6,357       $ 8,657

     Goodwill, net of accumulated amortization of $1,018
      and $563, respectively............................      3,535         3,990

     Customer list, net of accumulated amortization of
      $1,491 and $824, respectively.....................        509         1,176

     Non-compete agreement, net of accumulated
      amortization of $279 and $154, respectively.......        221           346

     Workforce, net of accumulated amortization of $45
      and $25, respectively.............................        155           175
                                                            -------       -------
                                                            $10,777       $14,344
                                                            =======       =======
</TABLE>

                                       44
<PAGE>

                         POWERWAVE TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

<TABLE>
<CAPTION>

  Amortization periods are as follows (in years):
<S>                                                              <C>
   Developed technology........................................    5
   Goodwill....................................................   10
   Customer list...............................................    3
   Non-compete agreement.......................................    4
   Workforce...................................................   10
</TABLE>


Note 7.  Financing Arrangements

  On June 16, 2000 the Company entered into an unsecured revolving credit
agreement with Comerica Bank-California, dated as of May 26, 2000.  The credit
facility provides for a revolving line of credit up to a maximum principal
amount outstanding at any one time of $20 million (the "Revolving Commitment
Amount"). The Company is required to pay a commitment fee of 0.25% per annum on
the unused portion of the Revolving Commitment Amount.  The commitment fee is
payable quarterly in arrears.  The revolving credit facility allows for
borrowings based either upon the bank's prime rate (9.5% at December 31, 2000)
or the bank's LIBOR rate plus an applicable LIBOR Margin of 1.25% or 1.50%,
based upon the Company's debt leverage ratio.  There were no amounts outstanding
as of December 31, 2000.  The revolving credit facility terminates on May 31,
2001.  The revolving credit facility contains certain standard affirmative and
negative covenants, including limitations on future indebtedness, restricted
payments, transactions with affiliates, liens, dividends, mergers, transfers of
assets and leverage ratios. The Company was in compliance with all covenants
contained in the revolving credit facility at December 31, 2000.  The full $20
million of the Revolving Commitment Amount was available to the Company at
December 31, 2000.

  The debt repayment schedules for commitments under Capital Leases at December
31, 2000 are as follows:

<TABLE>
<CAPTION>
                                                              Capital
                                                               Leases
                                                            ------------
<S>                                                         <C>
Fiscal Year:
     2001................................................        $101
     2002................................................          16
     2003................................................          16
     2004................................................          16
     2005................................................           3
                                                                 ----
  Total..................................................         152
  Less amounts representing interest.....................         (14)
                                                                 ----
  Present value of future minimum payments...............         138
  Less current portion...................................         (96)
                                                                 ----
                                                                 $ 42
                                                                 ====
</TABLE>


Note 8.  Income Taxes

  The provision (benefit) for income taxes for the fiscal years ended December
31, 2000, January 2, 2000 and January 3, 1999, consists of the following:

<TABLE>
                                             2000           1999          1998
                                           -------        -------       -------
<S>                                        <C>            <C>           <C>
  Current:
     Federal.............................  $24,807        $11,742       $ 2,982
     State...............................    4,106          2,402            76
                                           -------        -------       -------
     Total current provision.............   28,913         14,144         3,058
                                              2000           1999          1998
                                           -------        -------       -------
</TABLE>

                                       45
<PAGE>

                         POWERWAVE TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

<TABLE>
<CAPTION>
                                                         2000           1999          1998
                                                       -------        -------       -------
<S>                                                    <C>            <C>           <C>
 Deferred:
     Federal......................................      (3,850)        (1,928)       (3,760)
     State........................................          64           (910)       (1,003)
                                                       -------        -------       -------
     Total deferred benefit.......................      (3,786)        (2,838)       (4,763)
                                                       -------        -------       -------
  Provision (benefit) for income taxes............     $25,127        $11,306       $(1,705)
                                                       =======        =======       =======
</TABLE>

  The difference between income taxes provided in the financial statements and
as required by the federal statutory rate of 35% for the fiscal years ended
December 31, 2000, January 2, 2000 and January 3, 1999, is as follows:

<TABLE>
<CAPTION>
                                                         2000           1999          1998
                                                       -------        -------       -------
<S>                                                    <C>            <C>           <C>
   Taxes at federal statutory rate................     $24,773        $11,050       $(1,635)
   State taxes, net...............................       2,712            971          (602)
   Other..........................................      (2,358)          (715)          532
                                                       -------        -------       -------
   Provision (benefit) for income taxes...........     $25,127        $11,306       $(1,705)
                                                       =======        =======       =======
</TABLE>

  The Company's net deferred tax asset was comprised of the following major
components:

<TABLE>
<CAPTION>
                                                              December 31,    January 2,
                                                                  2000           2000
                                                              ------------    ----------
<S>                                                           <C>             <C>
   Depreciation of property and equipment..................     $(2,099)       $(1,823)
   Accruals and reserves...................................       5,419          4,017
   Costs capitalized into inventories......................       3,939          2,108
   State taxes.............................................        (836)          (850)
   Amortization of intangible assets.......................       6,233          6,071
   Credit carryforwards....................................       1,333            872
                                                                -------        -------
   Net deferred tax asset..................................     $13,989        $10,395
                                                                =======        =======
</TABLE>

  As of December 31, 2000, the Company has a California Manufacturer's
Investment Credit carryforward of approximately $725 which expires in various
years through 2008, and has federal and state alternative minimum tax credit
carryforwards of approximately $530 and $69 respectively, which have no
expiration date.


Note 9.  Pension and Profit-Sharing Plans

  The Company sponsors a 401(k) pension and profit-sharing plan covering all
eligible employees and provides for Company matching on participant
contributions. Employees may contribute up to 15% of base salary. During fiscal
1998, fiscal 1999 and the first half of fiscal 2000 the Company matched 10% of
the first 20% of eligible compensation contributed by an employee.  Starting in
the second half of fiscal 2000, the Company matched 100% of the first 2% of
eligible compensation contributed by an employee.  Employer matching
contributions for the years ended December 31, 2000, January 2, 2000 and January
3, 1999 were $381, $243, and $157, respectively.  There were no profit sharing
contributions authorized for the years ended December 31, 2000 January 2, 2000
and January 3, 1999.  Effective in January 2001, the Company will match 100% on
the first 3% of eligible compensation contributed and 50% on the next 2% of
eligible compensation contributed.


Note 10.  Shareholders' Equity

   In March 1999, the Company completed the sale of six million shares of its
Common Stock in a public offering at an offering price of $8.92 per share. The
Company's underwriters also exercised their right to purchase an additional
900,000 shares at the $8.92 offering price. Of these shares, 1,446,459 were
reissued from treasury

                                       46
<PAGE>

                         POWERWAVE TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

shares repurchased as part of a stock purchase program. The remaining 5,453,541
shares were newly issued shares. Total net proceeds after underwriting discount
and offering expenses were approximately $57.8 million.

  In August 2000, the Company sold a total of 1.5 million shares of its Common
Stock at a price per share of $41.19 pursuant to a previously filed shelf
registration.  Total net proceeds after offering expenses were approximately
$61.7 million.


Note 11.  Stock Option Plans

  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.  The 1995 Plan is administered by the Compensation Committee of the
Company's Board of Directors.  The 1995 Plan provides for the grant of
nonstatutory stock options under the applicable provisions of the Internal
Revenue Code.  The option price per share may not be less than 85% of the fair
market value of a share of Common Stock on the grant date as determined by the
Company's Board of Directors.  In addition, the exercise price may not be less
than 110% of the fair market value of a share of Common Stock on the grant date,
as determined by the Company's Board of Directors, for any individual possessing
10% or more of the voting power of all classes of stock of the Company.  Options
generally vest at the rate of 25% on the first anniversary date and 2% per month
thereafter and expire no later than ten years after the grant date.  Up to
5,815,845 shares of the Company's Common Stock were reserved for issuance under
the 1995 Plan.  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 pro rata
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 December 31, 2000, a total of 5,316,225 options have been
exercised under the 1995 Plan.   A total of 2,031,225 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 December 31, 2000 there
were 499,551 options outstanding under the 1995 Plan at a weighted average
exercise price of $3.87 per share.  There are 69 shares available for grant
under the 1995 Plan at December 31, 2000.

  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"), nonstatutory 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.  A total of 9,000,000 shares of the Company's Common Stock are
reserved for issuance under the 1996 Plan.  As of December 31, 2000, all of the
options granted under the 1996 Plan have been nonstatutory options.  The 1996
Plan provides that for nonstatutory stock options, the option price per share
may not be less than 85% of the fair market value of a share of Common Stock on
the grant date and that the exercise price may not be less than 110% of the fair
market value of a share of Common Stock on the grant date for any individual
possessing 10% or more of the voting power of all classes of stock of the
Company.  The purpose of the 1996 Plan is to provide participants with
incentives which will encourage them to acquire a proprietary interest in, and
continue to provide services to, the Company.  Authority to control and manage
the 1996 Plan is vested with the Company's Board of Directors, which has sole
discretion and authority, consistent with the provisions of the 1996 Plan, to
determine the administration of the 1996 Plan and 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 1996 Plan.  As of December 31, 2000, a total of
2,322,099 options have been exercised under the 1996 Plan and there were
6,660,071 options outstanding under the 1996 Plan at a weighted

                                       47
<PAGE>

                         POWERWAVE TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

average exercise price of $15.37 per share. There are 17,830 shares available
for grant under the 1996 plan at December 31, 2000.

  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.  The
Director Plan provides that each member of the Company's Board of Directors who
is not an employee or paid consultant of the Company will automatically be
eligible to receive options to purchase common stock under the Director Plan.
Pursuant to the terms of the Director Plan, each director elected after December
5, 1996, will be granted an initial option under the Director Plan covering
30,000 shares of Common Stock, which option shall vest at the rate of 25% on the
first anniversary of the grant date and the remaining 75% shall vest in equal
monthly installments over the following three years. Furthermore, on each
anniversary date of December 5, each director who shall have been an eligible
participant under the Director Plan for at least six (6) months shall be granted
an annual option under the Director Plan to purchase 5,000 shares of Common
Stock.  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.  As of December 31, 2000, a total
of 30,000 options have been exercised under the Director Plan.  There were
570,000 options outstanding under the Director Plan as of December 31, 2000 at a
weighted average exercise price of $19.37 per share.  There are 600,000 shares
available for grant under the Director Plan at December 31, 2000.

  2000 Stock Option Plan--The Company's 2000 Stock Option Plan (the "2000 Plan")
was approved by the shareholders of the Company on April 26, 2000.  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 nonstatutory 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.  All options granted
pursuant to the 2000 Plan shall have a maximum term of no more than five (5)
years from the grant date.  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 (2) or
more members of the Board of Directors or two (2) 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.
As of December 31, 2000, no options have been exercised under the 2000 Plan.
There were 536,900 options outstanding under the 2000 Plan as of December 31,
2000 at a weighted average exercise price of $37.62 per share.  There are
2,103,100 shares available for grant under the 2000 plan at December 31, 2000.

  Employee Stock Purchase Plan--On October 7, 1996, the shareholders of the
Company approved the Employee Stock Purchase Plan (the "Purchase Plan"), which
became effective on December 5, 1996.  The Purchase Plan covers an aggregate of
1,500,000 shares of Common Stock.  The Purchase Plan, which is intended to
qualify as an "employee stock purchase plan" under Section 423 of the Internal
Revenue Code, is implemented utilizing six-month offerings with purchases
occurring at six-month intervals.  The Purchase Plan 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 Purchase Plan permits

                                       48
<PAGE>

                         POWERWAVE TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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 Purchase Plan will be 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, and participation ends
automatically on termination of employment.  The Board may at any time amend or
terminate the Purchase Plan, except that no such amendment or termination may
adversely affect shares previously granted under the Purchase Plan. During
fiscal 2000, the sixth and seventh purchases under the Purchase Plan occurred on
January 31, 2000 and July 31, 2000, respectively.  A total of 64,611 shares were
purchased in the sixth purchase at $10.13 per share and 38,934 shares were
purchased in the seventh purchase at $25.50 per share.   At December 31, 2000,
there were rights to purchase approximately 55,000 shares outstanding under the
Purchase Plan and there were 927,678 shares available for purchase under the
plan.

  The following table summarizes activity under the Company's 1995 Plan, 1996
Plan, Director Plan and 2000 Plan:

<TABLE>
<CAPTION>
                                                                                                  Number of
                                                                                                   Options
                                                                                Weighted       Exercisable as       Weighted
                                         Number of           Price Per           Average             of              Average
                                           Shares              Share         Exercise Price    Fiscal Year End   Exercise Price
                                        -----------       --------------     --------------    ---------------   --------------
<S>                                   <C>                 <C>                <C>               <C>               <C>
Balance at December 28, 1997.......       5,095,842        $ 0.82-$13.52         $ 2.99           1,308,768          $1.19
                                                                                                  =========          =====
  Granted..........................       5,172,150        $ 2.19-$ 6.52         $ 4.26
  Exercised........................        (685,689)       $ 0.82-$ 5.42         $ 0.97
  Canceled.........................      (1,436,997)       $ 0.82-$13.52         $ 7.10
                                         ----------
Balance at January 3, 1999.........       8,145,306        $ 0.82-$10.58         $ 3.22           2,211,327          $1.88
                                                                                                  =========          =====
  Granted..........................       2,755,950        $ 6.13-$25.65         $10.27
  Exercised........................      (3,096,726)       $ 0.82-$10.67         $ 2.35
  Canceled.........................        (340,977)       $ 1.33-$ 9.19         $ 5.42
                                         ----------
Balance at January 2, 2000.........       7,463,553        $ 0.82-$25.65         $ 6.12           1,455,429          $3.28
                                                                                                  =========          =====
  Granted..........................       2,913,100        $15.42-$73.56         $34.68
  Exercised........................      (2,017,407)       $ 0.82-$25.65         $ 4.77
  Canceled.........................         (92,724)       $ 1.33-$50.92         $16.50
                                         ----------
Balance at December 31, 2000              8,266,522        $ 0.82-$73.56         $16.40           2,046,696          $5.31
                                         ==========                                               =========          =====
</TABLE>

  At December 31, 2000, a total of 2,720,999 options were available for grant
under all of the Company's option plans.

<TABLE>
<CAPTION>
                                                                                                 Options Exercisable at
                                       Options Outstanding at December 31, 2000                    December 31, 2000
                              --------------------------------------------------------       -----------------------------
                                                   Weighted           Weighted Average                         Weighted
                                Options             Average               Remaining            Options          Average
Range of Exercise Prices      Outstanding       Exercise Price        Contractual Life       Exercisable    Exercise Price
------------------------      -----------       --------------        ----------------       -----------    --------------
                                                                          (years)
<S>                         <C>                <C>                 <C>                       <C>            <C>
$ 0.82-$ 2.29............       1,015,726           $ 2.04                  7.11                 522,473          $ 1.81
$ 2.83-$ 5.67............       1,928,464           $ 4.58                  6.91                 874,008          $ 4.59
$ 5.85-$10.67............       1,722,738           $ 7.69                  7.42                 499,255          $ 7.22
$11.00-$15.42............         798,652           $13.69                  8.82                  95,061          $11.96
$15.67-$31.50............       1,719,192           $29.01                  8.22                  55,899          $20.76
$33.29-$45.63............         588,650           $37.94                  8.77                      --              --
$46.08-$73.56............         493,100           $57.32                  8.24                      --              --
                                ---------                                                      ---------
  Total..................       8,266,522           $16.40                  7.71               2,046,696          $ 5.31
                                =========                                                      =========
</TABLE>

                                       49
<PAGE>

                         POWERWAVE TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

   The Company is recording compensation expense relating to the difference
between fair market value and the exercise price of options granted.  The
Company recorded a total of $78, $52, and $33 as compensation expense during
fiscal 2000, 1999, and 1998, respectively. The remaining unamortized
compensation expense as of December 31, 2000 was approximately $156 and will be
amortized through September 2003.

   The estimated weighted average fair value of options granted during 2000 was
$21.37 per share.  The estimated weighted average fair value of options granted
during 1999 was $5.66 per share and during 1998 was $2.68 per share.  Pursuant
to SFAS No. 123, the Company has elected to continue using the intrinsic value
method of accounting for stock-based awards granted to employees and directors
in accordance with APB Opinion No. 25 and Related Interpretations in accounting
for its stock option and purchase plans.  Accordingly, no compensation cost has
been recognized for its stock option plans and its stock purchase plan other
than that described above.  Had compensation cost for the Company's stock option
plans and its stock purchase plans been determined based on the estimated fair
value at the grant dates for awards under those plans consistent with the fair
value method of SFAS No. 123, the Company's net income (loss) and basic and
diluted earnings (loss) per share for the years ended December 31, 2000, January
2, 2000 and January 3, 1999, would have been changed to the pro forma amounts
indicated in the following table:

<TABLE>
<CAPTION>
                                                                                    2000           1999           1998
                                                                                  --------       --------       --------
<S>                                                                               <C>            <C>            <C>
  Net income (loss) before income taxes
     As reported............................................................      $ 70,780       $ 31,571       $ (4,671)
  Less: Net expense per SFAS No. 123........................................       (25,041)        (8,553)        (4,631)
                                                                                  --------       --------       --------
  Pro forma operating income (loss) before income taxes.....................        45,739         23,018         (9,302)
  Less: Pro forma provision (benefit) for income taxes......................        16,237          8,240         (3,395)
                                                                                  --------       --------       --------
  Pro forma net income (loss)...............................................      $ 29,502       $ 14,778       $ (5,907)
                                                                                  ========       ========       ========
  Net income (loss) as reported.............................................      $ 45,653       $ 20,265       $ (2,966)
                                                                                  ========       ========       ========

                                                                                    2000           1999           1998
                                                                                  --------       --------       --------
  Basic earnings (loss) per share:
     As reported............................................................      $   0.75       $   0.34       $  (0.06)
     Pro forma..............................................................      $   0.48       $   0.25       $  (0.11)
  Diluted earnings (loss) per share:
     As reported............................................................      $   0.71       $   0.33       $  (0.06)
     Pro forma..............................................................      $   0.45       $   0.24       $  (0.11)
  Basic weighted average common shares (in thousands).......................        61,953         58,480         51,534
  Diluted weighted average common shares (in thousands).....................        65,313         60,671         51,534
</TABLE>

  The fair value of options granted under the Company's stock option plans and
its stock purchase plan during 2000, 1999 and 1998 was estimated on the date of
grant using the Black-Scholes option-pricing model utilizing the multiple option
approach with the following weighted-average assumptions used:

<TABLE>
<CAPTION>
                                                                                      2000           1999           1998
                                                                                      ----           ----           ----
   <S>                                                                                <C>            <C>            <C>
   Weighted average risk-free interest rate.................................          5.01%          6.33%          4.88%
   Expected years from vest date to exercise date...........................           0.3            0.5            0.4
   Expected stock volatility................................................           101%            80%           100%
   Dividend yield...........................................................           None           None           None
</TABLE>

  For the years ended December 31, 2000, January 2, 2000 and January 3, 1999,
the expected life of an option was 5.1 years, 5.1 years and 5.2  years
respectively.

                                       50
<PAGE>

                         POWERWAVE TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Note 12.  Commitments and Contingencies

  The Company leases its manufacturing and headquarters facility and its
Southern California sales and engineering facility from a limited liability
company owned by Alfonso G. Cordero, the founder and former Chairman of the
Company, a former employee, and a current employee, all of whom are shareholders
of the Company.  The lease term for the manufacturing and headquarters facility
commenced on July 15, 1996, and had an original expiration date of July 15,
2006.  The Company paid $1.0 million to the limited liability company at the
initiation of the lease as payment for additional tenant improvements made to
the facility at the request of the Company.  During 1999, the Company leased an
additional 34,000 square foot facility for its sales and engineering departments
from the same limited liability company.  This second facility lease term
commenced on October 1, 1999, and had an original expiration date of July 15,
2006.   In August 2000, the Company entered into an agreement with the limited
liability company to terminate the leases of both facilities effective March 31,
2001. The agreement also allowed for an option to extend the termination date
until June 30, 2001.  The Company exercised this option in September 2000.  In
consideration for the termination of the remaining lease periods and for any
costs to repair the facility to its original condition after the Company
relocates, the Company is required to pay a net amount of approximately $740,000
to the limited liability company at the termination date.

   The Company leases 20,000 square feet for its engineering staff in a facility
in El Dorado Hills, California from an unrelated third party.  The lease
commenced December 1, 1999 and has an expiration date of January 31, 2005.  In
November 2000, the Company agreed to lease an additional 11,500 square feet in
another facility in El Dorado Hills.  The lease commences on February 1, 2001
and has expiration date of January 31, 2007.

  The Company leases 61,300 square feet of warehouse space in Irvine,
California.  The lease commenced on April 1, 2000 and has an expiration date of
March 31, 2002.  The Company intends to vacate this property during the first
quarter of 2001.  The Company has also entered into an agreement to lease a
115,000 square foot warehouse facility in Santa Ana, California.  The lease
commences on April 15, 2001 and has an expiration date of March 31, 2007.

  The Company also leases equipment from unrelated parties.  Commitments to
shareholders and future minimum lease payments required under other operating
leases at December 31, 2000 are as follows:

<TABLE>
<CAPTION>
                                                                      Other
                                              Commitment to         Operating
                                               Shareholders           Leases            Total
                                             ----------------      -------------     ------------
  <S>                                          <C>                   <C>               <C>
  Fiscal Year:
     2001.................................        $ 1,240             $ 1,650          $ 2,890
     2002.................................             --               1,499            1,499
     2003.................................             --               1,350            1,350
     2004.................................             --               1,324            1,324
     2005.................................             --               1,080            1,080
     Thereafter...........................             --               1,248            1,248
                                                  -------             -------          -------
  Total future minimum lease payments.....        $ 1,240             $ 8,151          $ 9,391
                                                  =======             =======          =======
</TABLE>

  Total rent expense was $3,179, $3,707 and $2,616 for the years ended December
31, 2000, January 2, 2000  and January 3, 1999, respectively.

    The Company is subject to various legal proceedings from time to time as
part of the its business.  In September 1999, a former customer filed a lawsuit
against the Company.  The lawsuit alleged, among other things, that the Company
sold defective LMR products to this customer from 1994 to 1998.  The Company
denied these allegations of wrongdoing.  In December 2000, the parties settled
this lawsuit.  The settlement did not have a material adverse effect on the
Company.

                                       51
<PAGE>

                         POWERWAVE TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Note 13.  Earnings (Loss) Per Share

<TABLE>
                                                                       2000          1999          1998
                                                                     -------       -------       -------
  <S>                                                                <C>           <C>           <C>
  Basic:
     Basic weighted average common shares (in thousands).........      61,953        58,480        51,534
     Net income (loss)...........................................    $ 45,653      $ 20,265      $ (2,966)
                                                                     --------      --------      --------
     Basic earnings (loss) per share.............................    $   0.75      $   0.34      $  (0.06)
                                                                     ========      ========      ========

  Diluted:
     Basic weighted average common shares (in thousands).........      61,953        58,480        51,534
     Potential common shares (in thousands)......................       3,360         2,191            --
                                                                     --------      --------       -------
     Diluted weighted average common shares (in thousands).......      65,313        60,671        51,534
     Net income (loss)...........................................    $ 45,653      $ 20,265      $ (2,966)
                                                                     --------      --------      --------
     Diluted earnings (loss) per share...........................    $   0.71      $   0.33      $  (0.06)
                                                                     ========      ========      ========
</TABLE>


Note 14.  Segments

  Utilizing the management approach, the Company has broken down its business
based upon the RF frequency in which the product is utilized in, i.e., 800-1000
MHz, 1800-1900 MHz, 2000+ MHz and 400-450 MHz.  The Company does not allocate
operating expenses to these segments, nor does it allocate specific assets to
these segments.  Therefore, segment information reported includes only net
sales, cost of sales and gross profit (loss).

<TABLE>
<CAPTION>
                                                        Business Segments
                             ------------------------------------------------------------------------
                                 800-1000       1800-2000         2000+        400-450
                                   MHz             MHz             MHz           MHz          Total
                             ------------------------------------------------------------------------
<S>                           <C>               <C>             <C>         <C>              <C>
2000
Net sales                        $ 348,368      $   96,092      $  2,962    $        --     $ 447,422
Cost of sales                      224,858          75,627         4,610             --       305,095
                                 ---------      ----------      --------    -----------     ---------
Gross profit (loss)              $ 123,510      $   20,465      $ (1,648)   $        --     $ 142,327
                                 =========      ==========      ========    ===========     =========

1999
Net sales....................    $ 215,012      $   76,801      $     --    $       734     $ 292,547
Cost of sales................      144,644          62,706            --          2,955       210,305
                                 ---------      ----------      --------    -----------      --------
Gross profit (loss)..........    $  70,368      $   14,095      $     --    $    (2,221)     $ 82,242
                                 =========      ==========      ========    ===========      ========

1998
Net sales....................    $  77,355      $   18,835      $    970    $     3,071      $100,231
Cost of sales................       45,543          15,885           842          3,786        66,056
                                 ---------      ==========      --------    -----------      --------
Gross profit (loss)..........    $  31,812      $    2,950      $    128    $      (715)     $ 34,175
                                 =========      ==========      ========    ===========      ========
</TABLE>

  The following schedule presents an analysis of the Company's net sales based
upon the geographic location to which a product was shipped.  North American
sales include sales to the United States, Canada and Mexico. International sales
include sales to all other foreign countries.  Sales to Canada were $140.1
million, $88.0 million, and $22.4 million for the fiscal years ended December
31, 2000, January 2, 2000 and January 3, 1999, respectively.  Sales to Mexico
for the fiscal years ended December 31, 2000 and January 2, 2000 were $8.2
million and $2.9 million, while sales for the year ended January 3, 1999 were
insignificant.  For the fiscal years ended December 31, 2000, January 2, 2000
and January 3, 1999 sales to South Korea were $34.2 million, $62.2 million and
$30.1 million, respectively.  Sales to France for these periods were $40.3
million, $25.9 million and $6.1 million, respectively.

                                       52
<PAGE>

                         POWERWAVE TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

<TABLE>
<CAPTION>
                                                            North American     International       Total
                                                            --------------     --------------   ------------
<S>                                                         <C>                <C>              <C>
   Net sales for the year ended December 31, 2000.........     $ 352,733         $ 94,689        $ 447,422
   Net sales for the year ended January 2, 2000...........     $ 195,265         $ 97,282        $ 292,547
   Net sales for the year ended January 3, 1999...........     $  59,012         $ 41,219        $ 100,231
</TABLE>

  Total accounts receivable as of December 31, 2000, include 78% from United
States based customers and 10% from customers located in France.

  The majority of the Company's assets are located in the United States, in the
State of California.

  The Company's product sales have historically been concentrated in a small
number of customers.  During the years ended December 31, 2000, January 2, 2000
and January 3, 1999 sales to four customers totaled $347.6 million,  $212.6
million, and $68.7 million, respectively.


Note 15.  Other Information

  Accrued expenses and other current liabilities consist of the following:

<TABLE>
                                                          December 31,      January 2,
                                                             2000             2000
                                                          ------------      ----------
<S>                                                       <C>               <C>
   Accrued warranty costs...........................        $ 8,748          $ 7,264
   Accrued payroll and employee benefits............          8,716            9,216
   Other accrued expenses...........................          6,559            2,919
                                                            -------          -------
                                                            $24,023          $19,399
                                                            =======          =======
</TABLE>


Note 16.  Related Party Transactions

  As disclosed in Note 12, the Company leases its manufacturing and headquarters
facility and its Southern California sales and engineering facility from a
limited liability company owned by Alfonso G. Cordero, the founder and former
Chairman of the Company, a former employee, and a current employee, all of whom
are shareholders of the Company.  The Company also leases additional parking
spaces on a short-term basis from this limited liability company.  Rent paid to
this limited liability company was $1.1 million $0.8 million and $0.7 million
for the years ended December 31, 2000, January 2, 2000 and January 3, 1999,
respectively. Also, as discussed in Note 12, in August 2000, the Company entered
into an agreement with the limited liability company to terminate the leases of
both facilities effective March 31, 2001. The agreement also allowed for an
option to extend the termination date until June 30, 2001. In September 2000,
the Company exercised the option to extend the termination date to June 30,
2001.  In consideration for the termination of the remaining lease periods and
for any costs to repair the facility to its original condition after the Company
relocates, the Company is required to pay a net amount of approximately $740,000
to the limited liability company at the termination date.

  On April 28, 1998, the Company purchased $2.5 million of 13.75% Senior Secured
Bridge Notes due April 28, 2000 (the "Notes") from Metawave Communications
Corporation ("Metawave"), a supplier of "smart" antennas to the wireless
communications market and a customer of the Company, in a private offering.  The
President of the Company joined the Board of Directors of Metawave in May 1998.
The total amount raised in this private offering was $29.0 million.  The Notes
initially accrued interest at a rate of 13.75% per annum and interest was
payable semi-annually.  The Notes contained provisions to increase the rate of
interest during the life of the Notes if the Notes were not repaid prior to
maturity.  The Notes were secured by certain assets of Metawave and were repaid
in full on April 28, 1999.  Upon the issuance of the Notes, the Company received
related warrants to purchase  53,576 shares of Metawave Series D Preferred Stock
at $0.01 per share. The Company exercised these warrants in April

                                       53
<PAGE>

                         POWERWAVE TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

1999. These shares of Series D Preferred Stock were converted into 51,420 shares
of Metawave Common Stock upon Metawave's initial public offering in May 2000.
The market value of these securities is approximately $0.5 million at December
31, 2000, and is included in prepaid expenses and other current assets in the
accompanying consolidated balance sheets.

  In June 1997, the Company entered into an agreement to purchase 45% of the
capital stock of Teletransfer, S.A. de C.V., ("Teletransfer") a private Mexican
company operating several two-way dispatch radio services in Mexico.  The
Company invested a total of $600,000 for its 45% interest in the Teletransfer.
Due to ongoing operating losses at Teletransfer since 1997, the Company had
expensed the majority of its investment in Teletransfer.  Beginning in 1998, the
Company undertook efforts to sell its investment in Teletransfer.  In June 1999,
the Company sold its entire investment in Teletransfer to Mr. Alfonso G. Cordero
for $300,000.  Pursuant to the terms of the sale agreement, if within eighteen
(18) months of the sale Mr. Cordero was able to sell the investment in
Teletransfer at a price greater than $300,000, Mr. Cordero would pay to the
Company the amount the investment was sold for greater than $300,000 up to a
maximum additional amount of $300,000.  The eighteen months expired as of
December 31, 2000 and no additional amounts were received by the Company.


Note 17.  The HP Acquisition

  On October 9, 1998 the Company completed the acquisition of the Hewlett-
Packard Company's ("HP") RF power amplifier business and its manufacturing and
research and development facility in Folsom, California for approximately $65.9
million (the "HP Acquisition").  This business was part of HP's Wireless
Infrastructure Division and focused on the design and manufacture of RF power
amplifiers for wireless communications, including cellular, PCS and WLL.  The HP
Acquisition included certain assets, liabilities, operations and business
related to the design, manufacture and marketing of RF power amplifiers for use
in wireless communications.  Powerwave purchased all intellectual property
rights to the products as well as in-process research and development
activities.  The Company also assumed certain existing orders for the products
acquired.  The products acquired cover a broad range of wireless transmission
protocols, including CDMA, TDMA and GSM.  The total purchase price of
approximately $65.9 million, consisted of  approximately $57.4 million paid to
HP in cash and the balance related to acquisition costs and assumed liabilities.
Powerwave financed the acquisition utilizing borrowings of $25 million under a
$35 million secured credit facility which was dated as of September 30, 1998.
The Company utilized its existing cash balances for the remainder of the cash
purchase price paid.  This acquisition was accounted for in the fourth quarter
of fiscal 1998.

  The HP Acquisition was accounted for as a purchase and, accordingly, the total
purchase price was allocated to the assets acquired and liabilities assumed at
their estimated fair values.  The purchase price was allocated to tangible
assets acquired of approximately $34.7 million, developed technology of $11.5
million, in-process research and development of $12.4 million, other intangible
assets of $2.7 million and goodwill of approximately $4.6 million.  The
Company's consolidated financial statements for the year ended January 3, 1999
include a charge of $12.4 million for the write-off of acquired in-process
research and development expenses associated with the HP Acquisition.  The in-
process research and development expenses arose from new product projects that
were under development at the date of the acquisition and expected to eventually
lead to new products but had not yet established technological feasibility and
for which no future alternative use was identified.  The valuation of the in-
process research and development projects was based upon the discounted expected
future net cash flows of the products over the products expected life,
reflecting the estimated stage of completion of the projects and the estimate of
the costs to complete the projects.

  New product development projects underway at HP at the time of the acquisition
included, among others, single carrier CDMA technology, ultra-linear technology
for use in multi-carrier RF power amplifiers and advanced linear power module
technology for use in next generation wireless communications. The Company
estimated that these projects were approximately 75% complete at the date of the
acquisition in October 1998 and estimated that the cost to complete these
projects would aggregate approximately $2.5 million and would be incurred over a
two-year

                                       54
<PAGE>

                         POWERWAVE TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

period. The Company discontinued further development on the single
carrier CDMA project as of January 2, 2000 and discontinued further development
on the advanced linear power module technology project as of July 2, 2000.
Since the date of the acquisition the Company has incurred a total of $2.5
million of research and development expenses related to all three projects.  One
product incorporating the ultra-linear technology for use in multi-carrier RF
power amplifiers entered production during the third quarter of 2000.

  As part of the HP Acquisition, the Company assumed certain specific
liabilities from HP related to the acquired business, including certain warranty
obligations.  Since the date of the acquisition, the Company has incurred
approximately $1.3 million of warranty expenses which were offset against
specific liabilities assumed in the acquisition.  As of December 31, 2000
approximately $1.2 million remains of the assumed liability.

  As an additional part of the HP Acquisition, the Company assumed certain
specific liabilities related to the acquired business, including certain
retention bonuses for contracted HP employees.  Since the date of the
acquisition the Company has paid approximately $1.8 million for these retention
bonuses.  As of December 31, 2000, no amounts remain of the assumed liability.

  As part of the purchase price allocation, the Company recorded liabilities
related to moving and relocation costs associated with the planned closure of
the Folsom manufacturing facility.  During fiscal 1999, the Company paid
approximately $0.4 million related to these moving and relocation costs.  The
final closure of the Folsom facility occurred in December 1999.  As of December
31, 2000, no amounts remain of this liability.

  The Company's consolidated financial statements for the year ended January 3,
1999 reflect the one-time charge of $12.4 million related to the allocation of a
portion of the purchase price to in-process research and development expenses
associated with the HP Acquisition.  The total purchase price for the HP
Acquisition was allocated as follows:
<TABLE>
<CAPTION>
                                                                  Purchase Price
                                                                    Allocation
                                                                -----------------
<S>                                                             <C>
        Purchase Price Allocation
        Property, plant and equipment.......................        $ 18,211
        Inventory...........................................          16,500
        In-process research and development.................          12,400
        Developed technology................................          11,500
        Customer list.......................................           2,000
        Non-compete agreement...............................             500
        Workforce...........................................             200
        Goodwill............................................           4,553
                                                                    --------
                                                                    $ 65,864
                                                                    ========
</TABLE>

    The following unaudited pro forma condensed consolidated results of
operations assumes that the HP Acquisition had occurred on the first day of the
Company's fiscal year ended January 3, 1999. The pro forma condensed
consolidated results of operations is presented for information purposes only.
It is based on historical information and does not necessarily reflect the
actual results that would have occurred nor is it necessarily indicative of
future results of operations of the combined enterprise.
<TABLE>
<CAPTION>
                                                                   Year Ended
                                                                January 3, 1999
                                                                ---------------
<S>                                                             <C>
     Net sales..............................................      $ 165,324
     Net loss...............................................         (8,793)
     Loss per share:
        Basic...............................................           (.17)
        Diluted.............................................           (.17)
</TABLE>

                                       55
<PAGE>

                         POWERWAVE TECHNNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Note 18.  Selected Quarterly Financial Data (Unaudited)

<TABLE>
<CAPTION>
                                                                   Quarters Ended
                                               ------------------------------------------------------------
                                               April 2,        July 2,         October 1,      December 31,
                                                 2000           2000              2000              2000
                                               --------       --------          --------          --------
                                                      (in thousands, except per share amounts)
<S>                                            <C>            <C>               <C>               <C>
Fiscal 2000:
  Net sales................................... $103,854       $110,458          $111,877          $121,233
  Cost of sales...............................   71,397         74,504            75,337            83,857
                                               --------       --------          --------          --------
  Gross profit................................   32,457         35,954            36,540            37,376
  Operating expenses:
     Sales and marketing......................    5,065          5,382             5,122             5,648
     Research and development.................    9,008         10,627            11,009            10,410
     General and administrative...............    3,585          3,622             3,980             4,152
                                               --------       --------          --------          --------
  Total operating expenses....................   17,658         19,631            20,111            20,210
                                               --------       --------          --------          --------
  Operating income............................   14,799         16,323            16,429            17,166
  Other income, net...........................    1,210          1,332             1,529             1,992
                                               --------       --------          --------          --------
  Income before income taxes..................   16,009         17,655            17,958            19,158
  Provision for income taxes..................    5,683          6,267             6,375             6,802
                                               --------       --------          --------          --------
  Net income.................................. $ 10,326       $ 11,388          $ 11,583          $ 12,356
                                               ========       ========          ========          ========

  Basic earnings per share.................... $   0.17       $   0.19          $   0.19          $   0.20
  Diluted earnings per share.................. $   0.16       $   0.18          $   0.18          $   0.19
  Basic weighted average common shares........   60,936         61,332            62,230            63,313
  Diluted weighted average common shares......   64,284         64,784            65,402            66,784
</TABLE>


<TABLE>
<CAPTION>
                                                                  Quarters Ended
                                               -----------------------------------------------------------
                                               April 4,        July 4,          October 3,     January 2,
                                                 1999            1999              1999           2000
                                               -------         -------           -------         -------
                                                     (in thousands, except per share amounts)
<S>                                            <C>             <C>               <C>             <C>
Fiscal 1999:
  Net sales................................... $56,024         $68,493           $76,900         $91,130
  Cost of sales...............................  41,010          50,353            54,698          64,244
                                               -------         -------           -------         -------
  Gross profit................................  15,014          18,140            22,202          26,886
  Operating expenses:
     Sales and marketing......................   3,578           3,411             3,620           4,570
     Research and development.................   5,295           6,376             7,311           7,268
     General and administrative...............   2,691           2,654             3,464           3,279
                                               -------         -------           -------         -------
  Total operating expenses....................  11,564          12,441            14,395          15,117
                                               -------         -------           -------         -------
  Operating income............................   3,450           5,699             7,807          11,769
  Other income (expense), net.................    (219)            919               904           1,242
                                               -------         -------           -------         -------
  Income before income taxes..................   3,231           6,618             8,711          13,011
  Provision for income taxes..................   1,179           2,416             3,092           4,619
                                               -------         -------           -------         -------
  Net income.................................. $ 2,052         $ 4,202           $ 5,619         $ 8,392
                                               =======         =======           =======         =======

  Basic earnings per share....................   $0.04           $0.07             $0.09           $0.14
  Diluted earnings per share..................   $0.04           $0.07             $0.09           $0.13
  Basic weighted average common shares........  54,015          59,601            59,913          60,393
  Diluted weighted average common shares......  55,752          61,500            62,229          63,201
</TABLE>

                                       56
<PAGE>

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors

  John L. Clendenin, 66, has been non-executive Chairman of the Company's Board
of Directors since January 3, 1999 and has been a member of the Board of
Directors since May 1998.  Mr. Clendenin is a Chairman Emeritus of BellSouth
Corporation, a telecommunications holding company.  He served as Chairman of the
Board of BellSouth until December 31, 1997 and as President and Chief Executive
Officer from 1984 until his retirement at the end of 1996.  Prior to BellSouth,
Mr. Clendenin was President of Southern Bell from April 1981 to December 1983.
He also serves on the Board of Directors of Coca-Cola Enterprises, Inc., Equifax
Inc., National Service Industries, Inc., The Kroger Company, Springs Industries,
Inc., and The Home Depot, Inc.

  Gregory M. Avis, 42, has been a member of the Company's Board of Directors
since October 1995.  Mr. Avis has been a managing partner of Summit Partners, a
venture capital investment firm, since January 1990.  Mr. Avis also serves on
the Board of Directors of Ditech Communications Corp. and MCK Communications
Corp.

  Bruce C. Edwards, 47, joined the Company in February 1996 as President and
Chief Executive Officer and Director.  Mr. Edwards was Executive Vice President,
Chief Financial Officer and Director of AST Research, Inc., a personal computer
company, from July 1994 to December 1995 and Senior Vice President, Finance and
Chief Financial Officer of AST Research, Inc. from March 1988 to July 1994.  Mr.
Edwards currently serves on the Board of Directors of Emulex Corporation and
Metawave Communications Corporation.

  David L. George, 47, has been a member of the Company's Board of Directors
since November 1995. Mr. George is Executive Vice President of Operations at
Securicor Wireless, Inc.  Mr. George is a co-founder and served as Executive
Vice President and Chief Technical Officer of ComSpace Corporation, formerly
known as Unique Technologies, International, L.L.C., a wireless technology
development company, from February 1994 to June 2000.  Mr. George also serves on
the Board of Directors of ComSpace Corporation.  From November 1983 to February
1994, Mr. George served as Vice President, Director of Operations, Commercial
Division of Uniden America.  Mr. George has been a member of the Institute of
Electrical and Electronic Engineers (I.E.E.E.) for more than 20 years.

  Eugene L. Goda, 64, has been a member of the Company's Board of Directors
since November 1995.  From June 1997 to March 2000, Mr. Goda has served as
Chairman of the Board, President and Chief Executive Officer of Objectshare
Inc., a software company.  From October 1991 to October 1995, Mr. Goda served as
Chief Executive Officer of Simulation Sciences, Inc., a software company.  From
July 1989 to September 1991, he served as Chief Executive Officer of Meridian
Software Systems.

  Carl W. Neun, 57, has been a member of the Company's Board of Directors since
February 2000.  Mr. Neun is the Chairman of Wirex Communications, Inc. a
provider of server appliance software.  From 1993 to January 2000,  Mr. Neun was
Senior Vice President and Chief Financial Officer of Tektronix, Inc.  From 1987
to 1993 he was Senior Vice President of Administration and Chief Financial
Officer of Conner Peripherals, Inc.  Mr. Neun currently serves on the Board of
Directors of Planar Systems, RadiSys Corp, and Speed Fam-IPEC, Inc.

  Safi U. Qureshey, 50, has been a member of the Company's Board of Directors
since February 2000.  Mr. Qureshey was the cofounder and former Chief Executive
Officer and Chairman of AST Research, Inc. a personal computer manufacturer.
Mr. Qureshey is president of Skyline Ventures, which focuses on early stage
technology companies in Southern California.  Mr. Qureshey currently serves on
the Board of Directors of NextCard.  Mr. Qureshey is also President of the
Southern California Chapter of The Indus Entrepreneurs (TiE-SC) which is a
networking and mentoring organization for entrepreneurs.  Mr. Qureshey was also
a member of former President Clinton's Export Council and was a Regent's
Professor at the Graduate School of Management, University of California,
Irvine.

                                       57
<PAGE>

  Andrew J. Sukawaty, 45, has been a member of the Company's Board of Directors
since May 1998.  Mr. Sukawaty is President and Chief Operating Officer of
Callahan Associates International (UK), a global communications development and
operating company.  From September 1996 to June 2000, Mr. Sukawaty served as
President and Chief Executive Officer of Sprint PCS.  Prior to joining Sprint
PCS, Mr. Sukawaty was Chief Executive Officer of NTL Limited, a British
diversified broadcast transmission and communications company, since 1994.  From
1989 to 1994, he was Chief Operating Officer of Mercury One-2-One, a PCS service
provider in the United Kingdom.  Prior to 1989, Mr. Sukawaty held various
positions with US WEST, Inc., AT&T and Northwestern Bell.

Executive Officers

  Kevin T. Michaels, 42, joined the Company in June 1996 as Vice President,
Finance and Chief Financial Officer and was appointed Secretary in June 1996.
Mr. Michaels was named Senior Vice President, Finance in February 2000.  Prior
to joining the Company, Mr. Michaels worked for AST Research, Inc. for eight
years, most recently as Vice President, Treasurer from October 1995 to June
1996. From July 1991 to October 1995 Mr. Michaels was Treasurer of AST Research,
Inc. and from June 1988 to June 1991, he was Assistant Treasurer.

  Anthony J. Zuanich, 57, joined the Company in June 1998 as Senior Vice
President, Sales and Marketing.  Prior to joining the Company, Mr. Zuanich was
employed at Gregory Associates as Senior Vice President, Global Sales and
Marketing from July 1995 to December 1997.  From December 1973 to October 1994,
Mr. Zuanich held various executive positions with Triad Systems Corporation, an
integrated computer systems manufacturer.

Section 16(a) Beneficial Ownership Reporting Compliance

  Form 3 for Mr. Neun and Form 3 for Mr. Qureshey were filed on March 15, 2000,
which was subsequent to the initial due date of February 21, 2000.

ITEM 11.  EXECUTIVE COMPENSATION

  There is incorporated herein by reference the information required by this
Item included in the Company's Proxy Statement for the 2000 Annual Meeting of
Stockholders under the captions "Executive Compensation," "Compensation
Committee Interlocks and Insider Participation" and "Stock Performance Graph,"
which will be filed with the Securities and Exchange Commission no later than
120 days after the close of the fiscal year ended December 31, 2000.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

  There is incorporated herein by reference the information required by this
Item included in the Company's Proxy Statement for the 2000 Annual Meeting of
Stockholders under the caption "Security Ownership of Beneficial Owners," which
will be filed with the Securities and Exchange Commission no later than 120 days
after the close of the fiscal year ended December 31, 2000.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

  There is incorporated herein by reference the information required by this
Item included in the Company's Proxy Statement for the 2000 Annual Meeting of
Stockholders under the caption "Compensation Committee Interlocks and Insider
Participation" which will be filed with the Securities and Exchange Commission
no later than 120 days after the close of the fiscal year ended December 31,
2000.

                                       58
<PAGE>

                                    PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

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

      (1)  Index to Financial Statements

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

      (2)  Financial Statement Schedules

           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 presented in the consolidated
           financial statements or related notes.

<TABLE>
<CAPTION>

Exhibit
Number                                 Description
-------                                -----------
<C>          <S>
2.1          Amended and Restated Asset Purchase Agreement with Hewlett-Packard
             Company, dated as of October 9, 1998 (incorporated by reference to
             Exhibit 2.1 to the Company's Form 8-K as filed with the Securities
             and Exchange Commission on October 26, 1998).

2.2          Purchase and Sale Agreement and Joint Escrow Instructions with
             Hewlett-Packard Company, dated as of August 31, 1998. (incorporated
             by reference to Exhibit 2.2 to the Company's Form 8-K as filed with
             the Securities and Exchange Commission on October 26, 1998).

3.2          Form of Amended and Restated Certificate of Incorporation of the
             Company (incorporated by reference to Exhibit 3.2 to the Company's
             Registration Statement on Form-S-1 (File No. 333-13679) as filed
             with the Securities and Exchange Commission on December 3, 1996).

3.4          Form of Amended and Restated Bylaws of the Company (incorporated by
             reference to Exhibit 3.4 to the Company's Registration Statement on
             Form-S-1 (File No. 333-13679) as filed with the Securities and
             Exchange Commission on December 3, 1996).

3.5          Certificate of Amendment of Amended and Restated Certificate of
             Incorporation of Powerwave Technologies, Inc., a Delaware
             Corporation (incorporated by reference to Exhibit 3.1 to the
             Company's Form 10-Q as filed with the Securities and Exchange
             Commission on August 15, 2000).

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).

4.2          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).

10.1         Milcom International, Inc. 1995 Stock Option Plan (the "1995 Plan")
             (incorporated by reference to Exhibit 10.1 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).*

10.2         Form of Stock Option Agreement for 1995 Plan (incorporated by
             reference to Exhibit 10.2 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).*

10.3         Amendment No. 1 to 1995 Stock Option Plan (incorporated by
             reference to Exhibit 10.3 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).*

10.3.1       Amendment No. 2 to the 1995Plan (incorporated by reference to
             Exhibit 10.3.1 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).*
</TABLE>

                                       59
<PAGE>

<TABLE>
<C>          <S>
10.4         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).*

10.5         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).*

10.6         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).*

10.6.1       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).*

10.6.2       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).*

10.7         Powerwave Technologies, Inc. 1996 Director Stock Option Plan (the
             "Director Plan") (incorporated by reference to Exhibit 10.7 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).*

10.7.1       Amendment No.1 to Director Plan (incorporated by reference to
             Exhibit 4.7 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).*

10.8         Form of Stock Option Agreement for 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).*

10.9         Powerwave Technologies, Inc. Employee Stock Purchase Plan
             (incorporated by reference to Exhibit 10.9 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).*

10.9.1       Amendment No. 1 to Employee Stock Purchase Plan (incorporated by
             reference to Exhibit 10.9.1 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).*

10.11        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).

10.14        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).*

10.16        Standard Industrial/Commercial Single-Tenant Lease-Net, dated July
             1, 1996, between the Company and CNH, LLC, a California limited
             liability company (incorporated by reference to Exhibit 10.16 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).

10.24        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.)*

10.25        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.)*

10.26        Agreement for Purchase and Sale of Property and Joint Escrow
             Instructions by and between Boeing Realty Corporation and Powerwave
             Technologies, Inc., dated as of May 9, 2000 (incorporated by
             reference to Exhibit 2.1 to the Company's Form 8-K as filed with
             the Securities and Exchange Commission on June 9, 2000.)
</TABLE>

                                       60
<PAGE>

<TABLE>
<C>          <S>
10.27        First Amendment to Agreement for Purchase and Sale of Property and
             Escrow Instruction by and between Boeing Realty Corporation and
             Powerwave Technologies, Inc., dated May 12, 2000 (incorporated by
             reference to Exhibit 2.2 to the Company's Form 8-K as filed with
             the Securities and Exchange Commission on June 9, 2000.)

10.28        Loan Agreement dated as of May 26, 2000, by and among the Company,
             Comerica Bank-California, as Agent, and the lenders party thereto
             (incorporated by reference to Exhibit 10.3 to the Company's Form
             10-Q as filed with the Securities and Exchange Commission on August
             15, 2000.)

10.29        Revolving Note dated as of May 26, 2000, pursuant to the Loan
             Agreement dated as of May 26, 2000 by and among the Company,
             Comerica Bank-California, as Agent, and the lenders party thereto
             (incorporated by reference to Exhibit 10.4 to the Company's Form 10-
             Q as filed with the Securities and Exchange Commission on August
             15, 2000.)

21.1         Subsidiaries of the registrant

23.1         Independent Auditors' Consent

99.1         Press release dated June 1, 2000 (incorporated by reference to
             Exhibit 99.1 to the Company's Form 8-K as filed with the Securities
             and Exchange Commission on June 9, 2000.)
</TABLE>

* Indicates Item 14(a)(3) exhibit (management contract or compensation plan or
  arrangement).

  (b) Items reported on Form 8-K in Fourth Quarter

      None

  (c) Financial Statements Schedule

      Schedule II Valuation and Qualifying Accounts

  Powerwave Technologies and Powerwave are registered trademarks of Powerwave
  Technologies, Inc. The Powerwave Technologies logo is a trademark of Powerwave
  Technologies, Inc.

  All other products or service names mentioned herein may be trademarks or
  registered trademarks of their respective owners.

                                       61
<PAGE>

                                  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 23rd day of March 2001.

                                  POWERWAVE TECHNOLOGIES, INC.


                                  By:         /s/ BRUCE C. EDWARDS
                                       -------------------------------------
                                                  Bruce C. Edwards
                                       President and Chief Executive Officer

  We, the undersigned directors and officers of Powerwave Technologies, Inc., do
hereby constitute and appoint Bruce C. Edwards 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 in the capacities and on
the dates indicated.

<TABLE>
<CAPTION>
            Signature                      Title                            Date
            ---------                      -----                            ----
<S>                              <C>                                     <C>
    /s/ BRUCE C. EDWARDS         President, Chief Executive Officer      March 23, 2001
------------------------------    and Director (Principal
        Bruce C. Edwards          Executive Officer)


    /s/ KEVIN T. MICHAELS        Senior Vice President, Finance and      March 23, 2001
------------------------------    Chief Financial Officer
        Kevin T. Michaels         (Principal Accounting Officer)


    /s/ JOHN L. CLENDENIN        Chairman of the Board                   March 23, 2001
------------------------------
        John L. Clendenin

    /s/ GREGORY M. AVIS          Director                                March 23, 2001
------------------------------
        Gregory M. Avis

    /s/ EUGENE L. GODA           Director                                March 23, 2001
------------------------------
        Eugene L. Goda

    /s/ DAVID L. GEORGE          Director                                March 23, 2001
------------------------------
        David. L. George

    /s/ ANDREW J. SUKAWATY       Director                                March 23, 2001
------------------------------
        Andrew J. Sukawaty

    /s/ CARL W. NEUN             Director                                March 23, 2001
------------------------------
        Carl W. Neun

    /s/ SAFI U. QURESHEY         Director                                March 23, 2001
------------------------------
        Safi U. Qureshey
</TABLE>

                                       62
<PAGE>

                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                 Balance at   Charges to                  Balance at
                                                 Beginning    Costs and                     End of
             Description                         of Period     Expenses     Deductions      Period
             -----------                         ---------     --------     ----------      ------
<S>                                              <C>           <C>          <C>           <C>
Year ended December 31, 2000:
  Allowance for doubtful accounts...............   $2,988         256        $  (223)       $3,021
  Allowance for excess and obsolete inventory...   $6,192       4,211        $  (954)       $9,449

Year ended January 2, 2000:
  Allowance for doubtful accounts...............   $1,270      $1,756        $   (38)       $2,988
  Allowance for excess and obsolete inventory...   $5,084      $2,432        $(1,324)       $6,192

Year ended January 3, 1999:
  Allowance for doubtful accounts...............   $  769      $  525        $   (24)       $1,270
  Allowance for excess and obsolete inventory...   $2,518      $3,468(1)     $  (902)       $5,084
</TABLE>

(1) Includes inventory reserves recorded as part of the HP Acquisition.

                                       63