<PAGE>

================================================================================

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549


                                   FORM 10-Q


[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934


     For the quarterly period ended October 3, 1999

                                      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                     (I.R.S. Employer
   of incorporation or organization)               Identification No.)


                               2026 McGaw Avenue
                           Irvine, California 92614
              (Address of principal executive offices, zip code)


      Registrant's telephone number, including area code: (949) 757-0530


                              _________________


     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 [ ]

     As of November 11, 1999, the number of outstanding shares of Common Stock,
par value $.0001 per share, of the Registrant was 20,157,592.


================================================================================


<PAGE>

                         POWERWAVE TECHNOLOGIES, INC.
                                     INDEX
<TABLE>
<CAPTION>
                                                                                                            Page
                                                                                                            ----
<S>                                                                                                         <C>
Part I.   Financial Information

          Item 1.  Financial Statements

                     Consolidated Balance Sheets at October 3, 1999 (Unaudited)                                 3
                       and January 3, 1999

                     Consolidated Statements of Operations (Unaudited) for the three and nine months            4
                       ended October 3, 1999 and September 27, 1998

                     Consolidated Statements of Cash Flows (Unaudited) for the nine months ended                5
                       October 3, 1999 and September 27, 1998

                     Notes to Consolidated Financial Statements (Unaudited)                                   6-9

          Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations    10-30

          Item 3.  Quantitative and Qualitative Disclosures About Market Risk                                  30


Part II.  Other Information

          Item 1.  Legal Proceedings                                                                           31

          Item 4.  Submission of Matters to a Vote of Security Holders                                         31

          Item 5.  Other Items                                                                                 31

          Item 6.  Exhibits and Reports on Form 8-K                                                            32

Signatures                                                                                                     33
</TABLE>


This Quarterly Report on Form 10-Q includes certain forward-looking statements
as defined within the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are based on beliefs of and estimates made by and
information currently available to the Company's management. Such statements are
subject to certain risks, uncertainties and assumptions which could cause actual
results to differ materially from those projected or implied. 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 2, "Management's Discussion and Analysis of Financial Condition and Results
of Operations." The Company undertakes no obligation to publicly release the
result of any revisions to these forward-looking statements which may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.

                                       2
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                     October 3,           January 3,
                                                                                        1999                 1999
                                                                                     ----------          -----------
ASSETS:                                                                              (Unaudited)
<S>                                                                                  <C>                 <C>
Current Assets:
      Cash and cash equivalents...................................................      $ 71,948            $ 13,307
      Accounts receivable, net of allowance for doubtful accounts of $ 2,683 and
      $1,270 at October 3, 1999 and January 3, 1999, respectively.................        44,103              31,212
      Inventories, net............................................................        22,668              28,583
      Prepaid expenses and other current assets...................................         1,820               1,633
      Notes receivable............................................................         7,475                  --
      Deferred tax assets.........................................................         3,303               3,303
                                                                                        --------            --------
           Total current assets...................................................       151,317              78,038

Property and equipment............................................................        36,785              26,286
Less accumulated depreciation and amortization....................................       (10,167)             (5,838)
                                                                                        --------            --------
      Net property and equipment..................................................        26,618              20,448
                                                                                        --------            --------
Assets held for sale, net.........................................................            --               8,122
Intangible assets, net............................................................        15,235              17,916
Deferred tax assets...............................................................         4,254               4,254
Other non-current assets..........................................................           987               3,207
                                                                                        --------            --------
TOTAL ASSETS......................................................................      $198,411            $131,985
                                                                                        ========            ========

LIABILITIES AND SHAREHOLDERS' EQUITY:

Current Liabilities:
   Accounts payable...............................................................      $ 25,493            $ 18,667
   Accrued expenses and other liabilities.........................................        17,144              13,918
   Current portion of long-term debt..............................................           257               6,528
   Income taxes payable...........................................................         2,948               3,715
                                                                                        --------            --------
           Total current liabilities..............................................        45,842              42,828

Long-term debt, net of current portion............................................            --              17,621
Other non-current liabilities.....................................................           559                 466
                                                                                        --------            --------
       Total liabilities..........................................................        46,401              60,915
                                                                                        --------            --------

Shareholders' Equity:
   Preferred Stock, $.0001 par value, 5,000 shares authorized and no shares
      outstanding.................................................................            --                  --
   Common Stock, $.0001 par value, 40,000 shares authorized, 20,025 shares
      issued and outstanding at October 3, 1999 and 17,956 shares
      issued and 17,250 shares outstanding at January 3, 1999.....................       111,408              65,027
   Retained earnings..............................................................        40,602              28,729
   Less treasury stock at cost....................................................            --             (22,686)
                                                                                        --------            --------
           Total shareholders' equity.............................................       152,010              71,070
                                                                                        --------            --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........................................      $198,411            $131,985
                                                                                        ========            ========
</TABLE>

   The accompanying notes are an integral part of these financial statements

                                       3
<PAGE>

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

<TABLE>
<CAPTION>

                                                   Three Months Ended                       Nine Months Ended
                                              ----------------------------             ----------------------------
                                              October 3,      September 27,            October 3,      September 27,
                                                 1999              1998                   1999             1998
                                              ----------------------------             ----------------------------
<S>                                           <C>             <C>                      <C>             <C>
Net sales.................................      $76,900          $16,456                $201,417          $60,205
Cost of sales.............................       54,697           10,697                 146,060           37,059
                                                -------          -------                --------          -------
Gross profit..............................       22,203            5,759                  55,357           23,146
Operating expenses:
      Sales and marketing.................        3,620            2,147                  10,609            6,341
      Research and development............        7,311            2,938                  18,982            8,845
      General and administrative..........        3,464            1,329                   8,809            3,770
                                                -------          -------                --------          -------
Total operating expenses..................       14,395            6,414                  38,400           18,956

Operating income (loss)...................        7,808             (655)                 16,957            4,190
Other income, net.........................          904              845                   1,604            2,435
                                                -------          -------                --------          -------

Income before income taxes................        8,712              190                  18,561            6,625
Provision for income taxes................        3,093               69                   6,688            2,418
                                                -------          -------                --------          -------

Net income................................      $ 5,619          $   121                $ 11,873          $ 4,207
                                                =======          =======                ========          =======
Basic earnings per share..................      $   .28          $   .01                $    .60          $   .25
                                                =======          =======                ========          =======
Diluted earnings per share................      $   .27          $   .01                $    .58          $   .25
                                                =======          =======                ========          =======
Basic weighted average common shares......       19,971           17,188                  19,281           17,155
                                                =======          =======                ========          =======
Diluted weighted average common shares....       20,743           17,347                  19,942           17,389
                                                =======          =======                ========          =======
</TABLE>


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

                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                              Nine Months Ended
                                                                               --------------------------------------------
                                                                                     October 3,             September 27,
                                                                                        1999                     1998
                                                                               -------------------      -------------------
<S>                                                                            <C>                      <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
      Net income...............................................................     $ 11,873                 $  4,207
      Adjustments to reconcile net income to net cash provided by
      (used in) operating activities:
          Depreciation and amortization........................................        7,060                    1,984
          Provision for doubtful accounts......................................        1,413                       86
          Provision for inventory reserves.....................................          680                     (464)
          Compensation costs related to stock options..........................           30                       25
          Net loss on sales of property, plant and equipment...................          120                       --
      Changes in operating assets and liabilities:
          Accounts receivable..................................................      (14,306)                  (2,953)
          Inventories..........................................................        5,236                   (1,037)
          Prepaid expenses and other current assets............................         (186)                     108
          Accounts payable.....................................................        6,825                   (2,890)
          Accrued expenses and other liabilities...............................        3,226                   (4,528)
          Income taxes payable.................................................        6,304                     (894)
      Other....................................................................         (187)                     (86)
                                                                                    --------                 --------
               Net cash provided by (used in) operating activities.............       28,088                   (6,441)

CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchase of property and equipment.......................................      (10,830)                  (3,250)
      Sales of property, plant and equipment...................................          808                       --
      Redemption (Purchase) of long-term investments...........................        2,500                   (2,500)
                                                                                    --------                 --------
               Net cash used in investing activities...........................       (7,522)                  (5,750)

CASH FLOW FROM FINANCING ACTIVITIES:
      Principal payments on long-term debt.....................................      (23,892)                    (385)
      Issuance of Common Stock, net............................................       58,725                      652
      Repurchase of Common Stock...............................................           --                   (3,740)
      Proceeds from exercise of stock options..................................        3,242                      640
                                                                                    --------                 --------
               Net cash provided by (used in) financing activities.............       38,075                   (2,833)
                                                                                    --------                 --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...........................       58,641                  (15,024)
CASH AND CASH EQUIVALENTS, beginning of period.................................       13,307                   67,433
                                                                                    --------                 --------
CASH AND CASH EQUIVALENTS, end of period.......................................     $ 71,948                 $ 52,409
                                                                                    ========                 ========

SUPPLEMENTAL CASH FLOW INFORMATION:
      Cash paid for:
         Interest..............................................................     $    988                 $     95
                                                                                    ========                 ========
         Income taxes..........................................................     $    385                 $  3,312
                                                                                    ========                 ========

NON CASH ITEMS:
    Tax benefit related to stock option exercises..............................     $  6,855                 $    541
                                                                                    ========                 ========
    Tax benefit related to issuance of Common Stock under the Employee Stock
         Purchase Plan.........................................................     $    215                 $     43
                                                                                    ========                 ========
    Note received in conjunction with sale of land and building................     $  7,475
                                                                                    ========
</TABLE>

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

                                       5
<PAGE>

                         POWERWAVE TECHNOLOGIES, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
                                October 3, 1999

Basis of Presentation

  The accompanying consolidated financial statements have been prepared by the
Company without audit (except for balance sheet information as of January 3,
1999) in accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-Q and Article 10 of
Regulation S-X. In the opinion of management, all adjustments (consisting only
of normal recurring accruals) considered necessary for a fair presentation have
been included. The accompanying consolidated financial statements do not include
certain footnotes and financial presentations normally required under generally
accepted accounting principles and, therefore, should be read in conjunction
with the audited consolidated financial statements included in the Company's
Annual Report on Form 10-K for the fiscal year ended January 3, 1999. The
accounting policies followed by the Company are set forth in Note 2 of the Notes
to Consolidated Financial Statements in the Company's Annual Report on Form 10-K
for the fiscal year ended January 3, 1999.

  The results of operations for the three and nine months ended October 3, 1999,
are not necessarily indicative of the results to be expected for the entire
fiscal year ended January 2, 2000 (fiscal year 1999). For further information on
additional factors that may affect future results, please refer to the
"Management Discussion and Analysis of Financial Condition and Results of
Operations" under Item 2 and the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended January 3, 1999.

Earnings Per Share

  Effective December 28, 1997, the Company adopted SFAS No. 128, Earnings per
Share. In accordance with SFAS No. 128, basic earnings per share are based upon
the weighted average number of common shares outstanding. Diluted earnings per
share are based upon the weighted average number of common and potential common
shares for each period presented. Potential common shares include stock options
using the treasury stock method.

New Accounting Pronouncements

  The Company adopted SFAS No. 130, Reporting Comprehensive Income for the
quarterly periods beginning in fiscal 1998. For the three-month and nine-month
periods presented, the Company has no differences between net income and
comprehensive income. Therefore, no statement of comprehensive income has been
presented.

  The Company adopted SFAS No. 131, Disclosures About Segments of an Enterprise
and Related Information beginning in fiscal 1999. In accordance with SFAS No.
131, the Company has disclosed below certain information about operating
segments and certain information about the Company's products, geographic areas
to which the Company sells its products, and major customers.

  In June 1998, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
which the Company is required to adopt effective in its fiscal year 2000. SFAS
133 will require the Company to record all derivatives on the balance sheet at
fair value. The Company does not currently engage in hedging activities and will
continue to evaluate the effects of adopting SFAS No. 133. The Company will
adopt SFAS No. 133 in its fiscal year 2000.

                                       6
<PAGE>

Segment Information

  Utilizing the management approach, the Company has broken down its business
based upon the RF frequency in which the product is utilized in, i.e., cellular,
PCS, LMR and other. The Company does not allocate operating expenses to these
segments, nor does it allocate specific assets to these segments. Therefore,
segment information reported includes only net sales, cost of sales and gross
profit (loss).

<TABLE>
<CAPTION>
                                                                             Business Segments
                                                                             -----------------
                                                                              (in thousands)

                                                      Cellular        PCS            LMR         Other        Total
                                                      --------        ---            ---         -----        ------
<S>                                                   <C>             <C>            <C>         <C>          <C>
Three months ended October 3, 1999
Net sales..........................................     $ 54,711      $22,198        $    (9)    $ --          $ 76,900
Cost of sales......................................       36,133       18,213            351       --            54,697
                                                        --------      -------        -------     ----          --------
Gross profit (loss)................................     $ 18,578      $ 3,985        $  (360)    $ --          $ 22,203
                                                        ========      =======        =======     ====          ========

Three months ended September 27, 1998
Net sales..........................................     $ 12,964      $ 2,178        $   989     $325          $ 16,456
Cost of sales......................................        7,258        2,060          1,088      291            10,697
                                                        --------      -------        -------     ----          --------
Gross profit (loss)................................     $  5,706      $   118        $   (99)    $ 34          $  5,759
                                                        ========      =======        =======     ====          ========
</TABLE>

<TABLE>
<CAPTION>
                                                                             Business Segments
                                                                             -----------------
                                                                              (in thousands)

                                                         Cellular      PCS            LMR        Other        Total
                                                         --------      ---            ---        -----        -----
<S>                                                     <C>           <C>            <C>         <C>           <C>
Nine months ended October 3, 1999
Net sales..........................................     $147,123      $53,634        $   660      $ --         $201,417
Cost of sales......................................      100,667       42,932          2,461        --          146,060
                                                        --------      -------        -------      ----         --------
Gross profit (loss)................................     $ 46,456      $10,702        $(1,801)     $            $ 55,357
                                                        ========      =======        =======      ====         ========

Nine months ended September 27, 1998
Net sales..........................................     $ 51,306      $ 5,710        $ 2,713      $476         $ 60,205
Cost of sales......................................       27,548        6,109          2,980       422           37,059
                                                        --------      -------        -------      ----         --------
Gross profit (loss)................................     $ 23,758      $  (399)       $  (267)     $ 54         $ 23,146
                                                        ========      =======        =======      ====         ========
</TABLE>

  The following schedule presents an analysis of the Company's net sales based
upon the country to which a product was shipped. North American sales include
sales to the United States, Canada and Mexico. Asian sales include sales to
South Korea and all locations in Asia. Europe and other international sales
include all sales to Europe and all other foreign countries.

<TABLE>
<CAPTION>
                                                              North                   Europe and Other
                                                            American        Asia       International        Total
                                                            ---------       ----      ----------------      -----
<S>                                                         <C>             <C>       <C>                   <C>
Sales for the three months ended October 3, 1999.........     $49,885      $18,593          $8,422          $76,900
Sales for the three months ended September 27, 1998......     $ 8,739      $ 6,054          $1,663          $16,456
</TABLE>

<TABLE>
<CAPTION>
                                                              North                   Europe and Other
                                                            American        Asia       International        Total
                                                          -------------  -----------  ----------------  -------------
<S>                                                       <C>            <C>          <C>               <C>
 Sales for the nine months ended October 3, 1999.......        $138,219      $40,233           $22,965       $201,417
Sales for the nine months ended September 27, 1998.....        $ 34,205      $22,911           $ 3,089       $ 60,205
</TABLE>

  The Company's product sales have historically been concentrated in a small
number of customers. During the nine months ended October 3, 1999 and September
27, 1998 sales to five customers accounted for approximately 79% and 77% of
total revenues or $158.8 million and $46.6 million, respectively.

                                       7
<PAGE>

Stock Option Plans

  The following is a summary of stock option transactions under the Company's
stock option plans, including the 1995 Stock Option Plan, the 1996 Stock
Incentive Plan, and the 1996 Director Stock Option Plan, for the nine months
ended October 3, 1999:

<TABLE>
<CAPTION>
                                                                           Number of
                                                                           Options
                                                                           Exercisable
                                    Number of         Price per            as of
                                     Shares            Share               October 3, 1999
                                    ---------        ----------            ----------------
     <S>                            <C>              <C>                   <C>
     Balance at January 3, 1999     2,715,102         $ 2.47- $31.75

      Granted                         821,250         $18.38-$47.00
      Exercised                      (729,273)        $ 2.47-$32.00
      Canceled                        (81,170)        $ 4.00-$19.19
                                    ---------
     Balance at October 3, 1999     2,725,909         $ 2.47-$47.00            538,758
                                    =========
</TABLE>

Employee Stock Purchase Plan

  The fifth offering under the Company's Employee Stock Purchase Plan (the
"Purchase Plan") concluded on July 31, 1999, with 26,188 shares of the Company's
Common Stock purchased under the Purchase Plan. At October 3, 1999 there were
rights to purchase approximately 8,200 shares of Common Stock outstanding under
the Purchase Plan's sixth offering, which will conclude on January 31, 2000.

The HP Acquisition

  On October 9, 1998, the Company completed the purchase of Hewlett-Packard
Company's ("HP") RF power amplifier business and its manufacturing and research
and development facility in Folsom, California and its production equipment and
manufacturing lines located in Malaysia, for a total purchase price of
approximately $65.9 million (the "HP Acquisition"). Approximately $57.4 million
of the total purchase price was paid to HP in cash, approximately $1.1 million
was in acquisition costs and the balance related to assumed liabilities. This
business was part of HP's Wireless Infrastructure Division and was focused on
the design and manufacture of RF power amplifiers for wireless communications,
including cellular, PCS and WLL. Since the acquisition date, the Company has
transferred the Malaysian production equipment and manufacturing lines to its
Irvine, California facility. The Company is also in the process of transferring
the Folsom facility manufacturing lines to its Irvine facility and currently
excepts to complete the closure of the Folsom manufacturing facility in the
fourth quarter of 1999. On July 15, 1999 the Company sold the Folsom facility to
a third party for approximately $8.4 million. The Company received approximately
$0.9 million in cash (before expenses) and an interest free note for $7.475
million. The note is secured by the land, land improvements and building. In
exchange for the interest free note, the buyer entered into a rent-free lease
with the Company through December 31, 1999. The note is due and payable on
December 31, 1999. The Company also intends to maintain a research and
development location in the Folsom area and has entered into a lease agreement
for a facility in El Dorado Hills, California.

  The HP Acquisition included certain assets, liabilities, operations and
business related to the design, manufacture and marketing of RF power amplifiers
for use in wireless communications. Powerwave purchased all intellectual
property rights to the products as well as in-process research and development
activities. The products acquired cover a broad range of wireless transmission
protocols, including CDMA, TDMA and GSM.

  The HP Acquisition was accounted for as a purchase and, accordingly, the total
purchase price was allocated to the assets acquired and liabilities assumed at
their estimated fair values in accordance with Accounting Principles Board
Opinion No. 16. The purchase price was allocated to tangible assets acquired of
approximately $34.7 million, developed technology of $11.5 million, in-process
research and development of $12.4 million, other

                                       8
<PAGE>

intangible assets of $2.7 million and goodwill of approximately $4.6 million.
The Company's financial statements for the year ended January 3, 1999 include a
charge of $12.4 million for the write-off of acquired in-process research and
development expenses associated with the HP Acquisition. The in-process research
and development expenses arose from new product projects that were under
development at the date of the acquisition and expected to eventually lead to
new products but had not yet established technological feasibility and for which
no future alternative use was identified. The valuation of the in-process
research and development projects was based upon the discounted expected future
net cash flows of the products over the products expected life, reflecting the
estimated stage of completion of the projects and an estimate of the costs to
complete the projects. For more information on the HP Acquisition, please refer
to Note 16 of Notes to Consolidated Financial Statements of the Company for the
fiscal year ended January 3, 1999.

                                       9
<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
of Operations.

     The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto. This discussion contains
forward-looking statements, the realization of which may be impacted by certain
important factors including, but not limited to, those discussed in "Additional
Factors That May Affect Future Results."

Results of Operations

     The following table summarizes the Company's results of operations as a
percentage of net sales for the three months and nine months ended October 3,
1999 and September 27, 1998.

<TABLE>
<CAPTION>
                                                                      As a Percentage of Net Sales
                                                      Three Months Ended                       Nine Months Ended
                                                --------------------------------       -----------------------------------
                                                   October 3,      September 27,            October 3,       September 27,
                                                     1999              1998                   1999              1998
                                                -------------  ------------------      ----------------  -----------------
<S>                                             <C>            <C>                     <C>               <C>
Net sales                                         100.0%         100.0%                  100.0%            100.0%
Cost of sales                                      71.1           65.0                    72.5              61.5
                                                  -----          -----                   -----             -----
Gross profit                                       28.9           35.0                    27.5              38.5
Operating expenses:
      Sales and marketing                           4.7           13.0                     5.3              10.5
      Research and development                      9.5           17.9                     9.4              14.7
      General and administrative                    4.5            8.1                     4.4               6.3
                                                  -----          -----                   -----             -----
Total operating expenses                           18.7           39.0                    19.1              31.5

Operating income                                   10.2           (4.0)                    8.4               7.0
Other income (expense), net                         1.1            5.1                     0.8               4.0
                                                  -----          -----                   -----             -----

Income before income taxes                         11.3            1.1                     9.2              11.0
Provision for income taxes                          4.0            0.4                     3.3               4.0
                                                  -----          -----                   -----             -----

Net income                                          7.3%           0.7%                    5.9%              7.0%
                                                  =====          =====                   =====             =====
</TABLE>


Three months ended October 3, 1999 and September 27, 1998

Net Sales

     The Company's net sales are derived primarily from the sale of RF power
amplifiers for use in wireless communications networks. Sales increased by 367%
to $76.9 million for the quarter ended October 3, 1999 from $16.5 million for
the quarter ended September 27, 1998. The growth in revenue was due to increased
sales of the Company's cellular and PCS products. The quarter ended October 3,
1999 also includes revenues from the sales of products acquired in the HP
Acquisition which occurred in October 1998. For the quarter ended October 3,
1999, total sales of cellular products (including both single and multi-carrier
RF power amplifiers and racks) accounted for approximately 71% of revenues or
$54.7 million, compared to approximately 79% of revenues or $13.0 million for
the quarter ended September 27, 1998. Sales of RF power amplifiers and
associated products for PCS networks (consisting mainly of single carrier RF
power amplifiers) accounted for approximately 29% of revenues or $22.2 million
for the third quarter of 1999, compared to approximately 13% or $2.2 million for
the third quarter in 1998. Sales of Land Mobile Radio ("LMR") amplifiers
accounted for no revenues during the quarter ended October 3, 1999, compared to
approximately 6% of revenues or $1.0 million for the quarter ended September 27,
1998.

                                       10
<PAGE>

     Total sales to North American (which includes Canada and Mexico) customers
accounted for approximately 65% of revenues or $49.9 million for the quarter
ended October 3, 1999, compared with approximately 53% or $8.7 million for the
quarter ended September 27, 1998. The Company's total international sales
(excluding North American sales) accounted for approximately 35% of revenues or
$27.0 million for the quarter ended October 3, 1999, compared with approximately
47% or $7.7 million for the quarter ended September 27, 1998. Total Asian sales
(which predominately includes sales to South Korea) increased 207% to $18.6
million for the quarter ended October 3, 1999 from $6.1 million for the quarter
ended September 27, 1998. Total Asian sales accounted for approximately 24% of
revenues in the third quarter of 1999 compared to approximately 37% of revenues
in the third quarter of 1998. The Company has experienced postponement,
rescheduling and cancellation of orders from its South Korean customers which
the Company believes were due to the economic crisis in South Korea, and Asia in
general, which reduced South Korean wireless service operator's demand for the
Company's products. At this time, the Company is unable to predict if such order
fluctuations, including cancellations, will continue to be experienced from its
customers in Asia or any other areas that have or may have economic and or
financial crisis. See "Additional Factors That May Affect Future Results - A
Significant Amount of Our Revenues Comes from a Few Customers; Our Success is
Tied to the Growth of the Wireless Services Market; There are Many Risks
Associated With International Operations; and Over the Last Three Years, We Have
Had a Reliance upon the South Korean Market."

     The reduction and stoppage of the deployment of both the South Korean
digital cellular CDMA and PCS networks during 1998 did have an adverse effect on
the Company's revenues and business with its South Korean customers and its
results of operations. The Company continues to operate in South Korea and Asia
and does not currently plan any reduction in its operations in this region. Any
future delay, rescheduling or cancellation of customer orders or deployments
could have an adverse effect on the Company's business, results of operations
and financial condition. For additional information see "Additional Factors That
May Affect Future Results - A Significant Amount of Our Revenues Comes from a
Few Customers; Our Success is Tied to the Growth of the Wireless Services
Market; There are Many Risks Associated With International Operations; and Over
the Last Three Years, We Have Had a Reliance upon the South Korean Market."

  Sales to customers in countries outside of Asia, primarily in North America,
increased approximately 461% to $58.3 million for the quarter ended October 3,
1999 from $10.4 million for the quarter ended September 27, 1998. For the third
quarter ended October 3, 1999, total sales to Nortel Networks Corporation and
related entities ("Nortel") accounted for approximately 35% of revenues and
sales to Lucent Technologies, Inc. ("Lucent") accounted for over 10% of the
revenues for the quarter. As part of the HP Acquisition, the Company
significantly increased its sales to Nortel and added Lucent as a customer.
There can be no assurance that the Company will continue to be successful in
attracting new customers or retaining or increasing business with existing
customers. In addition, the Company believes that a significant portion of its
business with Original Equipment Manufacturers ("OEMs"), such as LM Ericsson
Telephone Company ("Ericsson"), Lucent and Nortel, is dependent upon the
development schedules of wireless network operators who are purchasing
infrastructure equipment from such OEMs and on such OEMs' strategy concerning
the outsourcing of RF power amplifiers. A number of factors may cause delays in
wireless infrastructure deployment schedules for both North American and
international deployments, including deployments in Brazil, Asia, South America
and other areas. Such factors include economic or political problems in the
wireless operator's operating region, delays in government approvals required
for system deployment, and reduced subscriber demand for wireless services. In
addition, a number of factors may cause OEMs to alter their outsourcing strategy
concerning RF power amplifiers, which could cause such OEMs to reduce or
eliminate their demand for external supplies of RF power amplifiers. Such
factors include lower perceived internal manufacturing costs and competitive
reasons to remain vertically integrated. Due to the possible uncertainties
associated with wireless infrastructure deployments and OEM demand, the Company
has experienced and expects to continue to experience significant fluctuations
in demand from its OEM customers. Such fluctuations could cause a significant
reduction in revenues which could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Additional Factors That May Affect Future Results - A Significant Amount of Our
Revenues Comes from a Few Customers; There are Many Risks Associated With
International Operations; We Recently Acquired HP's RF Power Amplifier Business
and are Currently Integrating It With Our Existing Business; and Our Quarterly
Results Fluctuate Significantly."

                                       11
<PAGE>

Gross Profit

     Cost of sales consists primarily of raw materials, assembly and test labor,
overhead and warranty costs. Gross profit margins for the third quarter of
fiscal 1999 and 1998 were 28.9% and 35.0%, respectively. The decrease in gross
margins compared to the prior year period was a result of several factors,
including increased labor and overhead costs associated with the significant
ramp-up of production personnel and facilities at the Company's Southern
California manufacturing facility due to increased demand for the Company's
products and the ongoing transition of the Folsom manufacturing activities to
Southern California. The Company's sales during 1999 as compared to 1998 also
include a larger percentage of single carrier RF power amplifiers, which
traditionally carry lower gross margins than multi-carrier RF power amplifiers.
All of the products acquired by the Company in the HP Acquisition were single
carrier RF power amplifier products. The Company anticipates that it will
continue to experience significant labor and overhead costs due to both its
ongoing transition of production from the Folsom manufacturing facility to the
Company's Irvine facility, and its increase in production personnel at its
Irvine facility. The Company currently anticipates that the Folsom production
activities will be fully transferred by the end of fiscal 1999. These costs are
currently anticipated to have a negative impact on the Company's future gross
margins. In addition, the Company currently expects that single carrier RF power
amplifier products will continue to account for a significant portion of its
business and that such products will have a negative impact on the Company's
future gross margins. While the Company continues to strive for manufacturing
and engineering cost reductions to offset pricing pressures on its products,
there can be no assurance that these cost reduction or redesign efforts will
keep pace with price declines and cost increases. If the Company is unable to
obtain cost reductions through its manufacturing and or engineering efforts, its
gross margins and profitability will continue to be adversely affected. For a
discussion of the effects of declining average sales prices on the Company's
business, see "Additional Factors That May Affect Future Results--Our Average
Sales Prices are Declining."

     As part of the HP Acquisition, the Company completed an allocation of the
purchase price of the acquisition to both the tangible and intangible assets and
liabilities acquired in the acquisition. The purchase price allocation is
included in the Company's financial statements for the fiscal year ended January
3, 1999, and includes an allocation of $11.5 million to developed technology
acquired and $0.2 million to workforce. These amounts were capitalized and are
being amortized on a straight-line basis over five and ten years, respectively,
and are included in cost of sales. For the quarter ended October 3, 1999,
approximately $0.6 million was amortized and included in cost of sales. For more
information concerning the purchase price allocation associated with the HP
Acquisition, see Note 16 of the Notes to Consolidated Financial Statements for
the fiscal year ended January 3, 1999.

     As an additional part of the HP Acquisition, the Company assumed certain
specific liabilities from HP related to the acquired business, including certain
warranty obligations. During the third quarter ended October 3, 1999, the
Company incurred approximately $0.1 million of warranty expenses which were
offset against specific liabilities assumed in the acquisition.

     The wireless communications infrastructure equipment industry is extremely
competitive and is characterized by rapid technological change, new product
development and product obsolescence, evolving industry standards and
significant price erosion over the life of a product. Due to these competitive
pressures, the Company expects that the average sales prices of its products
will continue to decrease. The Company has introduced new products at lower
sales prices which has impacted the average sales prices of the Company's
products. Future pricing actions by the Company and its competitors may also
adversely impact the Company's gross profit margins and profitability, which
could also result in decreased liquidity and adversely affect the Company's
business, results of operations and financial condition. For a discussion of the
impact of new products on the Company's business, see "Additional Factors That
May Affect Future Results - We Must Develop and Sell New Products in Order to
Keep Up With Rapid Technological Change."

Operating Expenses

     Sales and marketing expenses consist primarily of sales commissions,
salaries, other expenses for sales and marketing personnel, travel expenses,
charges for customer demonstration units, reserves for credit losses and trade

                                       12
<PAGE>

show expenses. Sales and marketing expenses increased by 69% to $3.6 million for
the quarter ended October 3, 1999 from $2.1 million for the quarter ended
September 27, 1998. As a percentage of sales, sales and marketing expenses were
4.7% and 13.0% for the quarters ended October 3, 1999 and September 27, 1998,
respectively. The increase in actual sales and marketing expenses was primarily
attributable to increases in the sales and marketing staff, and increased sales
commissions related to increased product sales. In addition, as part of the
purchase price allocation of the HP Acquisition, an allocation of $2.0 million
reflecting the value of the customer list and $0.5 million reflecting the value
of the non-compete agreement with HP was capitalized on the Company's balance
sheet. The customer list and non-compete agreement are amortized over three and
four years, respectively, and included in sales and marketing expenses.

     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, third generation wireless
and wireless local loop ("WLL") products. Research and development expenses
increased by 149% to $7.3 million for the quarter ended October 3, 1999 from
$2.9 million for the quarter ended September 27, 1998. Research and development
expenses as a percentage of sales were 9.5% and 17.9%, 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. In addition, as
part of the HP Acquisition, the Company added additional engineers who are
located in the Folsom facility. The Company currently anticipates that it will
continue operating at a higher expense level for research and development
because it intends to continue to emphasize investment in research and
development programs in future periods and continue to pursue several existing
programs acquired as part of the HP Acquisition.

     As part of the HP Acquisition, the Company acquired new product projects
that were under development at the date of the acquisition and which the Company
expected to eventually lead to new products. However, such products had not yet
established technological feasibility and no future alternative uses for such
products were identified at the time of the acquisition. New product development
projects underway at HP at the time of the acquisition included, among others,
single carrier CDMA technology, ultra-linear technology for use in multi-carrier
RF power amplifiers and advanced linear power module technology for use in next
generation wireless communications. At the date of the acquisition, the Company
estimated that these projects were approximately 75% complete and estimated that
the cost to complete these projects would aggregate approximately $2.5 million
and would be incurred over a two-year period. The Company incurred approximately
$0.4 million of research and development expenses related to these projects
during the third quarter of 1999, and since the date of the acquisition has
incurred a total of $1.4 million of research and development expenses related to
these projects. As of October 3, 1999, the Company believes that these projects
are approximately 90% complete.

     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 161% to
$3.5 million for the quarter ended October 3, 1999, from $1.3 million for the
quarter ended September 27, 1998. General and administrative expenses as a
percentage of sales were 4.5% and 8.1%, respectively. The increase in actual
general and administrative expenses was primarily attributable to increased
staffing costs associated with supporting the Company's increased revenues and
personnel. In addition, as part of the HP Acquisition, the Company is incurring
additional administration and facilities costs related to the company's Northern
California operations. Also, as part of the purchase price allocation of the HP
Acquisition, an allocation of approximately $4.6 million, reflecting the value
of goodwill acquired, was capitalized on the Company's balance sheet. This
amount is amortized over ten years and included in general and administrative
expenses.

     As an additional part of the HP Acquisition, the Company assumed certain
specific liabilities related to the acquired business, including certain
retention bonuses for contracted HP employees. During the third quarter of 1999,
the Company paid approximately $0.3 million for these retention bonuses, and
since the date of the acquisition the Company has paid a total of $1.0 million
for these retention bonuses. The remainder of these retention bonuses will be
paid over the remaining period of the Folsom manufacturing facility closure,
which is expected to be completed by the end of fiscal 1999.

                                       13
<PAGE>

     As part of the purchase price allocation, the Company recorded liabilities
related to moving and relocation costs associated with the planned closure of
the Folsom manufacturing facility. During the third quarter ended October 3,
1999, the Company paid approximately $0.1 million related to these moving and
relocation costs. The Company completed the sale of the Folsom facility to a
third party in July 1999. Under the terms of the sale, the Company has full use
of the facility (and is responsible for all operating expenses) through December
31, 1999.

Other Income (Expense)

     The Company earned $0.9 million of other income, net, in the third quarter
of 1999 compared to $0.8 million of other income, net, for the third quarter of
1998. Other income consists primarily of interest income, net of any interest
expense.

Provision for Income Taxes

     The Company's effective tax rate was 35.5% for the quarter ended October 3,
1999 and 36.5% for the quarter ended September 27, 1998.

Nine months ended October 3, 1999 and September 27, 1998

Net Sales

     Net sales increased by 235% to $201.4 million for the nine months ended
October 3, 1999 from $60.2 million for the nine months ended September 27, 1998.
The increase in revenue was primarily attributable to increased sales of the
Company's cellular and PCS products.  The first nine months of 1999 includes
revenues from the sales of products acquired in the HP Acquisition in October
1998, which are not included in the prior period.  For the first nine months of
1999, total sales of cellular products accounted for approximately 73% of
revenues or $147.1 million, compared to approximately 85% of revenues or $51.3
million for the first nine months of 1998.  Sales PCS products accounted for
approximately 27% of revenues or $53.6 million for the first nine months of
1999, compared to approximately 9% or $5.7 million during the first nine months
of 1998.  Sales of LMR products accounted for less than 1% of revenues or $0.7
million for the nine months ended October 3, 1999, compared to approximately 5%
of revenues or $2.7 million for the nine months ended September 27, 1998.

     Total sales to North American customers accounted for approximately 69% of
revenues or $138.2 million for the nine months ended October 3, 1999, compared
with approximately 57% or $34.2 million for the nine months ended September 27,
1998. The Company's total international sales (excluding North American sales)
accounted for approximately 31% of revenues or $63.2 million for the nine months
ended October 3, 1999, compared with approximately 43% or $26.0 million for the
nine months ended September 27, 1998. Total sales to Asian customers accounted
for approximately 20% of revenues in the first nine months of 1999 compared to
approximately 38% of revenues in the first nine months of 1998. For the first
nine months of 1999, total sales to Nortel accounted for approximately 44% of
revenues and sales to Lucent accounted for over 10% of revenues for this period.
For the first nine months of 1998, Nortel accounted for approximately 16% of
revenues and Lucent accounted for no revenues. See "Additional Factors That May
Affect Future Results - A Significant Amount of Our Revenues Comes from a Few
Customers."

Gross Profit

  The gross profit margins as a percentage of sales for the nine months ended
October 3, 1999 and September 27, 1998 were 27.5% and 38.4%, respectively.  The
decrease in gross margins during the first nine months of 1999 is due to several
factors, including increased labor and overhead costs associated with operating
the Folsom manufacturing facility acquired in the HP Acquisition and
inefficiencies in the ramp-up of increased production in the Company's Irvine
facility.  In addition, the significant increase in the Company's sales of
single carrier amplifiers has negatively impacted the Company's gross margins

                                       14
<PAGE>

Operating Expenses

     Sales and marketing expenses increased by 67% to $10.6 million for the nine
months ended October 3, 1999 from $6.3 million for the nine months ended
September 27, 1998.  As a percentage of sales, sales and marketing expenses were
5.3% and 10.5% for the nine months ended October 3, 1999 and September 27, 1998,
respectively.  The increase in actual sales and marketing expenses was primarily
attributable to increases in the sales and marketing staff and increased sales
commissions related to increased product sales.

     Research and development expenses increased by 114% to $19.0 million for
the nine months ended October 3, 1999 from $8.8 million for the nine months
ended September 27, 1998. Research and development expenses as a percentage of
sales were 9.4% and 14.7%, 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. The increase also reflects the additional engineers
added as part of the HP Acquisition.

     General and administrative expenses increased by 134% to $8.8 million for
the nine months ended October 3, 1999, from $3.8 million for the nine months
ended September 27, 1998. General and administrative expenses as a percentage of
sales were 4.4% and 6.3%, respectively. The increase in actual general and
administrative expenses was primarily attributable to increased staffing costs
associated with supporting the Company's increased revenues and personnel.

Other Income (Expense)

     The Company earned $1.6 million of other income, net, in the first nine
months of 1999 compared to $2.4 million of other income, net, for the first nine
months of 1998. The decrease in other income primarily reflects the interest
expense incurred during the first quarter of 1999 on the debt incurred as part
of the HP Acquisition. The acquisition debt was completely retired on March 31,
1999 with the proceeds of the Company's sale of shares of its Common Stock
during the first quarter of 1999.


Provision for Income Taxes

     The Company's effective tax rate was 36.0% for the nine months ended
October 3, 1999 and 36.5% for the nine months ended September 27, 1998.

Liquidity and Capital Resources

     The Company has historically financed its operations primarily through a
combination of cash on hand, cash provided from operations, equipment lease
financings, available borrowings under its bank line of credit and both private
and public equity offerings. As of October 3, 1999, the Company had working
capital of $105.5 million, including $71.9 million in cash and cash equivalents
as compared with working capital of $35.2 million, including $13.3 million in
cash and cash equivalents at January 3, 1999. The Company received net proceeds
of approximately $57.8 million from a Common Stock offering which was completed
during the fiscal quarter ended April 4, 1999. The Company utilized
approximately $22.8 million of these proceeds to retire the bank debt related to
the HP Acquisition. Net accounts receivable increased to $44.1 million at
October 3, 1999 from $31.2 million at January 3, 1999 primarily due to increased
sales volume in the third quarter of 1999 as compared to the fourth quarter of
1998. Net inventory decreased to $22.7 million at October 3, 1999, from $28.6
million at January 3, 1999. The decrease in net inventory is primarily due to
the ongoing consolidation of the Company's manufacturing facilities as well as
increased sales.

     Cash provided by operations was approximately $28.1 million for the nine
months ended October 3, 1999, compared with cash used in operations of $6.4
million for the nine months ended September 27, 1998. The positive cash flow
from operations for the first nine months of 1999 is attributable to increased
profitability and a decrease in inventory, offset by an increase in accounts
receivable from January 3, 1999 to October 3, 1999.

                                       15
<PAGE>

     Capital expenditures were approximately $10.8 and $3.2 million for the
first nine months of 1999 and 1998, respectively. The majority of the capital
spending during both periods represents spending on electronic test equipment
utilized in the Company's manufacturing and research and development areas.

     On April 28, 1998 the Company purchased $2.5 million of 13.75% Senior
Secured Bridge Notes due April 28, 2000 (the "Notes") from Metawave
Communications Corporation, a supplier of "smart" antennas to the wireless
communications market and a customer of the Company, in a private offering. The
total amount raised in the 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 Communications Corporation and were
redeemed in full on April 28, 1999. Upon the redemption of the Notes, the
Company received related warrants for shares of Metawave Communications
Corporation Series D Preferred Stock.

     Cash provided by financing activities was approximately $38.1 million for
the first nine months of 1999 compared with $2.8 million of cash used in
financing activities for the first nine months of 1998. On March 11, 1999, the
Company completed the sale of two million shares of Common Stock in a public
offering at an offering price of $26.75 per share. The underwriters also
exercised their right to purchase an additional 300,000 shares from the Company
at the $26.75 offering price on March 22, 1999. Total net proceeds to the
Company after the reduction for the underwriting discount and offering expenses
were approximately $57.8 million.

     On March 31, 1999, the Company utilized a total of $22.8 million of the
proceeds from its Common Stock offering to repay all of the outstanding bank
debt associated with the HP Acquisition. This included the Term Loan and the
Purpose Loan. The outstanding balances at the time of repayment were $15.5
million for the Term Loan and the Purpose Loan had a balance of $7.0. The
remaining $0.3 million was for accrued interest due on the loans. The Term Loan,
Purpose Loan and Revolving Credit Agreement were all cancelled by the Company on
March 31, 1999. The Company intends to obtain a new bank revolving credit
agreement and has currently initiated discussions with its banks regarding such
new agreement.

     As part of the HP Acquisition, the Company acquired HP's manufacturing and
research and development facility in Folsom California. Of the purchase price, a
total net value of $8.1 million was allocated to land, land improvements and
buildings. The Company has begun the process of transferring production from the
Folsom manufacturing facility to the Company's Irvine facility and expects to
complete the last transfers by the end of 1999. On July 15, 1999 the Company
sold the Folsom facility for approximately $8.4 million. The Company received
approximately $0.9 million in cash (before expenses) and an interest free note
for $7.475 million. The note is secured by the land, land improvements and
building. In exchange for the interest free note, the buyer entered into a rent-
free lease with the Company through December 31, 1999. The note is due and
payable on December 31, 1999.

     The Company had cash and cash equivalents of $71.9 million at October 3,
1999, compared with $13.3 million at January 3, 1999. The Company regularly
reviews its cash funding requirements and attempts 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. The Company invests its excess cash in short-term, investment-grade
money market instruments.

     The Company believes that its existing cash balances and funds expected to
be generated from operations will provide the Company with sufficient funds to
finance its operations for at least the next 12 months. The Company has utilized
both operating and capital lease financing for certain equipment used in its
manufacturing and research and development operations and expects to continue to
selectively do so in the future. The Company may in the future require
additional funds to support its working capital requirements or for other
purposes, and may seek to raise such additional funds through the sale of public
or private equity and/or debt financings or from other sources. No assurance can
be given that additional financing will be available in the future or that, if
available, such financing will be obtainable on terms favorable to the Company
or its shareholders when the Company may require it.

                                       16
<PAGE>

Disclosure About Foreign Currency Risk

     Historically, a majority of our revenues have been derived from
international sources, with our customers in South Korea previously accounting
for the significant majority of such revenues. With the reduction in sales to
customers in South Korea, we are continuing to pursue new customers in various
domestic and international locations where new deployments or upgrades to
existing wireless communication networks are planned. Such international
locations include Europe and South America, where there has been instability in
several of the region's currencies, including the Brazilian Real. Although we
currently invoice all of our customers in U.S. Dollars, changes in the 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.

     Certain countries in Asia, including South Korea, have experienced
weaknesses in their currencies, banking systems and equity markets. These
weaknesses at times have adversely affected South Korean wireless service
operators' demand for our products. In addition, Brazil has experienced
significant weakness in its currency and equity markets. Such weaknesses could
negatively impact demand for wireless services and thereby reduce demand for our
products in Brazil. 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 products with U.S. Dollars. In the past, the strengthening of
the U.S. Dollar as compared to the Brazilian Real or the South Korean Won, has
effectively increased the cost of our products by as much as 100% or more for
our Brazilian and South Korean customers. Any significant increase in the local
currency based cost of such products makes them less attractive to such
customers. Accordingly, future changes in exchange rates, and in particular a
strengthening of the U.S. Dollar, may negatively impact our future sales and
gross margins. For further discussion of the risks associated with our
international sales, see "Additional Factors That May Affect Future
Results-There are Many Risks Associated With International Operations."

European Monetary Union

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

     On January 1, 1999, the participating countries adopted the euro as their
local currency, initially available for currency trading on currency exchanges
and non-cash transactions such as banking. The existing local currencies, or
legacy currencies, will remain legal tender through January 1, 2002. Beginning
on January 1, 2002, euro-denominated bills and coins will be issued for cash
transactions. For a period of up to nine 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.

     Our transactions for Europe are currently recorded in U.S. Dollars and we
do not currently have requirements from our customers for transactions to be
recorded in the euro. Based on our current 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 currently 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.
If in the future, we are required by our customers to transact sales in the
euro, we do not believe that such requirements would have any material impact on
our business. We are unable

                                       17
<PAGE>

to predict what impact, if any, such transactions would have concerning currency
risks or any resulting exposure on our business, financial condition or results
of operations.

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

Year 2000 Compliance

     In the next quarter, many companies could face a potentially serious
information systems (computer) problem because many software applications and
operational programs written in the past may not properly recognize calendar
dates beginning in the Year 2000. This problem could force computers or machines
which utilize date dependent software to either shut down or provide incorrect
data or information. We have examined our computer and information systems and
contacted our software and hardware providers to determine whether our software
applications and computer and information systems are compliant with the Year
2000. We have completed an upgrade to our computer operating system and we have
been assured by our software and hardware providers that our computer systems
are fully compliant with the Year 2000. We have also performed our own internal
tests of our software and hardware to confirm that they are Year 2000 compliant.
It is not possible to quantify the aggregate cost to us of such upgrades since
they were part of the software and hardware providers normal upgrades to our
systems. The costs for upgrading our information systems have been funded
through our operating cash flows, and we estimate that we have spent
approximately $325,000 since 1996 for upgrades of our information systems and
services associated with such upgrades.

     While we believe that our information systems are fully Year 2000
compliant, we intend to continue to review our information systems for any
possible problems, as well as monitor our key suppliers and customers for any
impact that the Year 2000 may have on their information systems which could then
impact us. We have contacted all of our key suppliers and have been assured that
such suppliers will not be impacted by the Year 2000. During the remainder of
1999, we intend to contact all of our significant customers to request
verification that such customers are Year 2000 compliant. Embedded software sold
with our products is not date dependent and therefore is Year 2000 compliant. In
addition, the equipment we utilize in our manufacturing process is not date
dependent. During the remainder of 1999, we intend to conduct tests on our
manufacturing equipment to ensure that there are not any Year 2000 issues with
such equipment. To date, none of our internal testing has identified any
significant Year 2000 compliance issues.

     We do not believe that there will be significant issues or costs associated
with our products related to Year 2000 compliance; however, there can be no
assurance that such products do not contain undetected errors or defects
associated with Year 2000 date functions or that there exists heretofore
undetected aspects of our manufacturing process which could be impacted by the
Year 2000. Although we are not currently aware of any material operational
issues or costs associated with preparing our products, manufacturing processes
or internal information systems for the Year 2000, there can be no assurance
that we will not experience unanticipated negative consequences and/or material
costs caused by undetected errors or defects in the technology used in our
products, manufacturing processes or internal information systems, which are
comprised predominantly of third party software and hardware. We are reliant
upon several external companies in relation to our manufacturing processes,
including third party contract manufacturers and suppliers as well as third
party utility providers. While we have been assured that such providers will not
be impacted by the Year 2000, there can be no assurance that such parties will
not experience unanticipated failures which cold negatively impact us. We do not
currently anticipate that the Year 2000 programming issue will have a material
impact on our business, financial condition or results of operations.

     Should we not be completely successful in mitigating internal and external
Year 2000 risks, the result could be a system failure or miscalculations causing
disruptions of operations, including among other things, a temporary inability
to process transactions, manufacture products, send invoices or engage in
similar normal business activities at the Company or our vendors and suppliers.
We believe that under a worse case scenario, we could continue the majority of
our normal business activities on a manual basis. We do not have a contingency
plan with respect to potential Year 2000 failures of our suppliers or customers.

                                       18
<PAGE>

     We have evaluated the information systems, equipment and software included
in the HP Acquisition for our Year 2000 compliance. We have completed a
transition of the computer information and operating systems to our existing
systems so that the Folsom facility is now operating on a Year 2000 compliant
system. We are disposing of any computer equipment acquired in the HP
Acquisition which is not Year 2000 compliant. We upgraded the telephone system
at the Folsom facility to a new Year 2000 compliant system in May 1999. The
costs for upgrading our Folsom operations to be Year 2000 complaint were
approximately $100,000.

Additional Factors That May Affect Our Future Results

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

     . worldwide and regional economic downturns and unfavorable political
       conditions;
     . industry specific factors, including slowdown in demand for wireless
       communications and RF power amplifiers;
     . the ability to add new customers to reduce our dependence on any one
       customer while maintaining our existing customers;
     . the ability to produce products which meet the quality standards of both
       our existing and potential new customers;
     . the ability to consolidate and transfer the acquired HP Folsom
       manufacturing operations;
     . the ability to achieve re-qualification from customers of the products
       previously manufactured by HP;
     . the ability to finance our activities and maintain our financial
       liquidity;
     . the ability to timely develop and produce commercially viable products at
       competitive prices;
     . the ability to manage rapid change in demand for our products;
     . the ability of our products to operate and be compatible with various
       OEMs' base station equipment;
     . the availability and cost of components;
     . the ability to manage expense levels;
     . the ability to manage future product repairs; and
     . and the ability to accurately anticipate customer demand.


 A Significant Amount of Our Revenues Comes from a Few Customers

     We sell most of our products to a small number of customers, and we expect
that this will continue. We believe that our future success depends upon our
ability to broaden our customer base and maintain relationships with major
wireless original equipment manufacturers, or OEMs, such as Hyundai Electronics
Industries Co., Ltd. ("Hyundai"), LG Information and Communications, Ltd.
("LGIC"), Ericsson, Lucent, Nokia Telecommunications Inc. ("Nokia"), Nortel and
Samsung Electronics, Co. Ltd. ("Samsung") as well as major operators of wireless
networks, such as AT&T Wireless Services ("AT&T Wireless"), GTE Wireless Service
Corporation ("GTE") and BellSouth Cellular Corp. and related entities
("BellSouth"). 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.

     Revenues attributable to our top five customers for the nine months ended
October 3, 1999, (in alphabetical order) BellSouth, LGIC, Lucent, Nortel and
Samsung accounted for approximately 79% of our net revenues or $158.8 million,
and each of these customers accounted for more than 5% of our revenues for the
period. The risks

                                       19
<PAGE>

related to our customer concentration were magnified in 1998 due certain of our
customer's geographic concentration in South Korea which experienced an economic
and financial crisis during 1998. Our South Korean customers, including Hyundai,
LGIC and Samsung, accounted for approximately 20% of our total sales for the
first nine months of fiscal 1999, or $40.2 million. For all of 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 sales.

     We believe that continued purchases of our products by OEMs is dependent
upon many factors, including the OEMs current view of wireless infrastructure
deployments and could be significantly reduced due to any delays of such
deployments. A number of factors may cause delays in wireless infrastructure
deployments, including the following such factors:

     . economic or political problems in the wireless operator's operating
       region;
     . delays in government approvals required for system deployment; and
     . reduced subscriber demand for wireless services.

     In addition, from time to time OEMs may purchase products from us on a
large quantity basis over a short period of time which may cause demand for our
products to change rapidly. Due to these and other possible 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, which could negatively impact our ability
to meet customers' demands as well as could potentially impact product quality.
Alternatively, such fluctuations could cause a significant reduction in revenues
which could have a material adverse effect on our business, results of
operations and financial condition. We cannot guarantee that a major customer
will not reduce, delay or eliminate its purchases from us, which could have a
material adverse effect on our business, results of operations and financial
condition.

     We Recently Acquired HP's RF Power Amplifier Business and are Currently
Integrating It With Our Existing Business

     In October 1998, we completed the purchase of HP's RF power amplifier
business for a total purchase price of approximately $65.9 million. As part of
this acquisition, we acquired HP's manufacturing and research and development
facility located in Folsom, California, and its production equipment and
manufacturing lines located in Malaysia. Since the acquisition date, the Company
has transferred the Malaysian production equipment and manufacturing lines to
its Irvine, California facility.  The Company is also in the process of
transferring the Folsom facility manufacturing lines to its Irvine facility and
currently excepts to complete the closure of the Folsom manufacturing facility
in the fourth quarter of 1999.  The Company sold the Folsom facility to a third
party on July 15, 1999.  As part of the sale agreement, the Company retained use
of the facility through December 31, 1999.  The Company also intends to maintain
a research and development location in the Folsom area and has entered into a
lease agreement for a facility in El Dorado Hills, California.

     Upon completion of the HP Acquisition, we became responsible for the
operation of the Folsom manufacturing facility and the production of products
formerly manufactured by HP. Additionally, with the closing of the Malaysian
manufacturing operations we have to manufacture all products in our domestic
manufacturing facilities. We did not have any experience in operating multiple
manufacturing facilities and we rely upon a significant number of contract
employees from HP and third-party employment services to operate the Folsom
facility. We may fail to successfully operate the Folsom manufacturing facility
or to consolidate it with our Irvine facility on schedule or within our budget.
Either situation would have a material adverse effect upon our business,
financial condition and results of operations.

  The transfer and consolidation of the Folsom manufacturing operations carry
the following risks:

     . failure to properly train new employees on how to manufacture existing
       products;

                                       20
<PAGE>

 .  failure to retain existing Folsom employees;
 .  delays or failures to achieve requalification from customers of the products
   being produced from Irvine;
 .  failure to manage to reduce manufacturing costs as part of the consolidation
   of manufacturing facilities;
 .  failure to manage manufacturing capacity to meet product demand;
 .  failure to manage, reproduce or maintain the quality of the HP manufacturing
   processes; and
 .  failure to successfully redesign and requalify certain products that were
   formerly designed and manufactured by HP which utilize transistors
   manufactured by HP before the end of a one-year supply agreement with HP
   covering those transistors.

  Our integration of HP's RF power amplifier business also carries the following
business risks:

     . diversion of management time and attention;
     . failure to successfully operate multiple research and development
       facili ties;
     . failure to retain former HP employees; and
     . transition of customer relationships.

  Our failure to achieve the transfer and consolidation and integration of HP's
RF power amplifier business in a timely manner and within our expected cost
targets could have a material adverse effect on our business, financial
condition and results of operations.  Additionally, we must properly manage the
integration of HP's RF power amplifier business with our business to ensure that
our manufacturing capacity can meet product demand and to achieve the
anticipated cost reductions and synergies from the HP Acquisition.  Failure to
do so could result in a reduction in our revenues, a reduction in our gross
margins and working capital, and, more generally, a reduction in our business,
financial condition and results of operations.

  Our Quarterly Results Fluctuate Significantly

  We experience, and will continue to experience, significant fluctuations in
sales and operating results from quarter to quarter. Quarterly results fluctuate
due to a number of factors, any of which could have a material adverse effect on
our business, results of operations and financial condition.  Factors that could
cause our results of operations to vary include the following:

  . variations in the timing, cancellation, or rescheduling of customer orders
    and shipments;
  . our failure to timely and successfully complete the integration of the
    operations acquired in the HP Acquisition;
  . variations in manufacturing costs, capacities and efficiencies;
  . capacity and production constraints, including constraints associated with
    single-source component suppliers;
  . 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, such as South Korea or
    South America;
  . 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;
  . delays in qualification by customers of new products or redesigns or delays
    in qualification of new production facilities;
  . 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;

                                       21
<PAGE>

  . variations in product development and other operating expenses;
  . discounts given to certain customers for large volume purchases; and
  . high fixed expenses that increase operating expenses, especially during a
    quarter with a sales shortfall.

  In addition, while we periodically receive order forecasts from our major
customers, such customers have no binding obligation to purchase the forecasted
amounts. See "--A Significant Amount of Our Revenues Comes From a Few
Customers." Order deferrals and cancellations by our customers, declining
average sales prices, changes in the mix of products sold, delays in the
introduction of new products and longer than anticipated sales cycles for our
products have in the past adversely affected our quarterly results of
operations.  We cannot guarantee that our quarterly results of operations will
not be similarly adversely affected in the future.

  Our sales to customers are usually made under purchase orders with short
delivery requirements.  While we receive periodic order forecasts, customers
have no obligation to purchase the forecasted amounts and may cancel orders,
change delivery schedules or change the mix of products ordered with minimal
notice.  In spite of these limitations, we maintain significant work-in-progress
and raw materials inventory as well as increased levels of technical production
staff to meet estimated order forecasts.  If customers purchase less than the
forecasted amounts or cancel or delay existing purchase orders, we will have
higher levels of inventory that face a greater risk of obsolescence and excess
production staff.  If our customers desire to purchase products in excess of the
forecasted amounts or in a different product mix, we may lack the inventory or
manufacturing capacity to fill their orders.  Either situation could have a
material adverse effect upon our business, financial condition and results of
operations and future business with such customers.

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

Our Average Sales Prices are Declining

  We anticipate that the average sales prices for our products will continue to
decline and negatively impact our gross profit margins.  Wireless service
providers are placing increasing price pressure on wireless infrastructure
manufacturers, which in turn has resulted in downward pricing pressure on our
products.  Competition among third-party suppliers also has increased the
downward price pressure on our products.  Since wireless infrastructure
manufacturers frequently negotiate supply arrangements far in advance of
delivery dates, we must often commit to price reductions for our products before
we know how, or if, we can obtain such cost reductions.  In addition, average
sales prices are affected by price discounts negotiated for large volume
purchases by certain customers.  To offset declining average sales prices, we
must reduce manufacturing costs and ultimately develop new products with lower
costs or higher average sales prices.  If we cannot achieve such cost reductions
or product improvements, our gross margins will continue to decline.

  We anticipate that single carrier RF power amplifier products will account for
a larger portion of our net sales in 1999 than in prior years.  Our recent HP
Acquisition included only single carrier RF power amplifier business with no
existing multi-carrier RF power amplifier business.  Sales of single carrier RF
power amplifiers have been subject to intense price competition and carry lower
gross profit margins than multi-carrier RF power amplifier products.  If we
cannot reduce manufacturing costs on our single carrier RF power amplifiers and
such RF power amplifiers account for an increased percentage of net sales, our
overall gross profit margins will fall.

                                       22
<PAGE>

Our Failure to Manage Future Growth Could Have Adverse Effects

  Our ability to compete effectively, capitalize on the HP Acquisition and
manage future growth depends on our ability to:

  .  effectively expand, train and manage our work force, particularly to
     complete the transition of the Folsom manufacturing operations;
  .  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.

  We Must Retain Key Executives and Personnel

    We need to hire and retain highly qualified technical, marketing and
managerial personnel. Competition for personnel, particularly qualified
engineers, is intense, and the loss of a significant number of such persons, as
well as the failure to recruit and train additional technical personnel in a
timely manner, could have a material adverse effect on our business, results of
operations and financial condition.

  There are Many Risks Associated With International Operations

    For fiscal years 1996, 1997, 1998 and the first nine months of fiscal 1999,
international revenues (excluding North American sales) accounted for
approximately 77%, 84%, 41% and 29% respectively, of our net sales.  These
revenues will continue to account for a significant percentage of our revenues
for the foreseeable future.  Therefore, the following risks associated with
international operations could have a material adverse effect on our
performance:

  . compliance with multiple and potentially conflicting regulations, including
    export requirements, tariffs, import duties and other barriers, and health
    and safety requirements;
  . differences in intellectual property protections;
  . difficulties in staffing and managing foreign operations;
  . longer accounts receivable collection cycles;
  . currency fluctuations;
  . economic instability, including inflation and interest rate fluctuations,
    such as those seen in South Korea and Brazil;
  . competition from foreign based suppliers;
  . restrictions against the repatriation of earnings from a foreign country;
  . overlapping or differing tax structures; and
  . political or civil turmoil.

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

                                       23
<PAGE>

above risks actually occurs, there may be a material adverse effect on our
business, financial condition and results of operations.

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

     Most 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, including cellular and PCS.  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.

 Over the Last Three Years, We Have Had a Reliance upon the South Korean Market

     Three of our customers, Hyundai, LGIC and Samsung, are based in South Korea
and collectively accounted for approximately 20% of the Company's net sales for
the nine months ended October 3, 1999.  For fiscal year 1998, customers based in
South Korea collectively accounted for approximately 30% of our net sales and
they accounted for approximately 83% of our net sales for fiscal year 1997.
These customers have purchased products primarily for deployment in the South
Korean digital cellular and PCS networks.

     The build-out of the South Korean digital cellular networks began in 1995
with two independent service providers offering digital CDMA service beginning
in 1996. In contrast, the build-out of the South Korean PCS networks began in
the first quarter of 1997 with four service providers. We provided multi-carrier
cellular RF power amplifiers starting from the initial stages of the digital
cellular network buildout in South Korea. During 1997, we began shipping, in
volume, PCS single carrier RF power amplifiers for use in the new PCS networks
being built in South Korea. Sales to our South Korean customers for the South
Korean PCS networks represented substantially all of our PCS sales during 1997
and approximately 86% of our PCS sales for the first nine months of 1998. Since
the completion of the HP Acquisition, we have significantly increased our non-
Korean PCS sales. The delay, postponement and cancellation of the build-out of
the South Korean digital wireless networks which occurred during 1998, did have
an adverse effect on our revenues and results of operations during 1998. The
continued delay, termination or early completion of the infrastructure build-out
of the South Korean digital wireless networks could have a material adverse
effect on our business, results of operations and financial condition. Further,
even if these networks are developed as originally anticipated, there can be no
assurance that our products will continue to be purchased by our South Korean
customers or be capable of being manufactured at competitive prices in
sufficient volumes.

                                       24
<PAGE>

   The economic and financial crisis in Asia and South Korea caused a reduction
in the value of the South Korean Won when compared to the U.S. dollar.  This
reduction in purchasing value caused a reduction in South Korean wireless
service operators' demand for our products.  Our South Korean customers pay for
products with U.S. dollars. As such, the strengthening of the U.S. dollar as
compared to the South Korean Won during 1998, increased the effective cost of
our products by at times as much as 100% or more for our South Korean customers.
The resulting significant increase in the local currency cost of such products
made them less attractive to our customers. Additionally, due to the economic
problems facing the South Korean banking network, it became more difficult for
local operating companies to raise additional financing to support the increased
costs of their infrastructure buildout.  Please note that the types of economic
problems experienced in Asia have been encountered in other areas of the world
where we operate, such as Brazil in South America.

   Due to the numerous factors involved, we are unable to predict when, if ever,
these networks will be completed pursuant to the South Korean wireless network
operators' original build-out projections. In addition, we are unable to predict
what level such sales will be for 1999.

   Hyundai, LGIC and Samsung have also been marketing wireless infrastructure
equipment for installation in networks outside of the South Korean market.  We
cannot predict whether such customers will be successful in obtaining new
business outside of South Korea or that, if successful, they will continue to
purchase RF power amplifiers from us. Any further significant decrease in our
sales of RF power amplifiers to these customers, without an offsetting increase
in sales to other customers, could have a material adverse effect on our
business, results of operations and financial condition.

   We Depend on Single Sources for Key Components

     A number of the parts used in our products are available from only one or a
limited number of outside suppliers due to unique component designs as well as
certain quality and performance requirements.  To take advantage of volume
pricing discounts, we also purchase certain customized components from single
sources.  We have experienced, and expect to continue to experience, shortages
of single-sourced components.  Shortages have compelled us to adjust our product
designs and production schedules.  If single-sourced components become
unavailable in sufficient quantities or available only on unsatisfactory terms,
we would be required to purchase comparable components from other sources and
"retune" our products to function with the replacement components, or we may be
required to redesign our products to use other components, either of which could
delay production and delivery of our products.  In addition, our reliance on
certain single-sourced components could expose us to quality control issues if
such suppliers experienced 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 materially
adverse effect on our business, results of operations and financial condition.
In addition, if we could 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.

     The RF power amplifier business which we acquired in the HP Acquisition
utilizes certain custom components manufactured by HP.   We have a one-year
supply commitment from HP for these components and we are expected to begin
sourcing such components from new suppliers. While we have an ongoing process to
redesign certain products as well as identify and test alternative sources for
such custom components, if we are unsuccessful in adding such new suppliers,
such failure could have a material adverse effect on our business, results of
operations and financial condition.

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

                                       25
<PAGE>

The Market in Which We Operate is Highly Competitive

     The wireless communications infrastructure equipment industry is extremely
competitive and is characterized by rapid technological change, frequent new
product development, rapid product obsolescence, evolving industry standards and
significant price erosion over the life of a product.  Our products compete on
the basis of the following key characteristics:

    .  performance;
    .  functionality;
    .  reliability;
    .  pricing;
    .  quality;
    .  designs that can be efficiently manufactured in large volumes
    .  time-to-market delivery capabilities; and
    .  compliance with industry standards.

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

    Our current competitors include AML Communications, Inc., M/A-COM, Inc. (a
subsidiary of AMP, Inc.), Microwave Power Devices, Inc. and Spectrian
Corporation, in addition to the RF power amplifier manufacturing operations of
the leading wireless infrastructure manufacturers such as Ericsson, Lucent,
Motorola, Nokia and Samsung.  Some competitors have significantly greater
financial, technical, manufacturing, sales, marketing and other resources than
we do and have achieved greater name recognition for their products.

    Our success depends in part upon the rate at which wireless infrastructure
manufacturers incorporate our products into their systems.  A substantial
portion of the present worldwide production of RF power amplifiers is captive
within the internal manufacturing operations of leading wireless infrastructure
manufacturers such as Ericsson, Lucent, Motorola, Nokia and Samsung.  These
companies regularly evaluate whether to manufacture their own RF power
amplifiers rather than purchase them from us.  These companies could also
directly compete with us by selling their RF power amplifiers to other
manufacturers and operators, including our customers.  If we are not successful
in increasing the use of our products by the leading wireless infrastructure
manufacturers, there would be a material adverse effect on our business,
financial condition and results of operations.

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

    The markets in which we compete are characterized by:


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

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

     To develop new products, we invest in the research and development of RF
power amplifiers for wireless communications networks. We target our research
and development efforts on major wireless network deployments worldwide, which
cover a broad range of frequency and transmission protocols. We also engage in
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

                                       26
<PAGE>

producing product. In addition, the new products we develop may not achieve
market acceptance or may not be manufacturable at competitive prices in
sufficient volumes. We cannot guarantee the success of our research and
development efforts.

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

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

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

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

     We have had quality problems with our products in the past and may have
similar problems in the future. We have replaced components in some products in
accordance with our product warranties. We believe that our customers will
demand increasingly stringent product performance and reliability, particularly
in domestic markets. We cannot provide any assurance that our product designs
will remain successful or that they will keep pace with technological
developments, evolving industry standards and new communications protocols. We
may fail to adequately improve product quality and meet the quality standards of
our customers, which could cause us to lose such customers. Design problems
could damage relationships with existing and prospective customers and could
limit our ability to market our products to large wireless infrastructure
manufacturers, many of which build their own, high quality RF power amplifiers
and have stringent quality control standards. See "--Many Wireless
Infrastructure Manufacturers have Internal RF Power Amplifier Production
Capabilities."

The Sales Cycle for Our Products is Lengthy

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

 Many Wireless Infrastructure Manufacturers have Internal RF Power Amplifier
 Production Capabilities

     Many of the leading wireless infrastructure equipment manufacturers
internally manufacture their own RF power amplifiers. We believe that our
existing customers continuously evaluate whether to manufacture their own RF
power amplifiers. Certain of our customers produced RF power amplifiers in an
attempt to replace products manufactured by us. We believe that this practice
will continue. In addition, LGIC, one of our customers, previously entered into
a joint venture manufacturing arrangement with one of our competitors. In the
event that our customers manufacture their own RF power amplifiers, such
customers could reduce or eliminate their

                                       27
<PAGE>

purchases of our products. We cannot guarantee that our current customers will
continue to rely, or expand their reliance, on us as an external source of
supply for their RF power amplifiers.

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

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

     We rely upon trade secrets to protect our intellectual property. We execute
confidentiality and non-disclosure agreements with our employees and limit
access to and distribution of our proprietary information. During 1998, we were
granted our first U.S. patent for an aspect of our multi-carrier technology. In
addition, we have applied for several additional U.S. and international patents
for various aspects of our proprietary technology. These efforts allow us to
rely upon the knowledge and experience of our management and technical
personnel, 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. While we believe that we have adequately protected our proprietary
technology, and will take all legal measures to protect it, the use of our
processes by a competitor could have a material adverse effect on our business,
financial condition and results of operations.

     Our ability to compete successfully and achieve future revenue growth will
depend, in part, on our ability to protect our proprietary technology and
operate without infringing the rights of others.  We may fail to do so.  In
addition, the laws of certain countries in which our products are or may be sold
may not protect our products and intellectual property rights to the same extent
as the laws of the United States.

     As the number of patents, copyrights and other intellectual property rights
in our industry increases, and as the coverage of these rights and the
functionality of the products in the market further overlap, we believe that
companies in our industry may face more frequent infringement claims. Although
there are no pending or threatened intellectual property lawsuits against us, we
may face litigation or infringement claims in the future. Such claims could
result in substantial costs and diversion of our resources.

     A third party claiming infringement may also obtain an injunction or other
equitable relief, which could effectively block the distribution or sale of
allegedly infringing products. Although we may seek licenses from third parties
covering intellectual property that we are allegedly infringing, we cannot
guarantee that any such licenses could be obtained on acceptable terms, if at
all.

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

                                       28
<PAGE>

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

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

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

   Government Regulation of the Communications Industry

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

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

    Our Stock Price Has Been and May Continue to Be Volatile

     Our Common Stock, and the stock market generally, have from time to time
experienced significant price and volume fluctuations. The fluctuations in the
stock market are often unrelated to the operating performance of particular
companies, and the market prices for securities of technology companies have
been especially volatile. These broad market fluctuations may adversely affect
the market price of our Common Stock. Our stock price may be affected by the
factors discussed above as well as:

    .  fluctuations in our results of operations or the operations of our
       competitors;
    .  failure of such results of operations to meet the expectations of stock
       market analysts and investors
    .  sales of a significant number of shares of restricted securities in the
       market;
    .  changes in the political or economic outlook of the markets into which
       we sell our products (such as South Korea or Brazil);
    .  changes in stock market analyst recommendations regarding us or our
       competitors;
    .  the timing and announcements of technological innovations or new products
       by us or our competitors;
    .  changes in the wireless communications industry; and
    .  general market conditions.

                                       29
<PAGE>

  Risk of Litigation

      We are subject to various legal proceedings from time to time as part of
our business. In July 1998, lawsuits were filed by certain of our shareholders
against us and certain of our present and former directors and officers. The
shareholders bringing these lawsuits claim to represent a class consisting of
all persons who purchased our Common Stock between June 4, 1997 and January 16,
1998. These lawsuits allege, among other things, that we (and our officers and
directors) violated federal securities laws by making misrepresentations
designed to artificially inflate our stock price and allow certain individuals
to sell their Common Stock at artificially inflated prices. We, and our
directors and officers, deny the allegations of wrongdoing and intend to
vigorously defend the lawsuits, although the ultimate outcome of these
proceedings is not currently determinable.

     In September 1999, a lawsuit was filed against us by a former customer. The
lawsuit alleges, among other things, that we sold defective LMR products to this
customer from 1994 to 1998. The lawsuit seeks direct damages in the amount of
$1.6 million as well as unspecified punitive damages. We deny these allegations
of wrongdoing and intend to vigorously defend this lawsuit. At this time the
outcome of the proceedings is not determinable.

     A decision adverse to us in any of these matters could have a material
adverse effect on our business, financial condition and results of operations.
In addition, litigation, regardless of its merits, could result in substantial
costs to us and divert management's attention from our operations.


Item 3. Quantitative and Qualitative Disclosures About Market Risk

     Our financial instruments include cash and long-term debt. At October 3,
1999, the carrying values of these financial instruments approximated their fair
values based on current market prices and rates.

  It is currently our policy not to enter into derivative financial instruments.
We do not currently have any significant foreign currency exposure since we do
not transact business in foreign currencies.

                                       30
<PAGE>

                          PART II.  OTHER INFORMATION


Item 1.  Legal Proceedings

     On September 27, 1999, a lawsuit was filed against us in the Superior Court
of the State of California by a former customer. The lawsuit alleges, among
other things, that we sold defective LMR products to this customer from 1994 to
1998. The lawsuit seeks direct damages in the amount of $1.6 million as well as
unspecified punitive damages. We deny these allegations of wrongdoing and intend
to vigorously defend this lawsuit. At this time the outcome of the proceedings
is not determinable.

Item 4.  Submission of Matters to a Vote of Security Holders

     The Company's Annual Meeting of Shareholders was held on August 11, 1999 in
Irvine, California. A quorum was declared present for the meeting. The following
matters were submitted to a vote of security holders, and proposals (1) and (3)
were approved by the majority of those voting.

     (1) The election of the following seven 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.

         Gregory M. Avis     There were 16,850,398 votes for and 973,410 votes
                             withheld.
         John L. Clendenin   There were 17,292,771 votes for and 531,037 votes
                             withheld.
         Alfonso G. Cordero  There were 17,292,661 votes for and 531,147 votes
                             withheld.
         Bruce C. Edwards    There were 17,292,771 votes for and 531,037 votes
                             withheld.
         David L. George     There were 17,292,771 votes for and 531,037 votes
                             withheld.
         Eugene Goda         There were 17,292,771 votes for and 531,037 votes
                             withheld.
         Andrew J. Sukawaty  There were 16,989,064 votes for and 834,744 votes
                             withheld.

     (2) An amendment to the Company's 1996 Stock Incentive Plan to increase the
         number of shares of Common Stock issuable thereunder from 3,000,0000 to
         5,000,000. The proposal was not approved by the shareholders.

         There were 7,166,238 votes cast in favor, 8,207,737 votes opposed and
         9,904 votes abstaining.

     (3) The ratification of Deloitte & Touche LLP as independent auditors. The
         proposal was approved by the shareholders.

         There were 17,490,958 votes cast in favor, 328,395 votes opposed and
         4,455 votes abstaining.

Item 5.  Other Information

     On November 5, 1999, the Company announced that Mr. Alfonso G. Cordero had
resigned from the Company's Board of Directors, effective immediately.  No
replacement director was announced.

                                       31
<PAGE>

Item 6.  Exhibits and Reports on Form 8-K

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


Exhibit
Number                            Description
------                            -----------

 11.1  Computation of net income per share.

 27.1  Financial Data Schedule.


     (b) No reports have been filed on Form 8-K for the quarter for which this
report is filed.

                                       32
<PAGE>

                                  SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                 POWERWAVE TECHNOLOGIES, INC.


Date: November 16, 1999      By: /s/  Kevin T. Michaels
                             -----------------------------
                                      Kevin T. Michaels
                             Vice President, Finance and Chief Financial Officer

                                       33