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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 30, 2001

                                       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 1, 2002, the aggregate market value of the voting stock of
the Registrant held by non-affiliates of the Registrant was $1,154,670,288
computed using the closing price of $17.71 per share of Common Stock on February
1, 2002 as reported by Nasdaq, based on the assumption that directors and
officers and more than 10% stockholders are affiliates. As of February 1, 2002
the number of outstanding shares of Common Stock, par value $.0001 per share, of
the Registrant was 65,198,774.

     Information required by Part III is incorporated by reference to portions
of the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be
held on April 24, 2002, which will be filed with the Securities and Exchange
Commission within 120 days after the close of the 2001 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 of and demand for 3G
products and the level of expected capital expenditures. Such forward-looking
statements are based on the beliefs of, 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 14-32. 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
results 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),
1800-2000 MHz and over 2000 MHz frequency ranges. 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 also have 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 30, 2001, our largest customer was Nortel Networks
Corporation and related entities ("Nortel"), which accounted for approximately
44% of our net sales. Also, for fiscal year 2001, our next five largest
customers (in alphabetical order), Cingular Wireless, LM Ericsson Telephone
Company ("Ericsson"), Lucent Technologies, Inc. ("Lucent"), Samsung Electronics
Co. Ltd. ("Samsung"), and Verizon Wireless each accounted for 5% or more 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

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adverse effect on our business, results of operations and financial condition.
See "Additional Factors That May Affect Future Results--We rely upon a few
customers for a significant amount of our revenues...; -- Our success is tied to
the growth of the wireless services 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. We have previously
experienced significant reductions in demand from customers, such as the
significant reductions in demand from Nortel during fiscal 2001 as compared to
fiscal 2000. That reduction in demand coupled with the industry-wide reduction
in demand for fiscal 2001 had an adverse effect on our business and results of
operations. Any future such reductions by any of our major customers would have
a material adverse effect on our business, results of operations and financial
condition. See "Additional Factors That May Affect Future Results-- "We rely
upon a few customers for a significant amount of our revenues..." 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 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 margins, we must achieve
manufacturing cost reductions and develop new products that incorporate advanced
features that may generate higher gross margins. See "Additional Factors That
May Affect Future Results--We rely upon a few customers for a significant amount
of our revenues...; --Our success is tied to the growth of the wireless services
market...; --Our average sales prices have declined...; 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 2001

     During the first quarter of fiscal 2001, we completed the retrofitting and
relocation to our new 360,000 square foot Southern California headquarters and
manufacturing facility located in Santa Ana, California.

     Powerwave received TL-9000 Quality System Certification in March of 2001.
The TL 9000 Quality System is a set of requirements established specifically by
the telecommunications industry to help ensure uniform standards of quality and
performance for the design, development, production, delivery, installation and
maintenance of products and services.

     On May 31, 2001, the Board of Directors adopted a Shareholder Rights Plan
to protect shareholder interests against takeover strategies that may not
provide maximum shareholder value. See "Note 9 to Notes to Consolidated
Financial Statements."

     On December 28, 2001, Powerwave completed the acquisition of Toracomm
Limited, a private engineering research and development company located in
Bristol, United Kingdom. Toracomm has been providing design and development
services to the wireless and mobile communications industries since 1997.
Toracomm offers a broad range of RF, digital signal processing (DSP), system
design and simulation expertise covering 2G, 2.5G and 3G wireless applications.
The total purchase price, including capitalized acquisition costs, was $5.3
million.

     As a result of continuing poor economic conditions and reductions in the
forecasted future demand fo products acquired through our 1998 acquisition of
the RF amplifier group of Hewlett Packard Company ("the HP Acquisition"), we
determined that the majority of the intangible assets associated with the HP
Acquisition were impaired during the fourth quarter of fiscal 2001, and
therefore, recorded a one-time non-cash charge of $6.5 million. This amount
included approximately $3.6 million recorded in cost of sales related to the
writedown of

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developed technology and approximately $2.9 million recorded in general and
administrative expenses related to the writedown of goodwill. This non-cash
charge is included in our fourth quarter and year-end 2001 operating results.
See "Impairment Charges" under Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

Industry Segments and Geographic Information

     Powerwave currently operates in one industry segment: the design,
manufacture and marketing of RF power amplifiers for use in wireless
communication networks. We currently market our products through our own
internal sales force as well as independent sales representatives. For the
purposes of Statement of Financial Accounting Standards No. 131, Disclosures
About Segments of an Enterprise and Related Information, we have provided a
breakdown of our sales utilizing the management approach in Note 16 of the
"Notes to Consolidated Financial Statements" under Item 8, "Financial Statements
and Supplementary Data." Utilizing the management approach, we have broken down
our sales 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 over 2000 MHz, which includes third generation ("3G")
frequency bands. A summary of our sales by geographic region is incorporated
herein by reference from Note 16 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 our 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 future generation
transmission standards. 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 purchasing volume could also
adversely affect 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 have declined...; and --We may fail to develop

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products that are sufficiently manufacturable" under Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Markets

     Powerwave provides RF power amplifiers that 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.

     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 that 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 networks typically operate in
the over 2000 MHz range utilizing only digital transmissions. 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 be amplified simultaneously through
a single multi-carrier RF power amplifier that 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.

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 and multi-carrier RF power amplifiers for UMTS networks (3G) operating
at 2100 MHz. Typical system applications include CDMA, cdma 2000, W-CDMA, TDMA,
and GSM protocols with output power ranging from 5 to 140 Watts (W).

     Our ultra-linear multi-carrier RF power amplifiers utilize feedforward
technology, and typically pre-distortion techniques. 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

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be installed in racks of three or four RF power amplifiers. Smart combiner
paralleling units allow for both higher power as well as 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 25W to 140W 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.

     Our multi-carrier RF power amplifiers range in price from $3,000 to over
$12,000 per RF power amplifier, based upon the specification requirements. Our
single carrier RF power amplifiers range in price from $500 to $3,000 per RF
power amplifier depending upon product type and specifications. We also sell
rack systems, cabinets and combiners for multiple RF power amplifiers, ranging
in price from $400 to over $100,000, depending upon specifications.

Customers

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

     For the fiscal year ended December 30, 2001, our largest customer was
Nortel, which accounted for approximately 44% of our net sales. Also, for fiscal
year 2001, our next five largest customers (in alphabetical order), Cingular
Wireless, Ericsson, Lucent, Samsung and Verizon Wireless, each accounted for 5%
or more 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--We
rely upon a few customers for a significant amount of our revenues...; --Our
success is tied to the growth of the wireless services 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.


     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 that can be subject to cancellation,
postponement or other types of delays. While certain customers provide us with
estimated forecasts of their future requirements, they are not typically bound
by such forecasts.

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     International sales (excluding North American sales) of our products
amounted to approximately 41%, 21%, and 33% of net sales for the years ended
December 30, 2001, December 31, 2000, January 2, 2000, 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. Since our foreign customers typically pay for our products
with U.S. Dollars, a strengthening of the U.S. Dollar as compared to a foreign
customer's local currency 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. In an effort to strengthen our
research and development skills, we acquired Toracomm Limited in December 2001.
This acquisition added a total of 23 employees, 19 of which are engineers. Our
total research and development staff consisted of 208 people as of December 30,
2001. Expenditures for research and development amounted to approximately $34.8
million in 2001, $41.1 million in 2000, $26.3 million in 1999. See "Additional
Factors That May Affect Future Results--The wireless communications
infrastructure equipment industry is extremely competitive" 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, 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 competitors include Allen Telecom, Inc., Andrew Corporation,
Celiant Corporation, Fujitsu Limited, Hitachi Kokusai Electric Inc., Japan Radio
Co., Ltd., Mitsubishi Electric Corporation and Spectrian Corporation. We also
compete with a number of other foreign and privately held companies throughout
the world, the subsidiaries of certain multinational corporations and the
amplifier manufacturing operations captive within certain of the leading
wireless infrastructure OEMs such as Ericsson, 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.

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     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. During 2000, 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. In the third
quarter of 2001, Lucent announced that it had formed a new company called
Celiant Corporation, which consisted of its former power amplifier design group,
with the intended purpose of competing directly in the independent power
amplifier marketplace. Any potential reduction in business from Ericsson or
Lucent 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 manufactures have internal RF
production capabilities; and --The wireless communications infrastructure
equipment industry is extremely 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 have declined..." under Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Backlog

     Our backlog of orders was approximately $134.1 million on December 30, 2001
compared to approximately $84.5 million on December 31, 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. While 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 cannot make any guarantee that such orders will actually be shipped
or that such orders will not be cancelled in the future. We make regular
adjustments to our backlog as customer delivery schedules change and in response
to changes in our production schedule. Accordingly, we stress that although
somewhat useful for scheduling production, backlog as of any particular date
should not be considered a reliable indicator of sales for any future period.

Manufacturing and Suppliers

     We purchased our headquarters and manufacturing facility located in Santa
Ana, California in the second quarter of 2000 and completed 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 boards, specialized subassemblies,
fabricated housings, relays, and small electric circuit components, such as
integrated circuits, semiconductors, resistors and capacitors. The majority of
our subassemblies and all printed circuit boards are made by third parties to
our specifications and are generally delivered to us for final assembly,
testing, and tuning in the completed product.

     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

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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 and received our TL-9000
certification in March of 2001. 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. 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 15 U.S. patents, and as of December 30, 2001 we
have 23 separate additional 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 that we have taken all legal measures to protect it,
we will continue to pursue all legal measures available to protect it and to
prohibit the unauthorized use of our proprietary technology. In spite of our
efforts, the use of our processes by a competitor could have a material adverse
effect on our business, financial condition and results of operations.

     Our ability to compete successfully and achieve future revenue growth will
depend, in part, on our ability to protect our proprietary technology and
operate without infringing upon the rights of others. We may not be able to
successfully protect our intellectual property, or our intellectual property or
proprietary technology may otherwise become known or be independently developed
by competitors. In addition, the laws of certain countries in which our products
are or may be sold 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 we, along with other companies in our industry,
may face more frequent infringement claims. Such litigation or claims of
infringement could result in substantial costs and diversion of resources and
could have a material adverse effect on our business, results of operations and
financial condition. A third party claiming infringement may also be able to
obtain an injunction or other equitable relief, which could effectively block
our ability or our customers' ability to distribute, sell or import allegedly
infringing products. If it appears necessary or desirable, we may seek licenses
from third parties covering intellectual property that we are allegedly
infringing. 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.

                                       9

<PAGE>

Employees

     As of December 30, 2001, Powerwave had 1,233 full and part-time employees,
including 838 in manufacturing, 70 in quality, 208 in research and development,
42 in sales and marketing and 75 in general and administration. None of our
employees are represented by a union. We believe that employee relations are
good.

Contract Personnel

     Powerwave also utilizes contract personnel hired from third party agencies.
As of December 30, 2001, Powerwave was utilizing approximately 344 contract
personnel, primarily in our manufacturing operations.

ITEM 2.  PROPERTIES

     Our Southern California headquarters and manufacturing facility is located
in Santa Ana, California. This facility has approximately 360,000 square feet,
of which 275,000 is available to us. The remaining 85,000 square feet is being
sublet to an unrelated third party. We also lease an additional 115,000 square
foot warehouse facility in Santa Ana, California. The lease on this warehouse
facility commenced on April 15, 2001 and has a expiration date of March 31,
2007. In addition, we lease a 61,300 square foot warehouse in Irvine, California
under a lease expiring in March 2002, which we vacated during the first quarter
of 2001. In connection with the move to our new headquarters, we terminated the
leases of our two former Irvine facilities as of June 30, 2001.

     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. In addition, we also lease an additional 11,500 square feet adjacent to
our El Dorado Hills facility. This lease expires on January 01, 2007. Our
European research and development staff are located in a 6,000 square foot
facility in Bristol, United Kingdom under a lease expiring in October 2009.

     Powerwave also leases four office suites for our regional sales and support
staff. Theses leases cover approximately 8,000 square feet and expire from 2003
through 2006.

     We believe that our 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 and threatened legal
proceedings from time to time as part of our business. Powerwave is not
currently party to any legal proceedings nor aware of any threatened 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 litigation,
regardless of its merits, could result in substantial costs to us and divert
management's attention from our operations. Such diversions could have an
adverse impact on our business, results of operations and financial condition.

                                       10

<PAGE>

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

     The Company's 2001 Annual Meeting of Shareholders was held on October 17,
2001 in Irvine, California. A quorum was declared present for the meeting. The
following matters were submitted to a vote of security holders, and all
proposals were approved by the majority of those voting:

     (1) The election of the following eight directors to hold office until the
         next annual meeting or until their successors are duly elected and
         qualified. All of the nominated directors were elected.

<TABLE>
         <S>                   <C>
         Gregory M. Avis       There were 56,987,541 votes for 278,159 votes withheld and no broker non-votes.
         John L. Clendenin     There were 57,211,581 votes for 49,219 votes withheld, and no broker non-votes.
         Bruce C. Edwards      There were 51,024,542 votes for 6,236,258 votes withheld, and no broker non-votes.
         David L. George       There were 57,215,302 votes for 45,498 votes withheld, and no broker non-votes.
         Eugene Goda           There were 57,212,883 votes for 47,917 votes withheld, and no broker non-votes.
         Carl W. Neun          There were 57,212,932 votes for 47,868 votes withheld, and no broker non-votes.
         Safi U. Qureshey      There were 57,207,263 votes for 53,537 votes withheld, and no broker non-votes.
         Andrew J. Sukawaty    There were 56,933,402 votes for 321,398 votes withheld, and no broker non-votes.
</TABLE>



     (2) The ratification of the appointment of Deloitte & Touche LLP as
         independent auditors of the Company for the 2001 fiscal year. The
         proposal was approved by the shareholders.


          There were 57,133,427 votes cast for, 110,804 votes opposed, 16,574
          votes abstaining and no broker non-votes.


                                     PART II

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

     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 2001
          First Quarter Ended April 1, 2001 .........   $   60.5625   $ 11.8750
          Second Quarter Ended July 1, 2001 .........   $   22.2900   $  8.7500
          Third Quarter Ended September 30, 2001 ....   $   21.0000   $ 10.1500
          Fourth Quarter Ended December 30, 2001 ....   $   21.3000   $  9.6500

     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
</TABLE>

     There were approximately 104 stockholders of record as of February 1, 2002.
We believe there are approximately 30,000 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.

                                       11

<PAGE>

     On May 31, 2001, the Board of Directors adopted a Shareholder Rights Plan
to protect shareholder interests against takeover strategies that may not
provide maximum shareholder value. A dividend of one preferred stock purchase
right ("Right") for each share of the Company's Common Stock was distributed to
shareholders of record on June 18, 2001. The Rights automatically attached to
outstanding shares so no separate certificates were issued. Each Right allows
its holder to purchase one one-hundredth of a share of Series A Jr.
Participating Preferred Stock at an exercise price of $115.00 per share. This
portion of a preferred share gives the shareholder approximately the same
dividend, voting and liquidation rights as one share of Common Stock. The Rights
are not currently exercisable, but will become exercisable if certain events
occur relating to a person or group acquiring or attempting to acquire 15
percent or more of the outstanding shares of Common Stock. The Rights expire on
June 1, 2011, unless redeemed or exchanged by the Company earlier.

     On December 28, 2001, we issued a total of 250,000 shares of our common
stock to the shareholder's of Toracomm Limited in connection with our
acquisition of the company. Based on a closing price of $18.19 on that day,
these shares had a value of approximately $4.5 million when issued. Exemption
from the registration provisions of the Securities Act of 1933 (the "Act") is
claimed among other exemptions, with respect to the issuance of the shares of
Common Stock, on the basis that such transaction met the requirements of
Regulation S under the Act.

     All compensation plans under which Powerwave's Common Stock is reserved for
issuance have been approved by our shareholders. The following table provides
summary information as of December 30, 2001 for all equity compensation plans of
Powerwave.

<TABLE>
<CAPTION>
                                                                                                          No. of Shares of
                                                                                                            Common Stock
                                                    Number of                                          Remaining Available for
                                              Shares of Common Stock                                    Future Issuance  under
                                            to be Issued upon Exercise   Weighted Average Exercise     the Equity Compensation
                                               of Outstanding Options   Price of Outstanding Options  Plans (excluding shares
                                                 Warrants and Rights      Warrants and Rights           reflected in column 1)
                                                 -------------------      -------------------         -------------------------
<S>                                         <C>                         <C>                           <C>
Equity Compensation Plans Approved by
Shareholders ..............................           8,022,211                  $ 17.39                   1,672,158

Equity Compensation Plans not Approved
by Shareholders ...........................                  --                       --                          --
                                                   ------------                  -------                  ----------

Total .....................................           8,022,211                  $ 17.39                   1,672,158
                                                   ============                  =======                  ==========
</TABLE>

                                       12




<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

     The following selected consolidated financial data have been derived from
Powerwave's consolidated statements of operations for the fiscal years ended
December 30, 2001, December 31, 2000 and January 2, 2000, and consolidated
balance sheets as of December 30, 2001 and December 31, 2000 which are included
herein, and have been audited by Deloitte & Touche LLP, independent auditors.
Powerwave's consolidated statements of operations for the fiscal years ended
January 3, 1999 and December 28, 1997 and consolidated balance sheets as of
January 2, 2000, January 3, 1999, and December 28, 1997 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 30,   December 31,   January 2,    January 3,  December 28,
                                                     2001         2000          2000          1999         1997
                                                -------------------------------------------------------------------
                                                              (in thousands, except per share data)
<S>                                             <C>            <C>          <C>            <C>          <C>
Consolidated Statements of Operations Data:

Net sales .....................................   $ 300,293    $ 447,422    $ 292,547      $  100,231    $ 119,709
Operating income (loss) .......................   $ (37,615)   $  64,717    $  28,725      $   (7,001)   $  23,257
Net income (loss) .............................   $ (20,512)   $  45,653    $  20,265      $   (2,966)   $  16,191
Basic earnings (loss) per share ...............   $    (.33)   $    0.75    $    0.34      $    (0.06)   $    0.32
Diluted earnings (loss) per share .............   $    (.33    $    0.71    $    0.33      $    (0.06)   $    0.31
Basic weighted average common shares ..........      64,197       61,953       58,480          51,534       50,874
Diluted weighted average common shares ........      64,197       65,313       60,671          51,534       52,308

Consolidated Balance Sheet Data:
Cash and cash equivalents .....................   $ 123,171    $ 128,733    $  76,671      $   13,307    $  67,433
Working capital ...............................   $ 186,255    $ 196,733    $ 118,566      $   35,210    $  67,512
Total assets ..................................   $ 363,017    $ 393,797    $ 223,038      $  131,985    $ 101,683
Long-term debt, net of current portion ........   $     239    $      42           --      $   17,621    $     659
Total shareholders' equity ....................   $ 316,235    $ 316,272    $ 169,779      $   71,070    $  75,480
</TABLE>

                                       13

<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.

Significant Accounting Policies

     We prepare the consolidated financial statements of Powerwave in conformity
with accounting principles generally accepted in the United States of America.
As such, we are required to make certain estimates, judgments and assumptions
that we believe are reasonable based upon the information available. These
estimates and assumptions affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of revenues and
expenses during the periods presented. The significant accounting policies which
we believe are the most critical to aid in fully understanding and evaluating
our reported financial results include the following:

   Revenue Recognition

     Powerwave recognizes revenue from product sales at the time of shipment and
passage of title. We also offer certain of our customers the right to return
products that do not function properly within a limited time after delivery. We
continuously monitor and track such product returns and we record a provision
for the estimated amount of such future returns, based on historical experience
and any notification we receive of pending returns. While such returns have
historically been within our expectations and the provisions established, we
cannot guarantee that we will continue to experience the same return rates that
we have in the past. Any significant increase in product failure rates and the
resulting credit returns could have a material adverse impact on our operating
results for the period or periods in which such returns materialize.

   Accounts Receivable

     We perform ongoing credit evaluations of our customers and adjust credit
limits based upon payment history and the customer's current credit worthiness,
as determined by our review of their current credit information. We continuously
monitor collections and payments from our customers and maintain a provision for
estimated credit losses based upon our historical experience and any specific
customer collection issues that we have identified. While such credit losses
have historically been within our expectations and the provisions established,
we cannot guarantee that we will continue to experience the same credit loss
rates that we have in the past. Since our accounts receivable are concentrated
in a relatively few number of customers, a significant change in the liquidity
or financial position of any one of these customers could have a material
adverse impact on the collectability of our accounts receivables and our future
operating results. See "Additional Factors That May Affect Future Results--We
rely upon a few customers for a significant amount of our revenues..."

   Inventories

     We value our inventory at the lower of the actual cost to purchase and/or
manufacture the inventory or the current estimated market value of the
inventory. We regularly review inventory quantities on hand and record a
provision for excess and obsolete inventory based primarily on our estimated
forecast of product demand and production requirements for the next twelve
months. As demonstrated during 2001, demand for our products can fluctuate
significantly. A significant increase in the demand for our products could
result in a short-term increase in the cost of inventory purchases while a
significant decrease in demand could result in an increase in the amount of
excess inventory quantities on hand. In addition, our industry is characterized
by rapid technological change, frequent new product development, and rapid
product obsolescence that could result in an increase in the amount of obsolete
inventory quantities on hand. Additionally, our estimates of future product
demand may prove to be inaccurate, in which case we may have understated or
overstated the provision required for excess and obsolete inventory. In the
future, if our inventory is determined to be overvalued, we would be required to
recognize such costs in our cost of goods sold at the time of such
determination. Likewise, if our inventory is determined to be undervalued, we
may have over-reported our costs of goods sold in previous periods and would be
required to recognize such additional operating income at the time of sale.
Therefore, although we make every effort to ensure the accuracy of our forecasts
of future product demand, any significant unanticipated changes in demand or
technological developments could have a significant impact on the value of our
inventory and our reported operating

                                       14

<PAGE>

results. See "Additional Factors That May Affect Future Results--We have
experienced, and will continue to experience, significant fluctuations in sales
and operating results from quarter to quarter... and --The wireless
communications infrastructure equipment industry is extremely competitive and is
characterized by rapid technological change..."

   Deferred Taxes

     We recognize deferred tax assets and liabilities based on the differences
between the financial statement carrying amounts and the tax bases of assets and
liabilities. Powerwave regularly reviews its deferred tax assets for
recoverability and establishes a valuation allowance based on historical taxable
income, projected future taxable income, and the expected timing of the
reversals of existing temporary differences. If we continue to operate at a loss
or are unable to generate sufficient future taxable income, or if there is a
material change in the actual effective tax rates or time period within which
the underlying temporary differences become taxable or deductible, we could be
required to establish a valuation allowance against all or a significant portion
of our deferred tax assets resulting in a substantial increase in our effective
tax rate and a material adverse impact on our operating results.

   Warranties

     We offer warranties of various lengths to our customers depending upon the
specific product and terms of the customer purchase agreement. We typically
negotiate varying terms regarding warranty coverage and length of warranty
dependant upon the product involved and the type of customer. We also offer
certain customers various warranty options which impacts the quoted price that
we charge customers for our product. Our standard warranties require us to
repair or replace defective product returned to us during such warranty period
at no cost to the customer. We record an estimate for warranty related costs
based on our actual historical return rates and repair costs at the time of
sale. While our warranty costs have historically been within our expectations
and the provisions established, we cannot guarantee that we will continue to
experience the same warranty return rates or repair costs that we have in the
past. A significant increase in product return rates, or a significant increase
in the costs to repair our products, could have a material adverse impact on our
operating results for the period or periods in which such returns or additional
costs materialize.

Results of Operations

     The following table summarizes Powerwave's results of operations as a
percentage of net sales for the fiscal years ended December 30, 2001, December
31, 2000 and January 2, 2000.

<TABLE>
<CAPTION>
                                                       As a Percentage of Net Sales
                                                 ---------------------------------------
                                                          Fiscal Years Ended
                                                 ---------------------------------------
                                                  December 30,   December 31, January 2,
                                                     2001          2000         2000
                                                 ---------------------------------------
<S>                                              <C>             <C>         <C>
Net sales .................................        100.0%         100.0%      100.0%
Cost of sales .............................         90.1           68.2        71.9
                                                  ------         ------      ------
Gross profit ..............................          9.9           31.8        28.1
Operating expenses:
     Sales and marketing ..................          4.6            4.7         5.2
     Research and development .............         11.6            9.2         9.0
     General and administrative ...........          6.3            3.4         4.1
                                                  ------         ------      ------
Total operating expenses ..................         22.5           17.3        18.3
                                                  ------         ------      ------
Operating income (loss) ...................        (12.6)          14.5         9.8
Other income, net .........................          1.9            1.3         1.0
                                                  ------         ------      ------
Income (loss) before income taxes .........        (10.7)          15.8        10.8
Provision (benefit) for income taxes ......         (3.9)           5.6         3.9
                                                  ------         ------      ------
Net income (loss) .........................         (6.8%)         10.2%        6.9%
                                                  ======         ======      ======
</TABLE>

                                       15

<PAGE>

Impairment Charges

     As a result of continuing poor economic conditions and reductions in the
forecasted future demand for products acquired through our HP Acquisition, we
recorded a non-cash charge of $6.5 million during the fourth quarter of fiscal
year 2001 for the impairment of intangible assets associated with the HP
Acquisition. This amount included approximately $3.6 million recorded in cost of
sales related to the writedown of developed technology and approximately $2.9
million recorded in general and administrative expenses related to the writedown
of goodwill. The amount of this impairment charge was determined by comparing
the carrying value of these intangible assets to the net present value of the
estimated future cash flows, based on our best estimates using appropriate
judgments and assumptions, from the operations to which these assets relate.
Powerwave did not record any similar impairment charges in fiscal years 2000 or
1999. Excluding this non-cash impairment charge and the related tax benefit of
$2.3 million, Powerwave would have reported a net loss of $16.3 million and a
basic loss per share of 26 cents for the fiscal year ending December 30, 2001.

Years ended December 30, 2001 and December 31, 2000

   Net Sales

     Our net sales are derived primarily from the sale of RF power amplifiers
for use in wireless communications networks. Sales decreased by 33% to $300.3
million for the year ended December 30, 2001 from $447.4 million for the year
ended December 31, 2000. We believe that the decline in net sales for fiscal
year 2001 compared to fiscal year 2000 was predominantly due to the affects of
the global economic recession that has impacted the wireless communications
industry resulting in reductions and delays in wireless infrastructure spending
during 2001. During 2001, we experienced lower demand for the majority of our
products which are sold through our original equipment manufacturer ("OEM")
customers, as well as weakness in demand from our direct network operator
customers. The weakness in demand occurred in both the 800-1000 MHz and the
1800-2000 MHz ranges. For the year ended December 30, 2001, total sales of
products for networks in the 800-1000 MHz range accounted for approximately 60%
of revenues or $181.1 million, compared to approximately 78% or $348.3 million
for the year ended December 31, 2000. Sales of products for networks in the
1800-2000 MHz range accounted for approximately 19% of revenues or $57.1 million
for the year ended December 30, 2001, compared to approximately 21% or $96.1
million for the year ended December 31, 2000. The decline in sales of 800-1000
MHz and 1800-2000 MHz products was partially offset by increased sales of
products for use in networks over 2000 MHz or the new 3G networks as they are
commonly known. Sales of products for use in networks over 2000 MHz accounted
for approximately 21% of sales or $62.1 million for the year ended December 30,
2001 compared to approximately 1% or $3.0 million for the year ended December
31, 2000. We currently are unable to predict when the global economic slowdown
in the wireless communications industry will cease to have a negative impact on
our revenues and results of operations.

     We track the geographic location of our sales based upon the location of
our customers. Since many of our customers purchase 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. Sales to customers in North America
accounted for the majority of our sales, comprising approximately 59% of
revenues or $176.3 million for the year ended December 30, 2001, compared to
approximately 79% of revenues or $352.7 million for the year ended December 31,
2000. Total international sales (excluding North American sales) accounted for
approximately 41% of revenues or $124.0 million for the year ended December 30,
2001, compared with approximately 21% or $94.7 million for the year ended
December 31, 2000. Total Asian sales accounted for approximately 15% of revenues
or $46.0 million for the year ended December 30, 2001 compared to approximately
10% of revenues or $44.6 million for the year ended December 31, 2000. Total
sales to Europe increased to $77.3 million or approximately 26% of revenues for
the year ended December 30, 2001, as compared to $48.2 million or approximately
11% of revenues for the year ended December 31, 2000. The increase in European
sales is due primarily to the beginning of shipments for new 3G products. See
"Additional Factors That May Affect Future Results--We rely upon a few customers
for a significant amount of our revenues...; --Our success is tied to the growth
of the wireless services market: and --There are many risks associated with
international operations...."

                                       16

<PAGE>

     For fiscal 2001, total sales to Nortel accounted for approximately 44% of
revenues and sales to the following customers (in alphabetical order), Cingular
Wireless, Ericsson, Lucent, Samsung and Verizon Wireless each accounted for 5%
or more 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, Motorola, 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. During fiscal 2001, several
major OEMs made multiple announcements that they were lowering their
expectations for wireless infrastructure demand for 2002. A number of factors
have caused delays and may cause future delays in wireless infrastructure
deployment schedules for both North American and international deployments,
including deployments in Europe, Asia, South America and other areas. Such
factors include economic slowdowns in the wireless operator's operating region,
delays in government approvals required for system deployment, reduced
subscriber demand for wireless services, high prices for new spectrum licenses,
increased competition and bidding between OEMs for infrastructure contracts and
delays in the development and delivery of telephone handsets and base station
equipment that are compatible with new wireless protocols. 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 or shift their demand to
alternative suppliers. 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 and
network operator customers. Such fluctuations have caused and may continue to
cause significant reductions in revenues and/or reduction in operating income,
which has harmed and may continue to harm our business, financial condition and
results of operations. See "Additional Factors That May Affect Future Results
--We rely upon a few customers for a significant amount of our revenues...;
--There are many risks associated with international operations...; and --We
have experienced, and will continue to experience, significant fluctuations in
sales and operating results from quarter to quarter...."

   Gross Profit

     Cost of sales consists primarily of raw materials, assembly and test labor,
overhead and warranty costs. Gross profit margins for fiscal 2001 and 2000 were
9.9% and 31.8%, respectively. The decrease in our gross profit margins during
fiscal 2001 as compared to fiscal 2000 is due to several factors, the most
significant being the large decline in revenues which resulted in lower
absorption of manufacturing overhead expenses and increased labor costs, when
viewed as a percentage of revenues. During the second half of 2000 we began to
significantly ramp up our production capacity to support anticipated increases
in demand for our products. While this demand did not materialize during 2001,
we incurred additional depreciation expenses associated with new capital
equipment that was purchased and placed in service during 2001 to support our
previously expected increases in demand. We continue to be negatively impacted
by the additional depreciation costs associated with the capital equipment
purchased to support the anticipated growth in demand. In addition, our 2001
gross profit margins were also impacted by $12.5 million in provisions for and
disposals of excess and obsolete inventories as a result of the reduction in
demand during fiscal 2001. For both fiscal 2001 and 2000, approximately $2.3
million of cost of goods sold represented the amortization of developed
technology acquired as part of the HP Acquisition. Our 2001 gross profit margin
was further reduced by a non-cash charge of $3.6 million during the fourth
quarter relating to the writedown of developed technology acquired through the
HP Acquisition. See "Impairment Charges."

     While we continue to strive for manufacturing and engineering cost
reductions to offset pricing pressures on our products, we cannot guarantee that
these cost reduction or redesign efforts will keep pace with price declines and
cost increases. Our third generation multi-carrier products have not obtained
the level of gross margins that our high powered multi-carrier products have
historically obtained. If we are unable to reduce our costs through our
manufacturing and/or engineering efforts, our gross margins and profitability
may continue to be adversely affected. For a discussion of effects of declining
average sales prices on our business, see "Additional Factors That May Affect
Future Results--Our average sales prices have declined....."

     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

                                       17

<PAGE>

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 and 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--The wireless
communications infrastructure equipment industry is extremely competitive....."

   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, provisions for credit losses and trade
show expenses. Sales and marketing expenses decreased by 35% to $13.7 million
for the year ended December 30, 2001 from $21.2 million for the year ended
December 31, 2000. As a percentage of sales, sales and marketing expenses were
4.6% and 4.7% for the years ended December 30, 2001 and December 31, 2000,
respectively. The decrease in sales and marketing expenses in absolute dollars
was primarily attributable to decreases in sales commissions and reduced
personnel costs. For fiscal 2001 and 2000, approximately $0.6 million and $0.8
million, respectively, in sales and marketing expenses represented the
amortization of a customer list and non-compete agreement acquired as part of
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 cellular, PCS, and next generation "2.5G"
and "3G" products. Research and development expenses can fluctuate from year to
year depending on several factors including new product introduction schedules,
prototype developments, hiring patterns and depreciation of capital equipment.
For the year ended December 30, 2001, research and development expenses
decreased by 15% to $34.8 million for the year ended December 30, 2001 from
$41.1 million. Research and development expenses as a percentage of sales for
the years ended December 30, 2001 and December 31, 2000 were 11.6% and 9.2%,
respectively. The decrease in research and development expenses in absolute
dollars was primarily due to reductions in material and engineering expenditures
as several of our design projects entered the production stage during 2001.

     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 23.3% to
$18.9 million for the year ended December 30, 2001 from $15.3 million for the
year ended December 31, 2000. General and administrative expenses as a
percentage of sales for the years ended December 30, 2001 and December 31, 2000
were 6.3% and 3.4%, respectively. The increase in general and administrative
expenses in absolute dollars during 2001 was primarily attributable to
approximately $5.1 million in one time expenses, of which $2.2 million related
to the move to our new Southern Californian headquarters and manufacturing
facility during the first quarter of 2001 and $2.9 million related to a non-cash
charge for the write-down of goodwill associated with the HP Acquisition during
the fourth quarter of 2001. See "Impairment Charges."

   Other Income

     We earned other income, net, of $5.6 million in fiscal 2001 compared to
$6.1 million for fiscal 2000. Other income consists primarily of interest
income, net of any interest expense. The decrease in other income is primarily
due to the decline in short-term interest rates on our cash investments.

   Provision (Benefit) for Income Taxes

     Our effective tax rate was 36.0% and 35.5% for the years ended December 30,
2001 and December 31, 2000, respectively. The slight increase in our effective
tax rate was the result of the availability of net operating loss carrybacks and
carryforwards.

                                       18

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Years ended December 31, 2000 and January 2, 2000

   Net Sales

     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 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 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 2000 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.

     Total North American sales accounted for approximately 79% of revenues or
$352.7 million for the year ended December 31, 2000, compared to approximately
67% of revenue or $195.3 million for the year ended January 2, 2000. 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.

     For fiscal 2000, total sales to Nortel accounted for approximately 47% of
revenues and sales to (in alphabetical order), Cingular Wireless, Ericsson, and
Verizon Wireless each accounted for 5% or more of revenues for the year. For
fiscal 1999, total sales to Nortel accounted for approximately 41% of our
revenues. In addition, sales to (in alphabetical order), Ericsson, LG, Lucent
and Samsung, each accounted for 5% of more of revenues for fiscal 1999.

   Gross Profit

     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.

   Operating 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.

     Research and development programs included 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 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

                                       19

<PAGE>

general and administrative expenses in absolute dollars is primarily
attributable to increased staffing costs associated with supporting our
increased revenues and personnel.

   Other Income

     The Company earned other income, net, of $6.1 million in fiscal 2000
compared to $2.8 million for fiscal 1999. 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.

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 30, 2001, we had working capital of
$186.3 million, including $123.2 million in cash and cash equivalents as
compared with working capital of $196.7 million at December 31, 2000, which
included $128.7 million in cash and cash equivalents.

     Our net accounts receivable decreased to $59.7 million at December 30, 2001
from $80.0 million at December 31, 2000, consistent with the significant
decreases in our revenues during fiscal 2001 as compared to fiscal 2000. Net
inventory decreased to $33.5 million at December 30, 2001, from $51.3 million at
December 31, 2000 consistent with our decreased volume. Also consistent with our
decreased volume, net accounts payable decreased to $22.7 million at December
31, 2001 from $50.8 million at December 31, 2000. Cash provided by operations
was approximately $6.3 million in fiscal 2001, compared with cash provided by
operations of $57.6 million in fiscal 2000 and cash provided by operations of
$39.6 million in fiscal 1999. The decrease in cash flow from operating
activities from 2000 to 2001 is primarily due to our net loss from operations.

     Total capital spending for fiscal 2001 was approximately $21.6 million.
During 2001, we spent approximately $9.0 million on capital improvements for our
Santa Ana facility. The majority of the remaining amount of capital spending
during fiscal 2001 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 including $35.3 million for the
original purchase of, and approximately $8.0 million in capital improvements
for, our Santa Ana 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.

     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 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. We sold these shares in February 2001, at an
average price per share, net of commissions of $11.06, and recognized a gain of
approximately $0.6 million. This gain was included in other income, net during
the first quarter of 2001.

     Net cash provided by financing activities was $9.2 million for fiscal 2001,
compared with $71.5 million for fiscal 2000. For year ended December 30, 2001,
net cash provided by financing activities primarily represents

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<PAGE>

proceeds from our employee's stock option exercises as well as proceeds from the
issuance of common stock under our Employee Stock Purchase Plan. 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.

     We currently have a $20 million revolving credit agreement with Comerica
Bank-California. The credit facility provides for an unsecured 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 (4.75% at
December 30, 2001) or the bank's LIBOR rate plus an applicable LIBOR Margin of
1.25% or 1.50%, based upon our debt leverage ratio. The revolving credit
facility terminates on May 31, 2002. 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. At December 30,
2001 we were in compliance with all covenants contained in the revolving credit
facility. There were no amounts outstanding and the full $20 million of the
Revolving Commitment Amount was available to us at December 30, 2001.

     We had cash and cash equivalents of $123.2 million at December 30, 2001,
compared with $128.7 million at December 31, 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 2002, we currently
anticipate capital spending on property and equipment to be in the range of
approximately $10 million, and we plan to fund these expenditures from our
existing cash balances. In the past, we have occasionally 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 do so selectively in the future. We may require additional funds in the
future to support our working capital requirements or for other purposes, and we
may seek to raise such additional funds through the sale of public or private
equity and/or debt financings as well as 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
shareholders when we may require it.

Disclosure About Foreign Currency Risk

     We have operations in France, South Korea and England that incur foreign
currency expenses. These expenses expose us to foreign currency transactions and
result in gains and losses from such transactions. In addition, a significant
portion of our revenues are derived from international sources, with our
international customers accounting for approximately 41% of fiscal 2001 net
sales, 21% of fiscal 2000 net sales, and 33% of our fiscal 1999 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 and Argentine Peso. Although we currently invoice
all of our customers in U.S. Dollars, changes in the 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.

                                       21

<PAGE>

     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...."

Disclosure About Terrorist Risk

     We did not experience any direct impact from the September 11, 2001
terrorist attacks on the United States other than minor delays in certain
material shipments due to disruptions in the air transportation system. These
delays did not have a material impact on us. We are not able to estimate or
predict what long-term impact these events will have on us, our customers, our
suppliers and market demand for our products. Since all of our manufacturing
capability is located in the State of California, we may be exposed to risks
which could include production delays or shutdowns due to terrorist attacks. Any
reduction in demand or loss of customers could have a negative impact on our
results of operations and future sales.

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, remained legal tender through December 31, 2001. Beginning on
January 1, 2002, euro-denominated bills and coins are now 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 most 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 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

     In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 141, Business Combinations ("SFAS 141") and Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets ("SFAS 142").
They also issued Statement of Financial Accounting Standards No. 143, Accounting
for Obligations Associated with the Retirement of Long-Lived Assets ("SFAS
143"), and Statement of Financial Accounting Standards No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets ("SFAS 144"), in August and
October 2001, respectively.

                                       22

<PAGE>

     SFAS 141 requires that all business combinations initiated after June 30,
2001 be accounted for under the purchase method. SFAS 141 superseded APB Opinion
No. 16, Business Combinations, and Statement of Financial Accounting Standards
No. 38, Accounting for Preacquisition Contingencies of Purchased Enterprises and
is effective for all business combinations initiated after June 30, 2001.

     SFAS 142 addresses the financial accounting and reporting for acquired
goodwill and other intangible assets. Under SFAS 142, the Company is no longer
required to amortize goodwill and other intangible assets with indefinite lives
but will be required to subject these assets to periodic testing for impairment.
SFAS 142 supersedes APB Opinion No. 17, Intangible Assets, effective for fiscal
years beginning after December 15, 2001. The Company is currently evaluating the
provisions of SFAS 142 but expects that the provisions of SFAS 142 will not have
a material impact on its consolidated results of operations and financial
position upon adoption.

     SFAS 143 establishes accounting standards for the recognition and
measurement of an asset retirement obligation and its associated asset
retirement cost. It also provides accounting guidance for legal obligations
associated with the retirement of tangible long-lived assets. SFAS 143 is
effective for fiscal years beginning after June 15, 2002, with early adoption
permitted. The Company is currently evaluating the provisions of SFAS 143 but
expects that the provisions of SFAS 143 will not have a material impact on its
consolidated results of operations and financial position upon adoption.

     SFAS 144 establishes a single accounting model for the impairment or
disposal of long-lived assets and new standards for reporting discontinued
operations. SFAS 144 superseded Statement of Financial Accounting Standards No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of and APB Opinion No. 30, Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions. The
provisions of SFAS 144 are effective in fiscal years beginning after December
15, 2001 and, in general, are to be applied prospectively. The Company is
currently evaluating the provisions of SFAS 144 but expects that the provisions
of SFAS 144 will not have a material impact on its consolidated results of
operations and financial position upon adoption.

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 in this
document, which reflect our current expectations. These factors include the
following:

          .  the ability to add new customers to reduce our dependence on any
             one customer;
          .  the ability to maintain our existing customers;
          .  industry specific factors, including a slowdown in the demand for
             wireless communications and RF power amplifiers;
          .  the impact of any reduction in demand for our products;
          .  the ability to manage expense levels given reductions in demand;
          .  the ability to increase demand for our products from major wireless
             infrastructure original equipment manufacturers, or 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;
          .  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;
          .  the ability to manage future product repairs; and
          .  the ability to accurately anticipate customer demand.

                                       23

<PAGE>

   We rely upon a few customers for a significant amount of our revenues and 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.

     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 OEMs, such as Ericsson, LG, Lucent, Motorola, Nokia, Nortel and
Samsung, as well as major operators of wireless networks, such as ALLTEL
Corporation, 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 the year ended December 30, 2001, our largest customer, Nortel,
accounted for approximately 44% of our net sales or $130.7 million. During
fiscal 2001, a number of major OEMs have made multiple announcements lowering
their expectations for wireless infrastructure demand for 2002. The resulting
significant reductions in demand by our OEM customers has and will continue to
have an adverse effect on our business, results of operations and financial
condition. For the fourth quarter of 2001, our next two largest customers (in
alphabetical order) Cingular Wireless and Ericsson, each accounted for 10% or
more of our net sales.

     There are several examples of the risks related to our customer
concentration. One example is the reduction of $80 million in our sales to
Nortel for fiscal 2001 compared to 2000. A second example was in 1998 when we
had a significant geographic customer 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. For
fiscal 2001, our South Korean customers accounted for approximately 13% of our
net sales or $39.5 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 the third quarter of 2001, Lucent announced that
it had split off its internal power amplifier group to a new private entity
called Celiant Corporation. During fiscal 2000, Ericsson purchased Microwave
Power Devices, Inc., 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 purchasers are impacted by their current view of wireless
infrastructure deployments and orders for our products 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 in large
quantities over a short period of time, which may cause demand for our products
to change rapidly. Due to these and other 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 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

                                       24

<PAGE>

a material adverse effect on our business, results of operations and financial
condition.

   We have experienced, and will continue to experience, significant
   fluctuations in sales and operating results from quarter to quarter. Our
   quarterly results fluctuate due to a number of factors, including:

       .     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;
       .     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.

     Our sales to customers are usually made under purchase orders with short
delivery requirements. While we receive periodic order forecasts from our major
customers, such 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. 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. 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 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 and other factors, our past results are not reliable
indicators of our future performance. Future revenues and operating results may
not meet the expectations of 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 and you may not be
able to resell shares of our stock at or above the price you paid for such
shares."

   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 has
also 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

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<PAGE>

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 success is tied to the growth of the wireless services market, and if
   there is a slower than expected increase in the size of this market, sales of
   our products would be materially adversely affected.

     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.

     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;
       .     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, and a failure by any of these
   sources to provide components of sufficient quality and quantity, on a timely
   basis, would cause us to delay product shipments, which could result in
   delayed or lost revenues or customer dissatisfaction.

     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, are discontinued or are 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.

     As a result of our reliance on certain single-sourced customized
components, an abrupt reduction in customer demand could result in excess
inventories of such components due to the nature of the volume purchasing

                                       26

<PAGE>

agreements that we utilize 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 wireless communications infrastructure equipment industry is extremely
   competitive and is characterized by rapid technological change, frequent new
   product development, rapid product obsolescence, evolving industry standards
   and significant price erosion over the life of a product. If we are unable to
   compete effectively, our business would be harmed.

     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 currently compete favorably with respect to these
characteristics, this may change in the future. 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 Allen Telecom, Inc., Andrew Corporation,
Celiant Corporation, Fujitsu Limited, Hitachi Kokusai Electric Inc., Japan Radio
Co., Ltd., Mitsubishi Electric Corporation 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, 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, Motorola, Nokia and Samsung.
These companies regularly evaluate whether to manufacture their own RF power
amplifiers rather than purchase them from us. In addition, various companies
could also compete directly 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.

   Our failure to enhance our existing products or to develop and introduce new
   products that meet changing customer requirements and evolving technological
   standards would adversely impact our ability to sell our products.

     To succeed, we must improve current products and develop and introduce new
products that are competitive in terms of price, performance and quality. These
products must adequately address the requirements of wireless infrastructure
manufacturing customers and end-users.

     To develop new products, we invest in the research and development of 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.

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<PAGE>

     We also continue efforts to improve our existing cellular, PCS and 3G 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.

     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, which would adversely impact our ability to
   sell our products.

     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, if we are unable to attract additional trained technicians, or
if 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 manufactures have internal RF power amplifier production
capabilities and if these manufacturers begin offering their own RF power
amplifiers, demand for our products would be reduced, and our business,
financial condition and results of operations would be materially adversely
affected."

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

     Competition for personnel, particularly qualified engineers, is intense,
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 that we have taken all legal measures to protect it,
we will continue to pursue all legal measures available to protect it and to
prohibit the unauthorized use of our proprietary technology. In spite of our
efforts, the use of our processes by a competitor could have a material adverse
effect on our business, financial condition and results of operations.

     There are many risks associated with international operations, including
the following:

       .     terrorists attacks on American companies;
       .     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;
       .     longer accounts receivable collection cycles;
       .     currency fluctuations;

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<PAGE>

       .     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.

     For fiscal years 2001, 2000, and 1999, international revenues (excluding
North American sales) accounted for approximately 41%, 21%, and 33%,
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.

     We have traditionally invoiced all of our international 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. In addition, in December 2001,
we acquired Toracomm Limited, a company located in Bristol, United Kingdom. Due
to this acquisition, we will incur foreign currency expenses that will expose us
to foreign currency transactions and resulting gains and losses from such
transactions which will be included in our operating results.

     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.


   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 and we are not able to guarantee that we or any of
   our suppliers located in California will not experience any significant
   interruptions in electrical service to our or their facilities in the future.

     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. Pacific Gas & Electric has declared voluntary bankruptcy
in order to restructure its outstanding obligations, and Southern California
Edison continues to operate with the potential risk of a future bankruptcy
filing. 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 1, 2002, we have not experienced any significant
interruptions in electrical service to our facilities. We currently do not have
backup power generators or alternate sources of power to support our needs in
the event 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. The loss of electrical service would cause a temporary shutdown of our
operations resulting in lost production and may require 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

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<PAGE>

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. As a result, we have incurred significant increases in our electricity
costs which are negatively impacting our results of operations. If wholesale
prices continue to increase and these increases are passed on to end users, the
operating expenses associated with our facilities will increase, which could
further harm our results of operations.

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

     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 any OEM's product. 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. Individual wireless network operators can also 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 and if these manufacturers begin offering their own
   RF power amplifiers, demand for our products would be reduced and our
   business, financial condition and results of operations would be materially
   adversely affected.

     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. In 2000, 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. During the third quarter of
2001, Lucent announced the formation of Celiant Corporation for the specific
purpose of competing directly in the independent power amplifier marketplace.
Even if we are successful in selling our products to OEM 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.

   Protection of our intellectual property is limited and we are at risk of
   third-party claims of infringement that could harm our competitive position.

     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 15 U.S. patents, and we currently have 23 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

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<PAGE>

work for competitors in the past. While we believe that we have adequately
protected our proprietary technology, and we believe that we have taken all
legal measures to protect it, we may not be successful in prohibiting the
unauthorized use of our proprietary technology or the use of our processes by a
competitor. Any such unauthorized use of our proprietary technology 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 we,
along with other companies in our industry, may face more frequent infringement
claims. Such claims, whether or not valid, could result in substantial costs and
diversion of our resources. See "We are at risk of litigation which could result
in substantial costs to us and adversely impact our operations."

     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:

 .    a determination or allegation that systems or devices relying on or
     incorporating our products 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.

   The communications industry is heavily regulated and we must obtain
   regulatory approvals to manufacture and sell our products and our customers
   must obtain approvals to operate our products. Any failure or delay by us or
   any of our customers to obtain such approvals, would adversely impact our
   ability to sell 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.

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   Our stock price has been and may continue to be volatile and you may not be
   able to resell shares of our stock at or above the price you paid for such
   shares.

     The price of shares of our Common Stock has exhibited high levels of
volatility with significant volume and price fluctuations, which makes our
Common Stock unsuitable for many investors. 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 shares 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 or customers;
       .     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; o changes in the wireless
             communications industry; and
       .     general market conditions.

   We are at risk of litigation which could result in substantial costs to us
and adversely impact our operations.

     We are not currently party to any legal proceedings or threatened
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. Any potential litigation, regardless of its
merits, could result in substantial costs to us and divert our attention from
our operations. Such diversion could have an adverse impact on our business,
results of operations and financial condition.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Our financial instruments include cash and cash equivalents and long-term
debt. At December 30, 2001, the carrying values of our financial instruments
approximated their fair values based on current market prices and rates.

     Currently, we do not enter into derivative financial instruments and we do
not currently have any significant direct foreign currency exposure. Aside from
operating costs of our foreign operations in South Korea, France and England, we
do not transact business in foreign currencies. As a result, we do not have any
significant direct foreign currency exposure at December 30, 2001.

     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
significant 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 have fallen significantly during 2001. 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. During fiscal 2001, we
have seen significant interest rate reductions as the U.S. Federal Reserve has
aggressively lowered short-term interest rates. This has contributed to a
significant reduction in interest income from our cash investments. We currently
anticipate that our interest income will continue to decline as a result of this
lower interest rate environment.

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     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, 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. 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 addition, certain transistors and
semi-conductors are regularly revised or changed by their manufacturers, which
may result in a requirement for us to redesign a product which utilizes such
components or cease to produce such products. In such events, 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 affect our business, results of operations and financial
condition.

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<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Index to Financial Statements/Schedule:

<TABLE>
<CAPTION>
Consolidated Financial Statements                                                         Page
---------------------------------                                                         ----
<S>                                                                                       <C>
Independent Auditors' Report ...........................................................   35
Consolidated Balance Sheets--December 30, 2001 and December 31, 2000 ...................   36
Consolidated Statements of Operations--Three years ended December 30, 2001 .............   37
Consolidated Statements of Comprehensive Operations--Three years ended December 30, 2001   38
Consolidated Statements of Shareholders' Equity--Three years ended December 30, 2001 ...   39
Consolidated Statements of Cash Flows--Three years ended December 30, 2001 .............   40
Notes to Consolidated Financial Statements .............................................   42

Financial Statement Schedule
Schedule II--Valuation and Qualifying Accounts--Three years ended December 30, 2001 ....   63
</TABLE>



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

     None.

                                       34

<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 30, 2001 and
December 31, 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 30, 2001. 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 30, 2001 and December 31, 2000, and the results
of their operations and their cash flows for each of the three years in the
period ended December 30, 2001, 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 17, 2002

                                       35

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                  December 30,   December 31,
                                                                                      2001           2000
                                                                                  ------------   ------------
<S>                                                                               <C>            <C>
                                      ASSETS

Current Assets:
     Cash and cash equivalents ..................................................   $ 123,171    $ 128,733
     Accounts receivable, net of allowance for doubtful accounts of $3,143 and
       $3,021 at December 30, 2001 and December 31, 2000, respectively ..........      59,732       80,006
     Inventories ................................................................      33,525       51,275
     Prepaid expenses and other current assets ..................................       5,595        5,413
     Deferred tax assets ........................................................      10,707        8,553
                                                                                    ---------    ---------
          Total current assets ..................................................     232,730      273,980

Property, plant and equipment ...................................................     144,540      128,638
Less accumulated depreciation and amortization ..................................     (42,748)     (26,980)
                                                                                    ---------    ---------
     Net property, plant and equipment ..........................................     101,792      101,658
                                                                                    ---------    ---------
Intangible assets, net ..........................................................       5,961       10,777
Deferred tax assets .............................................................      21,194        5,436
Other non-current assets ........................................................       1,340        1,946
                                                                                    ---------    ---------
TOTAL ASSETS ....................................................................   $ 363,017    $ 393,797
                                                                                    =========    =========

                       LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
     Accounts payable ...........................................................   $  22,692    $  50,829
     Accrued expenses and other current liabilities .............................      20,928       24,023
     Current portion of long-term debt ..........................................         659           96
     Income taxes payable .......................................................       2,196        2,299
                                                                                    ---------    ---------
          Total current liabilities .............................................      46,475       77,247

Long-term debt, net of current portion ..........................................         239           42
Other non-current liabilities ...................................................          68          236
                                                                                    ---------    ---------
          Total liabilities .....................................................      46,782       77,525
                                                                                    ---------    ---------

Commitments and Contingencies (Note 11) .........................................          --           --

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, 65,081 and
     63,509 shares issued and outstanding at December 30, 2001 and December 31,
     2000, respectively .........................................................     242,100      221,349
     Accumulated other comprehensive income .....................................          --          276
     Retained earnings ..........................................................      74,135       94,647
                                                                                    ---------    ---------
          Total shareholders' equity ............................................     316,235      316,272
                                                                                    ---------    ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ......................................   $ 363,017    $ 393,797
                                                                                    =========    =========
</TABLE>

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

                                       36

<PAGE>

                          POWERWAVE TECHNOLOGIES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                Years Ended
                                                                  -----------------------------------------
                                                                  December 30,  December 31,     January 2,
                                                                     2001          2000            2000
                                                                  ------------  ------------    -----------
<S>                                                               <C>           <C>             <C>
Net sales ...................................................     $ 300,293      $ 447,422      $ 292,547
Cost of sales ...............................................       270,507        305,095        210,305
                                                                  ---------      ---------      ---------
Gross profit ................................................        29,786        142,327         82,242
Operating expenses:
     Sales and marketing ....................................        13,733         21,217         15,179
     Research and development ...............................        34,750         41,054         26,250
     General and administrative .............................        18,918         15,339         12,088
                                                                  ---------      ---------      ---------
          Total operating expenses ..........................        67,401         77,610         53,517
                                                                  ---------      ---------      ---------
Operating income (loss) .....................................       (37,615)        64,717         28,725
Other income, net ...........................................         5,565          6,063          2,846
                                                                  ---------      ---------      ---------
Income (loss) before income taxes ...........................       (32,050)        70,780         31,571
Provision (benefit) for income taxes ........................       (11,538)        25,127         11,306
                                                                  ---------      ---------      ---------
Net income (loss) ...........................................     $ (20,512)     $  45,653      $  20,265
                                                                  =========      =========      =========

Basic earnings (loss) per share .............................     $    (.33)     $    0.75      $    0.34
                                                                  =========      =========      =========
Diluted earnings (loss) per share ...........................     $    (.33)     $    0.71      $    0.33
                                                                  =========      =========      =========
Basic weighted average common shares ........................        64,197         61,953         58,480
                                                                  =========      =========      =========
Diluted weighted average common shares ......................        64,197         65,313         60,671
                                                                  =========      =========      =========
</TABLE>

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

                                       37

<PAGE>

                          POWERWAVE TECHNOLOGIES, INC.
               CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                          Years Ended
                                                                           -----------------------------------------
                                                                           December 30,   December 31,    January 2,
                                                                              2001           2000           2000
                                                                           ------------  -------------    ----------
<S>                                                                        <C>           <C>              <C>
Net income (loss) .....................................................    $(20,512)         $ 45,653     $ 20,265

Other comprehensive income (loss), net of tax:

   Unrealized gain on available-for-sale securities ...................          --               276           --
   Reclassification of unrealized gains for amounts included in
     net income .......................................................        (276)               --           --
                                                                           --------          --------     --------
Other comprehensive income (loss) .....................................        (276)              276           --
                                                                           --------          --------     --------
Comprehensive income (loss) ...........................................    $(20,788)         $ 45,929     $ 20,265
                                                                           ========          ========     ========
</TABLE>

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

                                       38

<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 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
Issuance of Common Stock related to
the exercise of stock options ............      1,177       6,605           --           --           --           --        6,605
Tax benefit related to stock option
exercises ................................         --       6,536           --           --           --           --        6,536
Compensation expense related to stock
option grants ............................         --          59           --           --           --           --           59
Issuance of Common Stock related to
the Employee Stock Purchase Plan .........        145       2,857           --           --           --           --        2,857
Tax benefit related to the sale of
shares purchased under the Employee
Stock Purchase Plan ......................         --         146           --           --           --           --          146
Issuance of Common Stock, net ............        250       4,548           --           --           --           --        4,548
Net loss .................................         --          --           --           --           --      (20,512)     (20,512)
Reclassification of unrealized gains
for amounts included in net income .......         --          --           --           --         (276)          --         (276)
                                            ---------   ---------    ---------    ---------    ---------    ---------    ---------
Balance at December 30, 2001 .............     65,081   $ 242,100           --    $      --    $      --    $  74,135    $ 316,235
                                            =========   =========    =========    =========    =========    =========    =========
</TABLE>

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

                                       39

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                 Years Ended
                                                                                  -------------------------------------------
                                                                                  December 30,    December 31,    January 2,
                                                                                      2001            2000           2000
                                                                                  ------------    -------------   -----------
<S>                                                                               <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income (loss) .......................................................     $ (20,512)      $  45,653       $  20,265
    Adjustments to reconcile net income (loss) to net cash provided by
    operating activities:
        Depreciation and amortization .......................................        25,922          19,009          10,331
        Impairment charges ..................................................         6,547              --              --
        Provision for excess and obsolete inventories .......................         8,828           4,211           2,432
        Provision for doubtful accounts .....................................           384             256           1,756
        Deferred income taxes ...............................................       (11,240)         (3,786)         (2,838)
        Compensation costs related to stock options .........................            59              78              52
        Loss on disposal of property, plant and equipment ...................           267              99             422
        Gain on sale of available-for-sale securities .......................          (568)             --              --
    Changes in operating assets and liabilities:
        Accounts receivable .................................................        20,030         (32,786)        (18,020)
        Inventories .........................................................         8,922         (23,791)         (5,545)
        Prepaid expenses and other current assets ...........................          (587)         (2,468)           (816)
        Accounts payable ....................................................       (28,525)         20,701          11,461
        Accrued expenses and other liabilities ..............................        (3,183)          4,624           5,481
        Income taxes payable ................................................            90          28,043          13,779
        Other non-current assets ............................................             6          (1,916)            677
        Other non-current liabilities .......................................          (168)           (364)            134
                                                                                  ---------       ---------       ---------
            Net cash provided by operating activities .......................         6,272          57,563          39,571

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of property, plant and equipment ...............................       (21,608)        (84,060)        (20,632)
    Proceeds from sale of property, plant and equipment .....................             4              --           1,544
    Proceeds from sale of available-for-sale securities .....................           568              --              --
    Payment received on notes receivable ....................................            26           7,019             500
    Cash paid for acquisition, net of cash acquired .........................           (68)             --              --
    Redemption of long-term investments .....................................            --              --           2,500
                                                                                  ---------       ---------       ---------
            Net cash used in investing activities ...........................       (21,078)        (77,041)        (16,088)

CASH FLOWS FROM FINANCING ACTIVITIES:
    Principal payments on long-term debt ....................................          (218)           (195)        (24,024)
    Proceeds from issuance of Common Stock ..................................            --          61,685          57,805
    Proceeds from sale of stock under employee stock purchase plans .........         2,857           1,647             920
    Proceeds from exercise of stock options .................................         6,605           8,403           5,180
                                                                                  ---------       ---------       ---------
            Net cash provided by financing activities .......................         9,244          71,540          39,881
                                                                                  ---------       ---------       ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........................        (5,562)         52,062          63,364
CASH AND CASH EQUIVALENTS, beginning of year ................................       128,733          76,671          13,307
                                                                                  ---------       ---------       ---------
CASH AND CASH EQUIVALENTS, end of year ......................................     $ 123,171       $ 128,733       $  76,671
                                                                                  =========       =========       =========
</TABLE>

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

                                       40

<PAGE>

                          POWERWAVE TECHNOLOGIES, INC.
               CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                                 Years Ended
                                                                                  ------------------------------------------
                                                                                  December 30,   December 31,   January 2,
                                                                                      2001           2000          2000
                                                                                  ------------------------------------------
<S>                                                                               <C>           <C>            <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
    Cash paid for:
        Interest ................................................................ $        82   $        47    $       999
                                                                                  ===========   ===========    ===========
        Income taxes ............................................................ $       400   $       869    $       367
                                                                                  ===========   ===========    ===========


NON CASH ITEMS:
    Acquisition of property and equipment through capital lease ................. $       128   $       208    $        --
                                                                                  ===========   ===========    ===========
    Tax benefit related to stock option exercises ............................... $     6,536   $    28,454    $    14,258
                                                                                  ===========   ===========    ===========
    Tax benefit related to sale of shares purchased under the Employee Stock
    Purchase Plan ............................................................... $       146   $       297    $       229
                                                                                  ===========   ===========    ===========

    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    $        --
                                                                                  ===========   ===========    ===========

    Reclassification of unrealized gains for amounts included in net
    income, net of tax of  $192 ................................................. $       276            --             --
                                                                                  ===========   ===========    ===========
    Business acquisitions (Note 13) ............................................. $     5,256   $        --    $        --
                                                                                  ===========   ===========    ===========
</TABLE>


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


                                       41

<PAGE>

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


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 cellular, PCS and 3G base stations throughout the world.

Note 2.  Summary of Significant Accounting Policies

   Basis of Presentation

     The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America and
include the accounts of 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 operates on a 52-53 week fiscal year that ends on the Sunday
closest to December 31. Fiscal year 1999 ended on January 2, 2000, fiscal year
2000 ended on December 31, 2000 and fiscal year 2001 ended on December 30, 2001.
Fiscal year 2002 will end on December 29, 2002.

   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. Translation adjustments have not had a significant
impact on the Company's financial results.

   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 a right
to return products that do not function properly within a limited time after
delivery. The Company continuously monitors and tracks such returns and records
a provision, as a charge to revenues, to reflect the Company's estimate of such
returns, based on historical experience and any notification received by the
Company of such a return. Such returns have historically been within
management's expectations.

   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 companies in a variety of industries and, therefore, believes
that it bears minimal principal 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.


                                       42

<PAGE>

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

   Accounts Receivable

     The Company performs ongoing credit evaluations of its customers and
generally does not require collateral. The Company continuously monitors
collections and payments from its customers and regularly adjusts credit limits
of customers based upon payment history and a customer's current credit
worthiness, as judged by the Company. The Company maintains a provision 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 records a provision for excess and obsolete inventory
based primarily on current production requirements and forecasted product
demand.

   Property, Plant and Equipment

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

<TABLE>
<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 and Other Intangible Assets

     Goodwill acquired in business combinations initiated before July 1, 2001
and other intangible assets are amortized under the straight-line method over
the estimated useful lives:

<TABLE>
<S>                                                                                <C>
               Developed technology ....................................           3-5 years
               Goodwill ................................................            10 years
               Customer list ...........................................            3 years
               Non-compete agreement ...................................            4 years
               Workforce ...............................................           10 years
               Developed technology ....................................           3-5 years
</TABLE>

     Goodwill acquired in business combinations initiated after June 30, 2001 is
not amortized in accordance with the provisions of Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets.

     The Company periodically reviews the recoverability of the carrying value
of goodwill, intangibles and other long-lived assets using the methodology
prescribed in SFAS No. 121. The Company also reviews these assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of these assets is determined by
comparing the forecasted undiscounted future net cash flows from the operations
to which the assets relate, based on management's best estimates using
appropriate assumptions and projections at the time, to the carrying amount of
the assets. If the carrying value is determined not to be recoverable from
future operating cashflows, the asset is deemed impaired and an impairment loss
is recognized equal to the amount by which the carrying amount exceeds the
estimated fair value of the asset.



                                       43

<PAGE>


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


   Warranties

     The Company offers warranties of various lengths depending on the product
and negotiated terms of purchase agreements with its customers. Such warranties
require the Company to repair or replace defective product returned to the
Company during such warranty period at no cost to the customer. An estimate by
the Company for warranty related costs based on it's actual historical
experience is recorded at the time of sale. Such costs have been within
management's expectations.

   Income Taxes

     The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards 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.
A valuation allowance is recorded when it is more likely than not that some or
all or any deferred tax assets will not be realized.

   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 Statement of Financial Accounting Standards No. 128,
Earnings Per Share, basic earnings (loss) per share is based upon the weighted
average number of common shares outstanding. Diluted earnings (loss) per share
is based upon the weighted average number of common and potential common shares
for each period presented. Potential common shares include stock options using
the treasury stock method. Potential common shares of 1,688,536 have been
excluded from diluted weighted average common shares for fiscal year 2001, as
the effect would be anti-dilutive.

   Comprehensive Income

     For the years ended December 30, 2001, December 31, 2000 and January 2,
2000, the Company had other comprehensive income (loss) of $(276), $276 and $0,
respectively, all of which reflect the change in unrealized gains on
available-for-sale securities, net of tax. Accumulated other comprehensive
income presented in the accompanying consolidated balance sheets consists solely
of the accumulated net unrealized gain on available-for-sale securities.

   Use of Estimates

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


                                       44

<PAGE>

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


   New Accounting Pronouncements

     In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 141, Business Combinations ("SFAS 141") and Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets ("SFAS 142").
They also issued Statement of Financial Accounting Standards No. 143, Accounting
for Obligations Associated with the Retirement of Long-Lived Assets ("SFAS
143"), and Statement of Financial Accounting Standards No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets ("SFAS 144"), in August and
October 2001, respectively.

     SFAS 141 requires that all business combinations initiated after June 30,
2001 be accounted for under the purchase method. SFAS 141 superseded APB Opinion
No. 16, Business Combinations, and Statement of Financial Accounting Standards
No. 38, Accounting for Preacquisition Contingencies of Purchased Enterprises and
is effective for all business combinations initiated after June 30, 2001.

     SFAS 142 addresses the financial accounting and reporting for acquired
goodwill and other intangible assets. Under SFAS 142, the Company is no longer
required to amortize goodwill and other intangible assets with indefinite lives
but will be required to subject these assets to periodic testing for impairment.
SFAS 142 supersedes APB Opinion No. 17, Intangible Assets, effective for fiscal
years beginning after December 15, 2001. The Company is currently evaluating the
provisions of SFAS 142 but expects that the provisions of SFAS 142 will not have
a material impact on its consolidated results of operations and financial
position upon adoption.

     SFAS 143 establishes accounting standards for the recognition and
measurement of an asset retirement obligation and its associated asset
retirement cost. It also provides accounting guidance for legal obligations
associated with the retirement of tangible long-lived assets. SFAS 143 is
effective for fiscal years beginning after June 15, 2002, with early adoption
permitted. The Company is currently evaluating the provisions of SFAS 143 but
expects that the provisions of SFAS 143 will not have a material impact on its
consolidated results of operations and financial position upon adoption.

     SFAS 144 establishes a single accounting model for the impairment or
disposal of long-lived assets and new standards for reporting discontinued
operations. SFAS 144 superseded Statement of Financial Accounting Standards No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of and APB Opinion No. 30, Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions. The
provisions of SFAS 144 are effective in fiscal years beginning after December
15, 2001 and, in general, are to be applied prospectively. The Company is
currently evaluating the provisions of SFAS 144 but expects that the provisions
of SFAS 144 will not have a material impact on its consolidated results of
operations and financial position upon adoption.

   Reclassifications

     Certain prior year amounts have been reclassified to conform to the fiscal
2001 presentation.

Note 3.  Inventories

     Inventories, net, consist of the following:

<TABLE>
<CAPTION>
                                                                        December 30, December 31,
                                                                            2001         2000
                                                                        -----------  ------------
<S>                                                                       <C>          <C>
          Parts and components ........................................   $ 14,436     $ 29,023
          Work-in-process .............................................      9,612       12,824
          Finished goods ..............................................      9,477        9,428
                                                                          --------     --------
          Total .......................................................   $ 33,525     $ 51,275
                                                                          ========     ========
</TABLE>

                                       45





<PAGE>

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


     Inventories are net of an allowance for excess and obsolete inventory of
$11,114 and $9,449 as of December 30, 2001 and December 31, 2000, respectively.

Note 4.  Property, Plant and Equipment

     Net property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
                                                                                    December 30,  December 31,
                                                                                       2001          2000
                                                                                   ------------- -------------
<S>                                                                                   <C>           <C>
          Machinery and equipment ................................................   $  78,031     $  70,766
          Buildings and improvements .............................................      37,912        20,516
          Land ...................................................................      14,838        14,838
          Office furniture and equipment .........................................      12,786         8,480
          Leasehold improvements .................................................         919         6,027
          Construction in progress ...............................................          54         8,011
                                                                                     ---------     ---------
                                                                                       144,540       128,638
          Less accumulated depreciation and amortization .........................     (42,748)      (26,980)
                                                                                     ---------     ---------
          Net property, plant and equipment ......................................   $ 101,792     $ 101,658
                                                                                     =========     =========
</TABLE>

     In May 2000, the Company purchased a 360,000 square foot headquarters and
manufacturing facility located in Santa Ana, California, 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 the land.

     Included in property and equipment are assets under capital lease of $363
and $219 at December 30, 2001 and December 31, 2000, respectively. Accumulated
amortization of assets under capital lease was $36 and $23 at December 30, 2001
and December 31, 2000, respectively.

Note 5. Intangible Assets

     Intangible assets consist of the following:

<TABLE>
<CAPTION>
                                                                                    December 30,  December 31,
                                                                                        2001         2000
                                                                                    ------------  ------------
<S>                                                                                   <C>           <C>
          Developed technology ..................................................    $   8,490     $  11,500
          Goodwill ..............................................................        6,218         4,553
          Customer list .........................................................        2,000         2,000
          Non-compete agreement .................................................          500           500
          Workforce .............................................................          178           200
                                                                                     ---------     ---------
                                                                                        17,386        18,753
          Less accumulated amortization .........................................      (11,425)       (7,976)
                                                                                     ---------     ---------
          Net Intangible assets .................................................    $   5,961     $  10,777
                                                                                     =========     =========
</TABLE>

     As a result of continuing poor economic conditions and reductions in the
forecasted future demand for products acquired through the Company's 1998
acquisition of the RF amplifier group of Hewlett Packard Company, Powerwave
recorded a non-cash charge of $6,547 during fiscal year 2001 for the impairment
of intangible assets associated with such acquisition. This charge included
approximately $3,580 recorded in cost of sales related to the writedown of
developed technology and approximately $2,945 recorded in general and
administrative expenses related to the writedown of goodwill. Powerwave did not
record any similar impairment charges in fiscal years 2000 or 1999.


                                      46

<PAGE>

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


Note 6.  Financing Arrangements

     On May 31, 2001, the Company renewed its unsecured revolving credit
agreement with Comerica Bank-California ("Comerica"). 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 (4.75% at December 30, 2001) or Comerica's
LIBOR rate plus an applicable LIBOR Margin of 1.25% or 1.50%, based upon the
Company's debt leverage ratio. The revolving credit facility terminates on May
31, 2002. 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. In December 2001, the Company and Comerica amended
the covenant terms in the credit agreement to allow for the losses reported
during fiscal 2001. At December 30, 2001 the Company was in compliance with all
covenants contained in the amended revolving credit facility. There were no
amounts outstanding and the full $20 million of the Revolving Commitment Amount
was available to the Company at December 30, 2001.

     The debt repayment schedules for commitments under Capital Leases at
December 30, 2001 are as follows:

                                                               Capital
                                                               Leases
                                                              ---------
         Fiscal Year:
             2002 ..........................................    $ 129
             2003 ..........................................       60
             2004 ..........................................       42
             2005 ..........................................        3
                                                                -----
         Total .............................................      234
         Less amounts representing interest ................      (32)
                                                                -----
         Present value of future minimum payments ..........      202
         Less current portion ..............................     (108)
                                                                -----
         Long term portion .................................    $  94
                                                                =====


Note 7.  Income Taxes

     The provision (benefit) for income taxes for the fiscal years ended
December 30, 2001, December 31, 2000 and January 2, 2000 consists of the
following:

<TABLE>
<CAPTION>
                                                                                   2001        2000        1999
                                                                                 ---------   --------   ----------
<S>                                                                              <C>         <C>        <C>
     Current:
          Federal ............................................................   $   (483)   $ 24,807   $  11,742
          State ..............................................................        174       4,106       2,402
          Foreign ............................................................         11          --          --
                                                                                ---------    --------   ---------
          Total current provision (benefit) ..................................       (298)     28,913      14,144
                                                                                ---------    --------   ---------
     Deferred:
          Federal ............................................................    (10,353)     (3,850)     (1,928)
          State ..............................................................       (887)         64        (910)
                                                                                ---------    --------   ---------
          Total deferred benefit .............................................    (11,240)     (3,786)     (2,838)
                                                                                ---------     -------   ---------
     Provision (benefit) for income taxes ....................................   $(11,538)   $ 25,127   $  11,306
                                                                                =========    ========   =========
</TABLE>


        The provision (benefit) for income taxes in the accompanying
consolidated financial statements reconciles to the amount computed by applying
the federal statutory rate of 35% to income (loss) before income taxes for the
fiscal years ended December 30, 2001, December 31, 2000 and January 2, 2000 as
follows:

                                       47

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                   2001        2000       1999
                                                                                 --------    --------   --------
<S>                                                                              <C>         <C>        <C>
     Taxes at federal statutory rate ..........................................  $(11,217)   $ 24,773   $ 11,050
     State taxes, net .........................................................      (463)      2,712        971
     Other ....................................................................       142      (2,358)      (715)
                                                                                 --------    --------   --------
     Provision (benefit) for income taxes .....................................  $(11,538)   $ 25,127   $ 11,306
                                                                                 ========    ========   ========
</TABLE>

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

<TABLE>
<CAPTION>
                                                                                 December 30,  December 31,
                                                                                     2001         2000
                                                                                   --------   ----------
<S>                                                                                <C>          <C>
     Depreciable property and equipment .........................................  $(3,167)     $(2,234)
     Accruals and provisions ....................................................    6,895        4,593
     Costs capitalized into inventories .........................................    5,510        3,939
     State taxes ................................................................   (1,450)        (836)
     Amortizable intangible assets ..............................................    9,461        6,233
     Tax credit carryforwards ...................................................    8,214        7,332
     Net operating loss carryforwards ...........................................   14,376        1,087
     Other ......................................................................      116          (70)
     Valuation allowance ........................................................   (8,054)      (6,055)
                                                                                   --------   ----------
     Net deferred tax assets ....................................................  $31,901      $13,989
                                                                                   ========   ==========
</TABLE>

     As of December 30, 2001, Powerwave had combined federal and state operating
loss carryforwards of approximately $36.2 million and $33.2 million,
respectively, that expire from 2016 to 2021. The Company also had federal and
California tax credit carryforwards of $1.7 million and $6.5 million,
respectively. The federal tax credits will begin to expire in 2019 and the
California tax credits will begin to expire in 2006.

     The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income and the actual timing within which the
underlying temporary differences become taxable or deductible. Powerwave has
recorded a valuation allowance of $8,054 at December 30, 2001 against tax credit
carryforwards that are not expected to be realized prior to their expiration.
Based on historical taxable income, projected future taxable income, and the
expected timing of the reversals of existing temporary differences, management
believes that it is more likely than not that the remaining net deferred tax
assets at December 30, 2001 will be realized by the Company.

Note 8.  401(k)  and Profit-Sharing Plans

     The Company sponsors a 401(k) and profit-sharing plan covering all eligible
employees and provides for a Company match in cash on a portion of participant
contributions. The Company's 401(k) and profit sharing plan is managed by
Fidelity Investments, and is an employee self-directed plan which offers a
variety of investment choices via mutual funds. Employees may contribute up to
15% of their base salary, subject to IRS maximums. During 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. During fiscal 2001, the Company matched 100% of the
first 3% of eligible compensation contributed and 50% of the next 2% of eligible
compensation contributed. The Company's matching contributions are invested in
the same percentage among the various funds offered as selected by the employee.
Employer matching contributions for the years ended December 30, 2001, December
31, 2000 and January 2, 2000 were $1,143, $381, and $243, respectively. There
were no profit sharing contributions authorized for the years ended December 30,
2001, December 31, 2000 and January 2, 2000.


                                       48

<PAGE>

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


Note 9.  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 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 1,500,000 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.

     On May 31, 2001, the Board of Directors adopted a Shareholder Rights Plan
to protect shareholder interests against takeover strategies that may not
provide maximum shareholder value. A dividend of one preferred stock purchase
right ("Right") for each share of the Company's Common Stock was distributed to
shareholders of record on June 18, 2001. The Rights automatically attached to
outstanding shares so no separate certificates were issued. Each Right allows
its holder to purchase one one-hundredth of a share of Series A Jr.
Participating Preferred Stock at an exercise price of $115.00 per share. This
portion of a preferred share gives the shareholder approximately the same
dividend, voting and liquidation rights as one share of Common Stock. The Rights
are not currently exercisable, but will become exercisable if certain events
occur relating to a person or group acquiring or attempting to acquire 15
percent or more of the outstanding shares of Common Stock. The Rights expire on
June 1, 2011, unless redeemed or exchanged by the Company earlier.

     In December 2001, the Company issued a total of 250,000 shares of its
Common Stock valued at $4.5 million in connection with the acquisition of
Toracomm Limited.

Note 10.  Stock Incentive 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, for any individual possessing 10% or
more of the voting power of all classes of stock of the Company, 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.
Options generally vest at the rate of 25% on the first anniversary of the grant
date and 2% per month thereafter. All options 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 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 30, 2001, a total of 5,432,640 options
have been exercised under the 1995 Plan, of which a total of 2,147,640 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
30, 2001 there were 383,112 options outstanding under the 1995 Plan at a
weighted average exercise price of $3.98 per share. There are 93 shares
available for grant under the 1995 Plan at December 30, 2001 and there is a
total of 383,205 shares of Common Stock held in escrow by the Company on behalf
of those shareholders party to the Stockholder's Agreement to fund all future
exercises under the 1995 Plan.


                                       49

<PAGE>

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


       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 30, 2001, 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
that 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. Options generally vest at the rate of 25% on the
first anniversary of the grant date and the remaining 75% vests in equal monthly
installments over the following three years. All options expire no later than
ten years after the grant date. As of December 30, 2001, a total of 3,405,644
options have been exercised under the 1996 Plan and there were 5,308,270 options
outstanding under the 1996 Plan at a weighted average exercise price of $17.17
per share. There are 286,086 shares available for grant under the 1996 Plan at
December 30, 2001.

       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 nonstatutory 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, that 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 that vests 100% on the fourth anniversary date of the grant. The Director
Plan provides that the exercise price per share of grants issued under the
Director Plan shall be equal to 100% of the fair market value of a share of
Common Stock on the grant date. All options expire no later than five years
after the grant date. As of December 30, 2001, a total of 120,000 options have
been exercised under the Director Plan. There were 510,000 options outstanding
under the Director Plan as of December 30, 2001 at a weighted average exercise
price of $21.80 per share. There are 570,000 shares available for grant under
the Director Plan at December 30, 2001.

       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. 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

                                       50



<PAGE>

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

determine which eligible participants will receive options, the time when
options will be granted, the terms of options granted and the number of shares
which will be subject to options granted under the 2000 Plan. Notwithstanding
the foregoing, the Administrator shall not have the authority to amend an Option
Agreement to effect a "re-pricing" of the exercise price of an option either by
(i) lowering the exercise price of a previously granted option or (ii) by
canceling a previously granted option and granting a new option, except that
changes in the Company's capital structure or a change in control of the Company
pursuant to the terms of the 2000 Plan shall not be considered a re-pricing of
such option. Options generally vest at the rate of 25% on the first anniversary
of the grant date and the remaining 75% vests in equal monthly installments over
the following three years. All options expire no later than five years after the
grant date. As of December 30, 2001, 3,192 shares have been exercised under the
2000 Plan. There were 1,820,829 options outstanding under the 2000 Plan as of
December 30, 2001 at a weighted average exercise price of $19.61 per share.
There are 815,979 shares available for grant under the 2000 plan at December 30,
2001.

     At December 30, 2001, a total of 1,672,158 options were available for grant
under all of the Company's option plans. The following table summarizes activity
under the Company's stock plans.

<TABLE>
<CAPTION>
                                                                                        Number of
                                                                        Weighted         Options         Weighted
                                        Number of       Price Per        Average     Exercisable as of    Average
                                         Shares           Share       Exercise Price  Fiscal Year End  Exercise Price
                                         ------           -----       --------------  ---------------  --------------
<S>                                     <C>            <C>                <C>          <C>              <C>
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
                                                                                          =========        ======
     Granted ........................    2,292,460     $10.50-$50.00      $14.03
     Exercised ......................   (1,293,152)    $ 0.82-$17.71      $ 5.46
     Canceled .......................   (1,243,619)    $ 2.29-$73.56      $17.01
                                       -----------
Balance at December 30, 2001 ........    8,022,211     $ 0.82-$73.56      $17.39          3,319,001        $13.54
                                       ===========                                        =========        ======
</TABLE>

     The following table summarizes information about all stock options
outstanding at December 30, 2001 under the 1995 Plan, 1996 Plan, Director Plan
and 2000 Plan.

<TABLE>
<CAPTION>
                                                                                         Options Exercisable at
                                   Options Outstanding at December 30, 2001                 December 30, 2001
                               ------------------------------------------------------    ---------------------------
                                                   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-$ 4.58 ..............     1,750,649           $ 3.39               5.98            1,452,055       $ 3.46
$ 4.65-$10.67 ..............     1,404,341           $ 8.52               5.74              682,727       $ 7.43
$10.87-$15.42 ..............     1,931,294           $12.60               7.16              342,374       $13.64
$15.50-$31.50 ..............     1,936,477           $26.18               6.94              475,279       $28.45
$33.29-$45.63 ..............       551,475           $37.87               6.19              216,297       $37.33
$46.08-$73.56 ..............       447,975           $57.33               6.97              150,269       $57.09
                               -----------                                               ----------
     Total .................     8,022,211           $17.39               6.53            3,319,001       $13.54
                               ===========                                               ==========
</TABLE>

       The Company records compensation expense for options granted with an
exercise price below the market value of the Company's common stock at the date
of grant. This compensation expense is calculated as the

                                       51

<PAGE>

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

difference between the market value of the stock and the option exercise price
at the grant date and is amortized over the option vesting period. The Company
recorded a total of $59, $78, and $52 as compensation expense during fiscal
2001, 2000, and 1999, respectively. The remaining unamortized compensation
expense as of December 30, 2001 was approximately $97 and will be amortized
through September 2003.

       Employee Stock Purchase Plan--The Company's Employee Stock Purchase Plan
(the "ESPP") provides that a total of 1,500,000 shares of Common Stock are
reserved for issuance under the plan. The ESPP, which is intended to qualify as
an "employee stock purchase plan" under Section 423 of the Code, is implemented
utilizing six-month offerings with purchases occurring at six-month intervals.
The ESPP administration is overseen by the Board of Directors. Employees are
eligible to participate if they are employed by the Company for at least 20
hours per week and if they have been employed by the Company for at least 90
days. The ESPP permits eligible employees to purchase Common Stock through
payroll deductions, which may not exceed 20% of an employee's compensation. The
price of Common Stock purchased under the ESPP 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 upon termination of employment. The Board may
at any time amend or terminate the ESPP, except that no such amendment or
termination may adversely affect shares previously granted under the ESPP.
During fiscal 2001, the eighth and ninth purchases under the ESPP occurred on
January 31, 2001 and July 31, 2001, respectively. A total of 60,595 shares were
purchased in the eighth purchase at $26.775 per share and 84,662 shares were
purchased in the ninth purchase at $14.586 per share. At December 30, 2001,
there were rights to purchase approximately 66,000 shares outstanding under the
ESPP and there were 782,421 shares available for purchase under the plan.

      The estimated weighted average fair value of options granted during 2001,
2000 and 1999 were $9.01 per share, $21.37 per share, and $5.66 per share,
respectively. 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 30, 2001, December 31, 2000 and January 2, 2000, would have been
changed to the pro forma amounts indicated in the following table:

<TABLE>
<CAPTION>
                                                                                   2001       2000         1999
                                                                                --------    --------     ---------
     <S>                                                                        <C>         <C>          <C>
     Income (loss) before income taxes as reported ..........................   $(32,050)   $ 70,780     $ 31,571
     Net expense per SFAS No. 123 ...........................................    (27,473)    (25,041)      (8,553)
                                                                                --------    --------     --------
     Pro forma income (loss) before income taxes ............................    (59,523)     45,739       23,018
     Pro forma provision (benefit) for income taxes .........................    (21,428)     16,237        8,240
                                                                                --------    --------     --------
     Pro forma net income (loss) ............................................   $(38,095)   $ 29,502     $ 14,778
                                                                                ========    ========     ========
     Net income (loss) as reported ..........................................   $(20,512)   $ 45,653     $ 20,265
                                                                                ========    ========     ========

<CAPTION>
                                                                                   2001       2000         1999
                                                                                --------    --------     --------
     <S>                                                                        <C>         <C>          <C>
     Basic earnings (loss) per share:
          As reported ......................................................    $   (.33)   $   0.75     $   0.34
          Pro forma ........................................................    $   (.59)   $   0.48     $   0.25
     Diluted earnings (loss) per share:
          As reported ......................................................    $   (.33)   $   0.71     $   0.33
          Pro forma ........................................................    $   (.59)   $   0.45     $   0.24
     Basic weighted average common shares (in thousands) ...................      64,197      61,953       58,480
     Diluted weighted average common shares (in thousands) .................      64,197      65,313       60,671
</TABLE>

                                       52

<PAGE>

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

       The fair value of options granted under the Company's stock incentive
plans during 2001, 2000 and 1999 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>
                                                                                   2001        2000            1999
                                                                                 ---------   ----------    --------
     <S>                                                                         <C>         <C>           <C>
     Weighted average risk-free interest rate ..................................    3.35%        5.01%       6.33%
     Expected years from vest date to exercise date ............................     0.3          0.3         0.5
     Expected stock volatility .................................................     105%         101%         80%
     Dividend yield ............................................................    None         None        None
</TABLE>

     For the years ended December 30, 2001, December 31, 2000 and January 2,
2000, the expected life of an option was 5.2 years, 5.1 years and 5.1 years
respectively.

Note 11.  Commitments and Contingencies

     The Company has various equipment and real estate operating leases,
including 115,000 square feet of warehouse space in Santa Ana, California,
31,500 square feet of engineering and office space in El Dorado Hills,
California, and 6,000 square feet of engineering and office space in Bristol,
United Kingdom.

       Future minimum lease payments required under these operating leases at
December 30, 2001 are payable as follows:

     Fiscal Year:
          2002 ...................................................   $ 1,614
          2003 ...................................................     1,468
          2004 ...................................................     1,439
          2005 ...................................................     1,176
          2006 ...................................................     1,124
          Thereafter .............................................       494
                                                                     -------
     Total future minimum lease payments .........................   $ 7,315
                                                                     =======

     Total rent expense was $2,845, $3,179 and $3,707 for the years ended
December 30, 2001, December 31, 2000 and January 2, 2000, respectively.

     The Company is subject to various legal proceedings from time to time as
part of its business. The Company does not believe that it is currently party to
any legal proceedings or threatened legal proceedings, the adverse outcome of
which, individually or in the aggregate, would have a material adverse effect on
its business, financial condition and results of operations.

Note 12.  Earnings (Loss) Per Share

<TABLE>
<CAPTION>
                                                                             2001          2000          1999
                                                                          --------       --------      --------
   <S>                                                                    <C>            <C>           <C>
   Basic:
          Basic weighted average common shares (in thousands) .........     64,197         61,953        58,480
          Net income (loss) ...........................................   $(20,512)      $ 45,653      $ 20,265
                                                                          --------       --------      --------
          Basic earnings (loss) per share .............................   $  (0.33)      $   0.75      $   0.34
                                                                          ========       ========      ========

   Diluted:
          Basic weighted average common shares (in thousands) .........     64,197         61,953        58,480
          Potential common shares (in thousands) ......................         --          3,360         2,191
                                                                          --------       --------      --------
          Diluted weighted average common shares (in thousands) .......     64,197         65,313        60,671
          Net income (loss) ...........................................   $(20,512)      $ 45,653      $ 20,265
                                                                          --------       --------      --------
          Diluted earnings (loss) per share ...........................   $  (0.33)      $   0.71      $   0.33
                                                                          ========       ========      ========
</TABLE>

                                       53

<PAGE>

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

Note 13.  Acquisitions

     On December 28, 2001, the Company acquired the net assets of Toracomm
Limited in exchange for 250,000 shares of the Company's Common Stock valued at
$4.5 million, a cash payment of $0.1 million, and a short-term promissory note
in the amount of $0.5 million. The acquisition was accounted for under the
purchase method of accounting and the total purchase price of approximately $5.3
million, was allocated based on the estimated fair value at the date of
acquisition as follows: $0.1 million to net assets (including cash acquired of
$54), $0.6 million to developed technology, $40 to in-process research and
development (expensed immediately), and $4.6 million to goodwill.

Note 14.  Customer Concentrations

     The Company's product sales have historically been concentrated in a small
number of customers. During the years ended December 30, 2001, December 31, 2000
and January 2, 2000, sales to four customers totaled approximately $216.8
million, $347.6 million and $212.6 million, respectively. Those same four
customers for fiscal 2001 accounted for approximately 61% of the Company's
accounts receivable at December 30, 2001. For fiscal 2001, two customers each
accounted for 10% or more of total revenues, with one of those customers, Nortel
Networks ("Nortel"), accounting for approximately 44% of total revenues. Nortel
accounted for approximately 47% of total revenues for fiscal 2000 while one
other customer accounted for 10% or more of total revenues. For fiscal 1999,
Nortel accounted for 41% of total revenues while two other customers each
accounted for 10% or more of total revenues. 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.

Note 15.  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.

Note 16.  Segments

       The Company currently operates in a single business segment as a designer
and manufacturer of radio frequency (RF) power amplifiers for wireless
telecommunications equipment. Net sales are derived primarily from the sale of
RF power amplifiers for use in wireless communications networks. The Company
reviews its revenues 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 over 2000 MHz, which includes "3G"
frequency bands. Cost of sales, operating expenses and specific assets are not
tracked or allocated to these RF frequency ranges. The following schedule
presents an analysis of Powerwave's net sales based upon RF frequency range.

<TABLE>
<CAPTION>
                                                                             RF Frequency Ranges
                                                        ------------------------------------------------------------
                                                        400-450      800-1000    1800-2000      2000+
                                                          MHz          MHz          MHz          MHz        Total
                                                        ------------------------------------------------------------
<S>                                                     <C>         <C>            <C>         <C>        <C>
Net sales for the year ended December 30, 2001 .......  $     --    $ 181,083      $ 57,142    $ 62,068   $ 300,293
Net sales for the year ended December 31, 2000 .......  $     --    $ 348,368      $ 96,092    $  2,962   $ 447,422
Net sales for the year ended January 3, 1999 .........  $    734    $ 215,012      $ 76,801    $     --   $ 292,547
</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.

                                       54

<PAGE>

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

International sales include sales to all other foreign countries. Sales to
Canada were $53.1 million, $140.1 million, and $88.0 million for the fiscal
years ended December 30, 2001, December 31, 2000 and January 2, 2000,
respectively. Sales to Mexico for the fiscal years ended December 30, 2001,
December 31, 2000 and January 2, 2000, were $ 0.8 million, $8.2 million, and
$2.9 million, respectively. For the fiscal years ended December 30, 2001,
December 31, 2000 and January 2, 2000 sales to South Korea were $39.5 million,
$34.2 million and $62.2 million, respectively. Sales to France for these periods
were $62.3 million, $40.3 million and $25.9 million, respectively.

<TABLE>
<CAPTION>
                                                                  North American      International       Total
                                                                  --------------      -------------     ----------
     <S>                                                          <C>                 <C>               <C>
     Net sales for the year ended December 30, 2001 .............    $ 176,295           $123,998       $  300,293
     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
</TABLE>

     Total accounts receivable as of December 30, 2001, include 61% from United
States based customers and 19% from customers located in France.

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

Note 17. Other Information

     Accrued expenses and other current liabilities consist of the following:

<TABLE>
<CAPTION>
                                                             December 30,     December 31,
                                                                  2001             2000
                                                               ----------      -----------
     <S>                                                     <C>              <C>
     Accrued warranty costs ...............................     $  6,669         $  8,748
     Accrued payroll and employee benefits ................        4,469            8,716
     Accrued vendor cancellation costs ....................        4,969               --
     Other accrued expenses ...............................        4,821            6,559
                                                                --------         --------
                                                                $ 20,928         $ 24,023
                                                                ========         ========
</TABLE>

Note 18. Related Party Transactions

     As of December 30, 2001, Powerwave had an outstanding unsecured note
receivable from an officer of the Company in the amount of approximately $1.4
million that relates to a bridge loan in connection with such officer's
relocation to Southern California. The note bears no interest and is payable the
earlier of (1) the sale of the officer's former principal residence, (2)
termination of employment, or (3) August 20, 2002. The Company had no
significant transactions with, receivables from or payables to, shareholders or
officers of the Company other than that described above.

     The President and CEO of the Company, Bruce Edwards, joined the Board of
Directors of Metawave Communications Corporation ("Metawave"), a supplier of
"smart" antennas to the wireless communications market and a customer of the
Company, in May 1998. During the years ended December 30, 2001, December 31,
2000, and January 2, 2000, the Company had net sales to Metawave in the amounts
of $5.0 million, $19.7 million and $6.4 million, respectively.

     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 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 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 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 Company
sold these shares in February 2001, at an average

                                       55

<PAGE>


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

price per share, net of commissions of $11.06, and recognized a gain of
approximately $0.6 million. This gain was included in other income, net, during
the first quarter of 2001.

Note 19. Selected Quarterly Financial Data (Unaudited)

<TABLE>
<CAPTION>
                                                                                Quarters Ended
                                                           --------------------------------------------------------
                                                             April 1,      July 1,    September 30,   December 30,
                                                            ----------    ---------  --------------- -------------
                                                               2001         2001           2001          2001
                                                                   (in thousands, except per share amounts)
<S>                                                        <C>            <C>        <C>             <C>
Fiscal 2001:
     Net sales ...........................................   $ 72,976     $  78,248     $   64,667     $   84,402
     Cost of sales .......................................     68,383        67,910         60,147         74,067
                                                             --------     ---------     ----------     ----------
     Gross profit ........................................      4,593        10,338          4,520         10,335
     Operating expenses:
          Sales and marketing ............................      4,976         3,602          2,565          2,590
          Research and development .......................     10,897         8,359          7,719          7,775
          General and administrative .....................      6,158         3,426          2,920          6,414
                                                             --------     ---------     ----------     ----------
     Total operating expenses ............................     22,031        15,387         13,204         16,779
                                                             --------     ---------     ----------     ----------
     Operating loss ......................................    (17,438)       (5,049)        (8,684)        (6,444)
     Other income, net ...................................      2,546         1,332            895            792
                                                             --------     ---------     ----------     ----------
     Loss before income taxes ............................    (14,892)       (3,717)        (7,789)        (5,652)
     Benefit for income taxes ............................     (5,361)       (1,338)        (2,804)        (2,035)
                                                             --------     ---------     ----------     ----------
     Net loss ............................................   $ (9,531)    $  (2,379)      $ (4,985)    $   (3,617)
                                                             ========     =========     ==========     ==========

     Basic loss per share ................................   $  (0.15)     $  (0.04)     $   (0.08)    $    (0.06)
     Diluted loss per share ..............................   $  (0.15)     $  (0.04)     $   (0.08)    $    (0.06)
     Basic weighted average common shares ................     63,697        64,061         64,386         64,644
     Diluted weighted average common shares ..............     63,697        64,061         64,386         64,644
</TABLE>

<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>

                                       56


<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors

     Gregory M. Avis, 43, 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 and private equity firm, since January 1990. Mr. Avis also
serves on the Board of Directors of Ditech Communications Corp. and MCK
Communications Corp.

     John L. Clendenin, 67, 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., Acuity Brands, Inc., The Kroger Company and The Home Depot, Inc.

     Bruce C. Edwards, 48, 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, 48, has been a member of the Company's Board of Directors
since November 1995. Mr. George is currently in private practice providing
consulting services to the wireless industry. From June 2000 to June 2001 he was
Executive Vice President of Operations for Securicor Wireless, Inc., a large
mobile radio network provider. Mr. George is the 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. From November
1983 to February 1994, Mr. George served as Vice President, Director of
Operations, Commercial Division of Uniden America. A member of the Institute of
Electrical and Electronic Engineers (I.E.E.E.) for more than 20 years, he holds
several patents relating to wireless technology and networks.

     Eugene L. Goda, 65, has been a member of the Company's Board of Directors
since November 1995. From June 1997 to March 2000, Mr. Goda 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, 58, has been a member of the Company's Board of Directors
since February 2000. 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 is the CEO of Avaz Networks, a fabless
semiconductor company that provides semiconductor and software platforms for
VoP, RAS and 2.5G/3G basestations. Mr. Qureshey was the cofounder and former
Chief Executive Officer and Chairman of AST Research, Inc. a personal computer
company. Mr. Qureshey is also a former member of President Clinton's Export
Council and was a Regent's Professor at the Graduate School of Management,
University of California at Irvine.

     Andrew J. Sukawaty, 46, 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. He is a Deputy Chairman of mm02, PLC, formerly BT
Wireless. 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

                                       57

<PAGE>

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

     Bruce C. Edwards, 48, 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.

     Ronald J. Buschur, 38, joined the Company in June 2001 as Chief Operating
Officer. Prior to joining the Company, Mr. Buschur held various positions at HMT
Technology/Komag, an independent supplier of thin-film disks, including
President and Chief Operating Officer from 1999 to 2000, Vice President of
Sales, Marketing and Quality Assurance from 1997 to 1999 and Vice President of
Quality Assurance from 1994 to 1997. From 1993 to 1994, Mr. Buschur was Director
of Quality at Maxtor, a disk drive company. Mr. Buschur held various managerial
positions at Digital Equipment Corporation, a computer manufacturer from 1987 to
1993.

     Kevin T. Michaels, 43, 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. Mr. Michaels currently
serves on the Board of Directors of Procom Technology, Inc.


ITEM 11. EXECUTIVE COMPENSATION

     The information required hereunder is incorporated by reference from the
sections of the Company's Proxy Statement filed in connection with its April 24,
2002 Annual Meeting of Stockholders under the captions "Executive Compensation,"
"Compensation Committee Interlocks and Insider Participation" and "Stock
Performance Graph."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required hereunder is incorporated by reference from the
sections of the Company's Proxy Statement filed in connection with its April 24,
2002 Annual Meeting of Stockholders under the caption "Security Ownership of
Beneficial Owners."

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required hereunder is incorporated by reference from the
sections of the Company's Proxy Statement filed in connection with its April 24,
2002 Annual Meeting of Stockholders under the caption "Compensation Committee
Interlocks and Insider Participation."

                                       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.

Exhibit
Number                                     Description
------                                     -----------
  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).

  3.6       Certificate of Designation of Rights, Preferences and Privileges of
            Series A Junior Participating Preferred Stock of Powerwave
            Technologies, Inc. (incorporated herein by reference to Exhibit 2.1
            to Registrant's Form 8-A dated June 4, 2001.)

  3.7       Rights Agreement, dated as of June 1, 2001 between Powerwave
            Technologies, Inc. and U.S. Stock Transfer Corporation, as Rights
            Agent, which includes as Exhibit A thereto the form of Certificate
                                     ---------
            of Designation for the Series A Junior Participating Preferred
            Stock, as Exhibit B thereto the Form of Rights Certificate and as
                      ---------
            Exhibit C thereto a Summary of Terms of Stockholder Rights Plan.
            ---------
            (incorporated herein by reference to Exhibit 2.1 to Registrant's
            Form 8-A dated June 4, 2001.)

  4.1       Stockholders' Agreement, dated October 10, 1995, among the Company
            and certain stockholders (incorporated by reference to Exhibit 4.1
            to the Company's Registration Statement on Form-S-1 (File No.
            333-13679) as filed with the Securities and Exchange Commission on
            October 8, 1996).

  4.2       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).*

                                       59

<PAGE>

  10.3.1    Amendment No. 2 to the 1995 Plan (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).*

  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).*

  10.24     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.)

                                       60

<PAGE>

  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.)

  10.30     First Amendment to Loan Agreement dated as of May 31, 2001, by and
            among the Company, Comerica Bank-California, as Agent, and the
            lenders party thereto (incorporated by reference to Exhibit 10.30 to
            the Company's Form 10-Q as filed with the Securities and Exchange
            Commission on August 7, 2001.)

  10.31     Second Amendment to Loan Agreement dated as of December 26, 2001, by
            and among the Company, Comerica Bank-California, as Agent, and the
            lenders party thereto.

  21.1      Subsidiaries of the registrant

  23.1      Independent Auditors' Consent

  99.1      Press release dated June 1, 2001 (incorporated by reference to
            Exhibit 99.1 to the Company's Form 8-K as filed with the Securities
            and Exchange Commission on June 6, 2001.)

_________________

  *   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 8th day of February 2002.

                                       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       February 8, 2002
      --------------------------------------------
                    Bruce C. Edwards                     and Director (Principal
                                                         Executive Officer)

                /s/ KEVIN T. MICHAELS                 Senior Vice President, Finance and       February 8, 2002
      --------------------------------------------
                    Kevin T. Michaels                      Chief Operating Officer
                                                         (Principal Accounting Officer)

                /s/ JOHN L. CLENDENIN                 Chairman of the Board                    February 8, 2002
      --------------------------------------------
                    John L. Clendenin

                /s/ GREGORY M. AVIS                   Director                                 February 8, 2002
      --------------------------------------------
                    Gregory M. Avis

                /s/ EUGENE L. GODA                    Director                                 February 8, 2002
      --------------------------------------------
                    Eugene L. Goda

                /s/ DAVID L. GEORGE                   Director                                 February 8, 2002
      --------------------------------------------
                    David. L. George

                /s/ ANDREW J. SUKAWATY                Director                                 February 8, 2002
      --------------------------------------------
                    Andrew J. Sukawaty

                /s/ CARL W. NEUN                      Director                                 February 8, 2002
      --------------------------------------------
                    Carl W. Neun

                /s/ SAFI U. QURESHEY                  Director                                 February 8, 2002
      --------------------------------------------
                    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 30, 2001:
     Allowance for doubtful accounts .................  $  3,021      $    384      $   (262)      $  3,143
     Allowance for excess and obsolete inventory .....  $  9,449      $  8,828      $ (7,163)      $ 11,114

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
</TABLE>

                                       63