<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 July 2, 2000

                                       OR


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


     For the transition period from ____________ to ______________


                        Commission File Number 000-21507

                          POWERWAVE TECHNOLOGIES, INC.
             (Exact name of registrant as specified in its charter)


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


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


       Registrant's telephone number, including area code: (949) 809-1100


                              __________________

     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 August 9, 2000 the number of outstanding shares of Common Stock, par
value $.0001 per share, of the Registrant was 61,537,443.

================================================================================
<PAGE>

                          POWERWAVE TECHNOLOGIES, INC.
                                     INDEX

                                                                          Page
                                                                          ----

Part I. Financial Information

        Item 1.  Financial Statements

                 Consolidated Balance Sheets at July 2, 2000
                  (Unaudited) and January 2, 2000                          3

                 Consolidated Statements of Income (Unaudited)
                  for the three and six months ended July 2, 2000
                  and July 4, 1999                                         4

                 Consolidated Statements of Comprehensive Income
                  (Unaudited) for the three and six months ended
                  July 2, 2000 and July 4, 1999                            5

                 Consolidated Statements of Cash Flows (Unaudited) for
                  the six months ended July 2, 2000 and July 4, 1999       6

                 Notes to Consolidated Financial Statements (Unaudited)    7-11

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                        12-30

Item 3.  Quantitative and Qualitative Disclosures About Market Risk       31

Part II. Other Information

Item 4.  Submission of Matters to a Vote of Security Holders              32

Item 6.  Exhibits and Reports on Form 8-K                                 32-33

Signatures                                                                34

This Quarterly Report on Form 10-Q includes certain forward-looking statements
as defined within Section 27A of the Securities Act of 1933, as amended and
Section 21E of the Securities Exchange Act of 1934, as amended, relating to
revenue and demand trends, future expense levels, trends in average selling
prices and the timing for the Company's facilities consolidation.  Such forward-
looking statements are based on the beliefs of, and estimates made by and
information currently available to, the Company's management  and are subject to
certain risks, uncertainties and assumptions.  Any statements contained herein
(including without limitation statements to the effect that the Company or
management "estimates," "expects," "anticipates," "plans," "believes,"
"projects," "continues," "may," or "will," or statements concerning "potential"
or "opportunity" or variations thereof or comparable terminology or the negative
thereof) that are not statements of historical fact should be construed as
forward looking statements. The actual results of Powerwave may vary materially
from those expected or anticipated in these forward-looking statements. The
realization of such forward-looking statements may be impacted by certain
important factors which are discussed in "Additional Factors That May Affect
Future Results" under Item 2, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" at pages 12-30.  Because of these and other
factors that may affect Powerwave's operating results, past performance should
not be considered an indicator of future performance and investors should not
use historical results to anticipate results or trends in future periods.
Powerwave undertakes no obligation to publicly release the result of any
revisions to these forward-looking statements which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events. Readers should carefully review the risk factors described
in this and other documents Powerwave files from time to time with the
Securities and Exchange Commission, including subsequent Current Reports on Form
8-K, Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.

                                       2
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                       July 2,              January 2,
                                                                                         2000                  2000
                                                                                     ------------           ----------
<S>                                                                                  <C>                    <C>
ASSETS                                                                               (Unaudited)

Current Assets:
  Cash and cash equivalents.......................................................       $ 68,710              $ 76,671
  Accounts receivable, net of allowance for doubtful accounts of  $3,606 and
   $2,988 at July 2, 2000 and January 2, 2000, respectively.......................         62,938                47,476
  Inventories, net................................................................         39,296                31,696
  Prepaid expenses and other current assets.......................................          4,374                 2,449
  Notes receivable................................................................             25                 7,045
  Prepaid income taxes............................................................          5,050                    --
  Deferred tax assets.............................................................          5,325                 5,888
                                                                                         --------              --------
     Total current assets.........................................................        185,718               171,225

Property, plant and equipment.....................................................         75,853                45,286
Less accumulated depreciation and amortization....................................        (18,334)              (12,354)
                                                                                         --------              --------
  Net property, plant and equipment...............................................         57,519                32,932
                                                                                         --------              --------

Land..............................................................................         14,838                    --
Intangible assets, net............................................................         12,560                14,344
Deferred tax assets...............................................................          4,507                 4,507
Other non-current assets, net.....................................................          2,284                    30
                                                                                         --------              --------
TOTAL ASSETS......................................................................       $277,426              $223,038
                                                                                         ========              ========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
  Accounts payable................................................................       $ 38,197              $ 30,128
  Accrued expenses and other liabilities..........................................         22,117                19,399
  Current portion of long-term debt...............................................             11                   125
  Income taxes payable............................................................             --                 3,007
                                                                                         --------              --------
     Total current liabilities....................................................         60,325                52,659

Long-term debt, net of current portion............................................             47                    --
Other non-current liabilities.....................................................            497                   600
                                                                                         --------              --------
     Total liabilities............................................................         60,869                53,259
                                                                                         --------              --------

Shareholders' Equity:
  Preferred Stock, $.0001 par value, 5,000 shares authorized and no shares
    outstanding...................................................................             --                    --
  Common Stock, $.0001 par value, 135,000 shares authorized, 61,457 shares
    issued and outstanding at July 2, 2000 and 60,489 shares
    issued and outstanding at January 2, 2000.....................................        145,040               120,785
  Accumulated other comprehensive income..........................................            809                    --
  Retained earnings...............................................................         70,708                48,994
                                                                                         --------              --------
     Total shareholders' equity...................................................        216,557               169,779
                                                                                         --------              --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........................................       $277,426              $223,038
                                                                                         ========              ========
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                       3
<PAGE>

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


<TABLE>
<CAPTION>
                                                       Three Months Ended                          Six Months Ended
                                                    --------------------------                 --------------------------
                                                    July 2,           July 4,                  July 2,           July 4,
                                                      2000              1999                     2000              1999
                                                    --------------------------                 --------------------------
<S>                                                 <C>               <C>                      <C>               <C>
Net sales.................................          $110,458           $68,493                 $214,312          $124,517
Cost of sales.............................            74,504            50,353                  145,901            91,363
                                                    --------           -------                 --------          --------
Gross profit..............................            35,954            18,140                   68,411            33,154
Operating expenses:
  Sales and marketing.....................             5,382             3,411                   10,447             6,989
  Research and development................            10,627             6,376                   19,635            11,671
  General and administrative..............             3,622             2,654                    7,207             5,345
                                                    --------           -------                 --------          --------
Total operating expenses..................            19,631            12,441                   37,289            24,005
                                                    --------           -------                 --------          --------

Operating income..........................            16,323             5,699                   31,122             9,149
Other income, net.........................             1,332               919                    2,542               700
                                                    --------           -------                 --------          --------

Income before income taxes................            17,655             6,618                   33,664             9,849
Provision for income taxes................             6,267             2,416                   11,950             3,595
                                                    --------           -------                 --------          --------

Net income................................          $ 11,388           $ 4,202                 $ 21,714          $  6,254
                                                    ========           =======                 ========          ========

Basic earnings per share..................          $   0.19           $  0.07                 $   0.36          $   0.11
                                                    ========           =======                 ========          ========
Diluted earnings per share................          $   0.18           $  0.07                 $   0.34          $   0.11
                                                    ========           =======                 ========          ========
Basic weighted average common shares......            61,332            59,600                   61,134            56,807
                                                    ========           =======                 ========          ========
Diluted weighted average common shares....            64,784            61,499                   64,534            58,625
                                                    ========           =======                 ========          ========
</TABLE>

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

                                       4
<PAGE>

                         POWERWAVE TECHNOLOGIES, INC.
                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                  (Unaudited)

<TABLE>
<CAPTION>

                                                Three Months Ended       Six Months Ended
                                               --------------------      ----------------
                                               July 2,      July 4,      July 2,  July 4,
                                                2000         1999         2000     1999
                                               -------      -------      -------  -------
<S>                                            <C>          <C>          <C>      <C>

Net income................................     $11,388       $4,202      $21,714   $6,254
                                               -------       ------      -------   ------
Other comprehensive income, net of tax:
  Unrealized gains on available for sale
   securities, restricted.................         809           --          809       --
                                               -------       ------      -------   ------
Other comprehensive income................         809           --          809       --
                                               -------       ------      -------   ------
Comprehensive income......................     $12,197       $4,202      $22,523   $6,254
                                               =======       ======      =======   ======
</TABLE>

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

                                       5
<PAGE>

                          POWERWAVE TECHNOLOGIES, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                                Six Months Ended
                                                                                 --------------------------------------------
                                                                                        July 2,                    July 4,
                                                                                         2000                       1999
                                                                                 -------------------         ----------------
<S>                                                                              <C>                         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income.....................................................................           $ 21,714                 $  6,254
  Adjustments to reconcile net income to net cash provided by
  operating activities:
    Depreciation and amortization................................................              8,483                    4,513
    Change in provision for doubtful accounts....................................                618                      150
    Change in provision for inventory reserves...................................              2,363                       --
    Compensation costs related to stock options..................................                 45                       18
    Loss on disposal of property, plant and equipment............................                 71                       --
  Changes in current assets and liabilities:
    Accounts receivable..........................................................            (16,080)                 (10,481)
    Inventories..................................................................             (9,963)                   8,335
    Prepaid expenses and other current assets....................................               (554)                    (407)
    Income taxes.................................................................             11,002                    3,370
    Accounts payable.............................................................              8,069                     (204)
    Accrued expenses and other liabilities.......................................              2,718                      937
  Other non-current assets.......................................................             (2,704)                     479
  Other non-current liabilities..................................................               (103)                      65
                                                                                            --------                 --------
      Net cash provided by operating activities..................................             25,679                   13,029

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property, plant and equipment......................................            (30,844)                  (5,505)
  Purchase of land...............................................................            (14,838)                      --
  Redemption of long-term investments............................................                 --                    2,500
                                                                                            --------                 --------
      Net cash used in investing activities......................................            (45,682)                  (3,005)

CASH FLOW FROM FINANCING ACTIVITIES:
  Payment received on notes receivable...........................................              7,020                       --
  Principal payments on long-term debt...........................................               (128)                 (23,757)
  Issuance of Common Stock.......................................................                654                   58,129
  Proceeds from exercise of stock options........................................              4,496                    1,538
                                                                                            --------                 --------
      Net cash provided by financing activities..................................             12,042                   35,910
                                                                                            --------                 --------
NET (DECREASE) INCREASE  IN CASH AND CASH EQUIVALENTS............................             (7,961)                  45,934
CASH AND CASH EQUIVALENTS, beginning of period...................................             76,671                   13,307
                                                                                            --------                 --------
CASH AND CASH EQUIVALENTS, end of period.........................................           $ 68,710                 $ 59,241
                                                                                            ========                 ========
SUPPLEMENTAL CASH FLOW INFORMATION:
  Cash paid for:
    Interest.....................................................................           $     12                 $    963
                                                                                            ========                 ========
    Income taxes.................................................................           $    949                 $    225
                                                                                            ========                 ========
NON CASH ITEMS:
    Tax benefit related to stock option exercises................................           $ 18,827                 $  3,979
                                                                                            ========                 ========
    Tax benefit related to issuance of Common Stock under the Employee Stock
     Purchase Plan...............................................................           $    232                 $    165
                                                                                            ========                 ========
  Acquisition of property and equipment through capital leases...................           $     60                 $     --
                                                                                            ========                 ========
  Unrealized gain on available for sale securities, restricted, net of tax of               $    809                 $     --
   $563..........................................................................           ========                 ========
</TABLE>

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

                                       6
<PAGE>

                         POWERWAVE TECHNOLOGIES, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
             (in thousands except for share and per share amounts)
                                 July 2, 2000

Basis of Presentation

  The accompanying consolidated financial statements have been prepared by
Powerwave Technologies, Inc. ("Powerwave" or the "Company") without audit
(except for balance sheet information as of January 2, 2000) 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 2, 2000.  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 2, 2000.

  The results of operations for the three and six months ended July 2, 2000, are
not necessarily indicative of the results to be expected for the entire fiscal
year ended December 31, 2000 (fiscal year 2000).  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 2, 2000.

Stock Split

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

  Earnings 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 is based upon
the weighted average number of common shares outstanding.  Diluted earnings per
share is based upon the weighted average number of common and potential common
shares for each period presented.  Potential common shares include stock options
using the treasury stock method.

  The following details the calculation of basic and diluted earnings per share
(share numbers are in thousands):

<TABLE>
<CAPTION>
                                                        Three Months Ended                       Six Months Ended
                                                --------------------------------        -------------------------------
                                                      July 2,         July 4,                 July 2,        July 4,
                                                       2000            1999                    2000           1999
                                                --------------------------------        -------------------------------
<S>                                                  <C>             <C>                     <C>            <C>
  Basic:
    Basic weighted average common shares........      61,332          59,600                  61,134         56,807
    Net income..................................     $11,388         $ 4,202                 $21,714        $ 6,254
                                                     -------         -------                 -------        -------
    Basic earnings per share....................     $  0.19         $  0.07                 $  0.36        $  0.11
                                                     =======         =======                 =======        =======
</TABLE>

                                       7
<PAGE>

<TABLE>
<CAPTION>
                                                        Three Months Ended                       Six Months Ended
                                                --------------------------------        -------------------------------
                                                      July 2,         July 4,                 July 2,        July 4,
                                                       2000            1999                    2000           1999
                                                --------------------------------        -------------------------------
<S>                                                   <C>             <C>                     <C>            <C>
  Diluted:
    Basic weighted average common shares........       61,332          59,600                  61,134         56,807
    Potential common shares.....................        3,452           1,899                   3,400          1,818
                                                      -------         -------                 -------        -------
    Diluted weighted average common shares......       64,784          61,499                  64,534         58,625
    Net income..................................      $11,388         $ 4,202                 $21,714        $ 6,254
                                                      -------         -------                 -------        -------
    Diluted earnings per share..................      $  0.18         $  0.07                 $  0.34        $  0.11
                                                      =======         =======                 =======        =======
</TABLE>

Comprehensive Income

  The Company has adopted SFAS No. 130, Reporting Comprehensive Income.  For the
three and six months ended July 2, 2000 the Company had other comprehensive
income of $809, all of which is unrealized gains on available for sale
securities, net of tax.  These securities are restricted under Rule 144 of the
Securities and Exchange Act of 1933.

New Accounting Pronouncements

  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 2001. SFAS
No. 133 will require the Company to record all derivatives on the balance sheet
at fair value.  The Company does not currently engage in foreign currency or
interest rate hedging activities and will continue to evaluate the effect of
adopting SFAS No. 133. The Company will adopt SFAS No. 133 in its fiscal year
2001.

  In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial
Statements, which the Company is required to adopt no later than the fourth
fiscal quarter of fiscal years beginning after December 15, 1999.  The Company
is in the process of determining the effect of adopting SAB No. 101.

Segment Information

  Utilizing the management approach, the Company has broken down its business
based upon the RF frequency in megahertz ("MHz"), in which the product is
utilized in, i.e., 800 to 1000 MHz ("Cellular"), 1800 to 2000 MHz  ("PCS"), 400
to 450 MHz ("LMR") and over 2000 MHz ("Other").  The Company does not allocate
operating expenses to these segments, nor does the Company 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 July 2, 2000
Net sales...............................................      $82,446       $28,012   $       --    $      --      $110,458
Cost of sales...........................................      $52,726        21,778           --           --        74,504
                                                             --------       -------   ----------    ---------      --------
Gross profit............................................      $29,720       $ 6,224   $       --    $      --      $ 35,954
                                                              =======       =======   ==========    =========      ========

Three months ended July 4, 1999
Net sales...............................................      $53,459       $14,634   $      400    $      --      $ 68,493
Cost of sales...........................................       36,601        12,585        1,167           --        50,353
                                                             --------       -------   ----------    ---------      --------
Gross profit (loss).....................................      $16,858       $ 2,049   $     (767)   $      --      $ 18,140
                                                              =======       =======   ==========    =========      ========
</TABLE>

                                       8
<PAGE>

<TABLE>
<CAPTION>
                                                                                 Business Segments
                                                                                 -----------------
                                                                                   (in thousands)
                                                           Cellular         PCS           LMR         Other        Total
                                                         ------------   -----------   -----------   ---------   -----------
<S>                                                      <C>            <C>           <C>           <C>         <C>
Six months ended July 2, 2000
Net sales.............................................       $158,032       $56,280   $       --    $      --      $214,312
Cost of sales.........................................        101,550        44,351           --           --       145,901
                                                             --------       -------   ----------    ---------      --------
Gross profit..........................................       $ 56,482       $11,929   $       --    $      --      $ 68,411
                                                             ========       =======   ==========    =========      ========

Six months ended July 4, 1999
Net sales.............................................       $ 92,412       $31,436   $      669    $      --      $124,517
Cost of sales.........................................         64,534        24,719        2,110           --        91,363
                                                             --------       -------   ----------    ---------      --------
Gross profit (loss)...................................       $ 27,878       $ 6,717   $   (1,441)   $      --      $ 33,154
                                                             ========       =======   ==========    =========      ========
</TABLE>


  The following schedule presents an analysis of Powerwave's net sales based
upon the geographic location to which a product was shipped. North American
sales include sales to the United States, Canada and Mexico. Asian sales include
sales to South Korea and all locations in Asia. Europe and Other International
sales include sales to Europe and all other foreign countries. Included in North
American sales were shipments to Canada of $37.4 million and $24.2 million for
the quarters ended July 2, 2000 and July 4, 1999, respectively. Shipments to
Canada were $61.7 million and $48.2 million for the six months ended July 2,
2000 and July 4, 1999, respectively. For the quarters ended July 2, 2000 and
July 4, 1999, shipments to South Korea were $7.1 million and $11.8 million,
respectively. For the six months ended July 2, 2000 and July 4, 1999, shipments
to South Korea were $14.9 million and $21.6 million, respectively.

<TABLE>
<CAPTION>
                                                             North                     Europe and Other
                                                           American         Asia         International         Total
                                                           --------         ----         -------------         -----
<S>                                                        <C>              <C>          <C>                   <C>
   Sales for the three months ended July 2, 2000......     $ 92,128         $ 7,080          $11,250           $110,458
   Sales for the three months ended July 4, 1999......     $ 49,040         $11,803          $ 7,650           $ 68,493

   Sales for the six months ended July 2, 2000........     $173,806         $14,911          $25,595           $214,312
   Sales for the six months ended July 4, 1999........     $ 88,334         $21,640          $14,543           $124,517
</TABLE>

  Total accounts receivable as of July 2, 2000, include 85% from United States
based customers, 12% from customers located in France and 1% from customers
located in South Korea.

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

  The Company's product sales have historically been concentrated in a small
number of customers.  During the quarter ended July 2, 2000 sales to four
customers totaled $86.4 million, or approximately 78% of sales.  For the quarter
ended July 4, 1999 sales to five customers totaled $54.8 million, or
approximately 80% of sales.

  During the six months ended July 2, 2000 sales to four customers totaled
$164.1 million, or approximately 77% of sales.  For the six months ended July 4,
1999 sales to five customers totaled $103.1 million, or approximately 83% of
sales.

                                       9
<PAGE>

Stock Option Plans

  The following is a summary of stock option transactions under Powerwave's
stock option plans, including the 1995 Stock Option Plan, the 1996 Stock
Incentive Plan, the 2000 Stock Option Plan and the 1996 Director Stock Option
Plan, for the six months ended July 2, 2000:

<TABLE>
<CAPTION>
                                                                       Number of          Number of
                                                                        Options            Options
                                                                      Exercisable       Available for
                                      Number of        Price per         as of           Grant as of
                                       Shares            Share        July 2, 2000      July 2, 2000
                                     -----------   ----------------   ------------    ---------------
<S>                                  <C>           <C>                <C>             <C>
     Balance at January 2, 2000       7,463,553      $ 0.82-$25.65
      Granted                         1,269,000      $15.42-$67.08
      Exercised                      (1,380,228)     $ 0.82-$10.58
      Cancelled                         (44,296)     $ 1.33-$14.32
                                     -----------
     Balance at July 2, 2000          7,308,029      $ 0.82-$67.08       1,455,341       4,316,671
                                     ===========                      ============    ===============
</TABLE>

  During the quarters ended July 2, 2000 and July 4, 1999, the Company recorded
compensation expense related to stock options of approximately $22 and $10,
respectively.  For the six months ended July 2, 2000 and July 4, 1999
compensation expense related to stock options was $45 and $18. The remaining
unamortized compensation expense as of July 2, 2000 was approximately $190 and
will be amortized through September 2003.

Employee Stock Purchase Plan

  The sixth offering under the Powerwave's Employee Stock Purchase Plan (the
"Purchase Plan") concluded on January 31, 2000, with 64,611 shares of the
Company's Common Stock purchased under the Purchase Plan at a price per share of
$10.13.  At July 2, 2000 there were rights to purchase approximately 33,000
shares of Common Stock outstanding under the Purchase Plan's seventh offering,
which will conclude on July 31, 2000.

The HP Acquisition

  On October 9, 1998, Powerwave 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 wireless local loop ("WLL").  Since the acquisition
date, we have transferred both the Folsom and Malaysian production equipment and
manufacturing lines to our Irvine, California facility.  We have sold the Folsom
facility and have established a new research and development facility in El
Dorado Hills, California.

  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 intangible assets of $2.7
million and goodwill of approximately $4.6 million.  The Company's consolidated
financial statements for the year ended January 3, 1999 include a charge of
$12.4 million for the write-off of acquired in-process research and development
expenses associated with the HP Acquisition.  The in-process research and
development expenses arose from new product projects that were under development
at the date of the acquisition and expected to eventually lead to new products
but had not yet established technological feasibility and for which no future
alternative use was identified.  The valuation of the in-process research and
development projects was based upon the discounted expected future net cash
flows of the products over the products' expected

                                       10
<PAGE>

life, reflecting the estimated stage of completion of the projects and an
estimate of the costs to complete the projects. New product development projects
underway at HP at the time of the acquisition included, among others, single
carrier CDMA technology, ultra-linear technology for use in multi-carrier RF
power amplifiers and advanced linear power module technology for use in next
generation wireless communications. The Company estimated that these projects
were approximately 75% complete at the date of the acquisition in October 1998
and estimated that the cost to complete these projects would aggregate
approximately $2.5 million and would be incurred over a two-year period. The
Company discontinued further development on the single carrier CDMA project as
of January 2, 2000 and discontinued further development on the advanced linear
power module technology project as of July 2, 2000. The Company incurred
approximately $0.3 million of research and development expenses related to the
remaining ultra-linear technology project during the second quarter of 2000, and
since the date of the acquisition has incurred a total of $2.5 million of
research and development expenses related to all three projects. One product
incorporating the ultra-linear technology for use in multi-carrier RF power
amplifiers is currently planned to enter production during the second half of
fiscal 2000. For more information on the HP Acquisition, please refer to Note 17
of Notes to Consolidated Financial Statements in the Company's Annual Report on
Form 10-K for the fiscal year ended January 2, 2000.

                                       11
<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 our results of operations as a percentage of
net sales for the three and six months ended July 2, 2000 and July 4, 1999.

<TABLE>
<CAPTION>
                                                     As a Percentage of Net Sales
                                                ------------------     -----------------
                                                Three Months Ended     Six Months Ended
                                                ------------------    ------------------
                                                July 2,    July 4,    July 2,    July 4,
                                                 2000       1999       2000       1999
                                                ------------------    ------------------
<S>                                             <C>        <C>        <C>        <C>
Net sales.................................        100.0%    100.0%      100.0%    100.0%
Cost of sales.............................         67.5      73.5        68.1      73.4
                                                  -----     -----       -----     -----
Gross profit..............................         32.5      26.5        31.9      26.6
Operating expenses:
  Sales and marketing.....................          4.8       5.0         4.9       5.6
  Research and development................          9.6       9.3         9.1       9.4
  General and administrative..............          3.3       3.9         3.4       4.3
                                                  -----     -----       -----     -----
Total operating expenses..................         17.7      18.2        17.4      19.3

Operating income..........................         14.8       8.3        14.5       7.3
Other income, net.........................          1.2       1.3         1.2       0.6
                                                  -----     -----       -----     -----

Income before income taxes................         16.0       9.6        15.7       7.9
Provision for income taxes................          5.7       3.5         5.6       2.9
                                                  -----     -----       -----     -----

Net income................................         10.3%      6.1%       10.1%      5.0%
                                                  =====     =====       =====     =====
</TABLE>

Three months ended July 2, 2000 and July 4, 1999

Net Sales

  Our net sales are derived primarily from the sale of RF power amplifiers for
use in wireless communications networks.  Sales increased by 61% to $110.5
million for the quarter ended July 2, 2000 from $68.5 million for the quarter
ended July 4, 1999.  The growth in revenue was due to increased sales of our
cellular and PCS products.  For the quarter ended July 2, 2000, total sales of
cellular products (including both single and multi-carrier RF power amplifiers
and racks) accounted for approximately 75% of revenues or $82.4 million,
compared to approximately 78% of revenues or $53.5 million for the quarter ended
July 4, 1999.  Sales of RF power amplifiers and associated products for PCS
networks (consisting mainly of single carrier RF power amplifiers) accounted for
approximately 25% of revenues or $28.1 million for the second quarter of 2000,
compared to approximately 21% or $14.6 million for the second quarter in 1999.
Sales of Land Mobile Radio ("LMR") amplifiers accounted for no revenues for the
quarter ended July 2, 2000, compared to less than 1% of revenues or $0.4 million
for the quarter ended July 4, 1999.  The reduction of sales of LMR products is
due to both our divestiture of certain LMR products and our strategic decision
to no longer focus resources on this area.

  Total international sales (excluding North American sales) accounted for
approximately 17% of revenues or $18.3 million for the quarter ended July 2,
2000, compared with approximately 28% or $19.5 million for the quarter ended
July 4, 1999. Total Asian sales (which predominately includes sales to South
Korea) decreased to $7.1

                                       12
<PAGE>

million for the quarter ended July 2, 2000 from $11.8 million for the quarter
ended July 4, 1999. Total Asian sales accounted for approximately 6% of revenues
in the second quarter of 2000 compared to approximately 17% of revenues in the
second quarter of 1999. We have previously experienced postponement,
rescheduling and cancellation of orders from our South Korean customers which we
believe was due to the economic crisis in South Korea, and Asia in general,
which reduced South Korean wireless service operator's demand for our products.
We are unable to predict the level of future demand from our Asian customers and
whether order fluctuations, including cancellations will continue to be
experienced from our customers in Asia or any other areas that have or may have
economic and or financial crisis. In addition, fluctuations in customers' demand
can lead to postponement, rescheduling and cancellation of orders. See
"Additional Factors That May Affect Future Results--A Significant Amount of Our
Revenues Comes from a Few Customers; --Our Success is Tied to the Growth of the
Wireless Service Market: --There are Many Risks Associated With International
Operations; and --We Previously Have Relied Upon the South Korean Market."

  For the second quarter ended July 2, 2000, total sales to Nortel Networks
Corporation and related entities ("Nortel") accounted for approximately 47% of
revenues and sales to LM Ericsson Telephone Company ("Ericsson") accounted for
over 10% of the revenues for the quarter.  We cannot guarantee that we will
continue to be successful in attracting new customers or retaining or increasing
business with our existing customers.  In addition, we believe that a
significant portion of our business with OEMs, such as Ericsson, Lucent
Technologies, Inc. ("Lucent") and Nortel, depends 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 or shift their demand to alternative
suppliers.   Such factors include lower perceived internal manufacturing costs
and competitive reasons to remain vertically integrated.  Due to the possible
uncertainties associated with wireless infrastructure deployments and OEM
demand, we have experienced and expect to continue to experience significant
fluctuations in demand from our OEM customers.  Such fluctuations could
significantly reduce our revenues and/or operating income which could harm our
business, financial condition and results of operations.  See "Additional
Factors That May Affect Future Results --A Significant Amount of Our Revenues
Comes from a Few Customers; --There are Many Risks Associated With International
Operations; and --Our Quarterly Results Fluctuate Significantly."

Gross Profit

  Cost of sales consists primarily of raw materials, assembly and test labor,
overhead and warranty costs.  Gross profit margins for the second quarter of
fiscal 2000 and 1999 were 32.5% and 26.5%, respectively. The increase in gross
margins during the second quarter of 2000 as compared to the second quarter of
1999 was primarily due to the final closure of the acquired Folsom manufacturing
facility in the fourth quarter of 1999 and the resulting improvements in
manufacturing operating cost.  In addition, in the second quarter of fiscal
2000, we experienced improved manufacturing efficiencies in labor and overhead
costs compared to the second quarter of 1999, as our manufacturing workforce,
which significantly increased in size during 1999, gained more experience and we
increased our production volumes. Also during the second quarter of 2000, sales
of multi-carrier RF power amplifier products accounted for a greater percentage
of product sales when compared to the second quarter of 1999.  Our single
carrier RF power amplifier products have traditionally carried lower margins
than our multi-carrier RF power amplifier products.  While we continue to strive
for manufacturing and engineering cost reductions to offset pricing pressures on
our products, we cannot guarantee that these cost reduction or redesign efforts
will keep pace with price declines and cost increases. If we are unable to
reduce our costs through our manufacturing and/or engineering efforts, our gross
margins and profitability may be adversely affected. For a discussion of the
effects of declining average sales prices on our business, see "Additional
Factors That May Affect Future Results--Our Average Sales Prices are Declining."

                                       13
<PAGE>

  As part of the HP Acquisition, we completed an allocation of the purchase
price of the acquisition to both the tangible and intangible assets and
liabilities acquired in the acquisition.  The purchase price allocation is
included in our financial statements for the 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 both the quarter ended July 2, 2000 and the
quarter ended July 4, 1999, approximately $0.6 million was amortized and
included in cost of sales.  As an additional part of the HP Acquisition, we
assumed certain specific liabilities from HP related to the acquired business,
including certain warranty obligations.  During the second quarter ended July 2,
2000, and the second quarter ended July 4, 1999, we incurred warranty expenses
of approximately $0.2 million and $0.1 million, respectively, which were offset
against specific liabilities assumed in the acquisition.  For more information
concerning the purchase price allocation associated with the HP Acquisition, see
Note 17 of the Notes to Consolidated Financial Statements in our Annual Report
on Form 10-K for the fiscal year ended January 2, 2000.

  The wireless communications infrastructure equipment industry is extremely
competitive and is characterized by rapid technological change, new product
development and product obsolescence, evolving industry standards and
significant price erosion over the life of a product.  Due to these competitive
pressures, we expect that the average sales prices of our products will continue
to decrease.  We have introduced new products at lower sales prices.  These
lower sales prices have impacted the average sales prices of our products.
Future pricing actions by us and our competitors may also adversely impact our
gross profit margins and profitability, which could also result in decreased
liquidity and adversely affect our business, financial condition and results of
operations.  For a discussion of the impact of new products on our 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 show
expenses.  Sales and marketing expenses increased by 58% to $5.4 million for the
quarter ended July 2, 2000 from $3.4 million for the quarter ended July 4, 1999.
As a percentage of sales, sales and marketing expenses were 4.8% and 5.0% for
the quarters ended July 2, 2000 and July 4, 1999, respectively.  The increase in
sales and marketing expenses in absolute dollars was primarily attributable to
increases in the sales and marketing staff, and increased sales commissions
related to increased product sales.

  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, WLL products and next
generation "3G" products.  Research and development expenses increased by 67% to
$10.6 million for the quarter ended July 2, 2000 from $6.4 million for the
quarter ended July 4, 1999.  Research and development expenses as a percentage
of sales for the quarters ended July 2, 2000 and July 4, 1999 were 9.6% and
9.3%, respectively. The actual increase in research and development expenses was
primarily due to increased staffing and associated engineering costs related to
new product development programs and existing product enhancement efforts. We
anticipate that we will continue operating at a higher expense level for
research and development because we intend to continue to emphasize investment
in research and development programs in future periods and continue to pursue
the remaining program acquired as part of the HP Acquisition.

  As part of the HP Acquisition, we acquired new product projects that were
under development at the date of the acquisition and were expected to eventually
lead to new products but such projects had not yet established technological
feasibility and no future alternative use was 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. We
estimated that these projects were approximately 75% complete at the date of the
acquisition in October 1998 and estimated that the cost to complete these
projects would aggregate approximately $2.5 million and would be incurred over a
two-year period. We discontinued further development on the single carrier CDMA
project as of January 2, 2000 and discontinued further development on the
advanced linear power module technology project as of July 2, 2000.  We incurred

                                       14
<PAGE>

approximately $0.3 million of research and development expenses related to the
remaining ultra-linear technology project during the second quarter of 2000, and
since the date of the acquisition have incurred a total of $2.5 million of
research and development expenses related to all three projects. One product
incorporating the ultra-linear technology for use in multi-carrier RF power
amplifiers is currently planned to enter production during the second half of
fiscal 2000.

  Uncertainties that could impede the progress of converting a development
project to a developed technology include the availability of financial
resources to complete the project, failure of the technology to function
properly, continued economic feasibility of developed technologies, failure to
convert technology into a repetitively manufacturable product, customer
acceptance, customer demand and customer qualification of such new technology,
and general competitive conditions in the industry. There can be no assurance
that an in-process research and development project will be successfully
completed and commercially introduced.

  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 37% to
$3.6 million for the quarter ended July 2, 2000, from $2.7 million for the
quarter ended July 4, 1999.  General and administrative expenses as a percentage
of sales were 3.3% and 3.9%, respectively. The increase in general and
administrative expenses in dollars is primarily attributable to increased
staffing costs associated with supporting our increased revenues and personnel.
As part of the purchase price allocation of the HP Acquisition, an allocation of
approximately $4.6 million, reflecting the value of goodwill acquired, was
capitalized on our balance sheet.  Approximately $0.1 million of goodwill
amortization expense has been included in general and administrative expenses
for both the quarters ended July 2, 2000 and July 4, 1999.

Other Income (Expense)

  We earned $1.3 million of other income, net, during the second quarter of 2000
compared to $0.9 million of other income, net, earned in the second quarter of
1999. Other income consists primarily of interest income, net of any interest
expense.

Provision for Income Taxes

  Our effective tax rate was 35.5% and 36.5% for the quarters ended July 2, 2000
and July 4, 1999, respectively.  The decrease in our effective tax rate was due
to tax benefits from international sales and research and development tax
credits.


Six months ended July 2, 2000 and July 4, 1999

Net Sales

  Net sales increased by 72% to $214.3 million for the six months ended July 2,
2000 from $124.5 million for the six months ended July 4, 1999.  The increase in
revenue was primarily attributed to increased sales of our cellular and PCS
products.  For the six months ended July 2, 2000, total sales of cellular
products accounted for approximately 74% of revenues or $158.0 million, compared
to approximately 74% of revenues or $92.4 million for the six months ended July
4, 1999.  Sales of PCS products accounted for approximately 26% of revenues or
$56.3 million for the first six months of 2000, compared to approximately 25% of
revenues or $31.4 million for the first six months of 1999.  Sales of LMR
amplifiers accounted for no revenues for the six months ended July 2, 2000,
compared to less than 1% of revenues or $0.7 million for the six months ended
July 4, 1999.

  Total sales to North American customers accounted for approximately 81% of
revenues or $173.8 million for the six months ended July 2, 2000, compared with
approximately 71% or $88.3 million for the six months ended July 4, 1999.  Our
total international sales (excluding North American sales) accounted for
approximately 19% of revenues or $40.5 million for the six months ended July 2,
2000, compared with approximately 29% or $36.2 million for the six months ended
July 4, 1999. Total Asian sales accounted for approximately 7% of revenues in
the first six months of 2000 compared to approximately 17% of revenues in the
first six months of 1999.

                                       15
<PAGE>

  For the first six months of 2000, total sales to Nortel accounted for
approximately 44% of revenues and sales to Ericsson accounted for over 10% of
revenues. For the first six months of 1999, Nortel accounted for approximately
49% of revenues and sales to Lucent accounted for over 10% of revenues for this
period. See "Additional Factors That May Affect Future Results --A Significant
Amount of Our Revenues Comes from a Few Customers; --There are Many Risks
Associated With International Operations; and --Our Quarterly Results Fluctuate
Significantly."

Gross Profit

  Gross profit margins for the first six months of fiscal 2000 and 1999 were
31.9% and 26.6%, respectively. The increase in gross margins during the first
six months of 2000 as compared to the first six months of 1999 was primarily due
to the final closure of the acquired Folsom manufacturing facility in the fourth
quarter of 1999 and the resulting improvements in manufacturing operating cost.
In addition, in the first six months of fiscal 2000 we experienced improved
manufacturing efficiencies in labor and overhead costs, as the manufacturing
workforce which significantly increased in size during 1999, gained more
experience and we increased our production volumes.  Also during the first six
months of 2000, sales of multi-carrier RF power amplifier products accounted for
a slightly greater percentage of product sales when compared to the first six
months of 1999.  Our single carrier RF power amplifier products have
traditionally carried lower margins than our multi-carrier RF power amplifier
products.  See "Additional Factors That May Affect Future Results --Our Average
Sales Prices are Declining."

Operating Expenses

  Sales and marketing expenses increased by 50% to $10.4 million for the six
months ended July 2, 2000 from $7.0 million for the six months ended July 4,
1999.  As a percentage of sales, sales and marketing expenses were 4.9% and 5.6%
for the six months ended July 2, 2000 and July 4, 1999, 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 68% to $19.6 million for the
six months ended July 2, 2000 from $11.7 million for the six months ended July
4, 1999.  Research and development expenses as a percentage of sales for the six
months ended July 2, 2000 and July 4, 1999 were 9.1% and 9.4%, respectively. The
increase in actual research and development expenses was primarily due to
increased staffing and associated engineering costs related to continued new
product development efforts, such as 3G developments, and existing product
enhancement efforts.

  General and administrative expenses increased by 35% to $7.2 million for the
six months ended July 2, 2000, from $5.3 million for the six months ended July
4, 1999.  General and administrative expenses as a percentage of sales were 3.4%
and 4.3%, respectively. The increase in actual general and administrative
expenses was primarily attributable to increased staffing costs associated with
supporting our increased revenues and personnel.

Other Income (Expense)

  We earned $2.5 million of other income, net, during the first six months of
2000 compared to $0.7 million of other income, net, earned in the first six
months of 1999. The increase in other income primarily reflects the retirement
of the debt incurred as part of the HP Acquisition in March 1999, and the
resulting elimination of interest expense associated with such debt.  Other
income consists primarily of interest income, net of any interest expense.

Provision for Income Taxes

  Our effective tax rate was 35.5% and 36.5% for the six months ended July 2,
2000 and July 4, 1999, respectively.  The decrease in our effective tax rate was
due to tax benefits from international sales and research and development tax
credits.

                                       16
<PAGE>

Liquidity and Capital Resources

  We have historically financed our operations primarily through a combination
of cash on hand, cash provided from operations, equipment lease financings,
available borrowings under bank lines of credit and both private and public
equity offerings.  As of July 2, 2000, we had working capital of $125.4 million,
including $68.7 million in cash and cash equivalents as compared with working
capital of $118.6 million at January 2, 2000, which included $76.7 million in
cash and cash equivalents.

  Net accounts receivable increased to $62.9 million at July 2, 2000 from $47.5
million at January 2, 2000, primarily due to increased sales volume during the
second quarter of 2000 as compared to the fourth quarter of 1999. Net inventory
increased to $39.3 million at July 2, 2000 from $31.7 million at January 2,
2000. Cash provided by operating activities was approximately $25.9 million for
the six months ended July 2, 2000, compared with $13.0 million for the six
months ended July 4, 1999. The increase in cash flow from operating activities
is primarily due to increased profitability, an increase in accounts payable and
accrued expenses, offset by the increases in accounts receivable and inventory.

  Capital expenditures were approximately $45.7 million and $5.5 million for the
first six months of 2000 and 1999, respectively.  On May 31, 2000, we paid $35.3
million for a 360,000 square foot facility located on approximately 22 acres of
land in Santa Ana, California.  Approximately $20.5 million of the purchase
price was allocated to the building, with the remaining $14.8 million allocated
to land, which includes approximately 3 acres of undeveloped land.  We are
planning to consolidate our Southern California manufacturing operations,
engineering, and headquarters facility to this facility over the next nine
months.  The remaining amount of capital spending during the first six months of
2000 and the majority of capital spending during the first six months of 1999
represents spending on electronic test equipment utilized in our manufacturing
and research and development areas.

  As part of the HP Acquisition, we 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.
On July 15, 1999, we sold the Folsom facility for approximately $8.4 million.
We received approximately $0.9 million in cash (before expenses) and an interest
free note for $7.5 million due December 31, 1999.  The note was secured by the
land, land improvements and building.  In exchange for the interest free note,
the buyer entered into a rent-free lease with us of the Folsom facility through
December 31, 1999.  In December 1999, the note receivable on the Folsom facility
was amended to extend the maturity date to January 27, 2000 and to apply an
annual interest rate of 8% beginning December 31, 1999.  The buyer of the Folsom
facility made an additional principal payment of $0.5 million on December 30,
1999, and prepaid the future interest due on the note.  The remaining principal
balance of approximately $7.0 million was paid on January 27, 2000.

  Net cash provided by financing activities was approximately $12.0 million for
the first six months of 2000 compared with $35.9 million of cash provided by
financing activities for the first six months of 1999. During the second quarter
of 1999, we received net proceeds of approximately $57.8 million from a public
offering of 2.3 million shares of our Common Stock. We utilized approximately
$22.8 million of these proceeds to retire bank debt associated with the HP
Acquisition.

  On June 16, 2000 we entered into a revolving credit agreement with Comerica
Bank-California, dated as of May 31, 2000.  The credit facility provides for a
revolving line of credit up to a maximum principal amount outstanding at any one
time of $20 million (the "Revolving Commitment Amount"). We are required to pay
a commitment fee of 0.25% per annum on the unused portion of the Revolving
Commitment Amount.  The commitment fee is payable quarterly in arrears.  The
revolving credit facility allows for borrowings based either upon the bank's
prime rate (9.5%) at July 2, 2000 or the bank's LIBOR rate plus an applicable
LIBOR Margin of 1.25% or 1.50%, based upon our debt leverage ratio.  There were
no amounts outstanding as of July 2, 2000.  The revolving credit facility
terminates on May 31, 2001.  The revolving credit facility contains certain
standard affirmative and negative covenants, including limitations on future
indebtedness, restricted payments, transactions with affiliates, liens,
dividends, mergers, transfers of assets and leverage ratios. We were in
compliance with all covenants contained in the revolving credit facility at July
2, 2000.  The full $20 million of the Revolving Commitment Amount was available
to us at July 2, 2000.

                                       17
<PAGE>

  We had cash and cash equivalents of $68.7 million at July 2, 2000, compared
with $76.7 million at January 3, 1999. We regularly review our cash funding
requirements and attempt to meet those requirements through a combination of
cash on hand, cash provided by operations, available borrowings under any credit
facilities, financing through equipment lease transactions, and possible future
public or private debt and/or equity offerings. We invest our excess cash in
short-term, investment-grade money market instruments.

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


Disclosure About Foreign Currency Risk

  A significant portion of our revenues have been derived from international
sources, with our international customers accounting for approximately 19% of
our first half fiscal 2000 revenues, 33% of our fiscal 1999 revenues and 41% of
our fiscal 1998 revenues. We regularly pursue new customers in various domestic
and international locations where new deployments or upgrades to existing
wireless communication networks are planned.  Such international locations
include Europe and South America, where there has been instability in several of
the region's currencies, including the Brazilian Real.  Although we currently
invoice all of our customers in U.S. Dollars, changes in the value of the U.S.
Dollar versus the local currency in which our products are sold, along with the
economic and political conditions of such foreign countries, could adversely
affect our business, financial condition and results of operations.  In
addition, the weakening of an international customer's local currency and
banking market may negatively impact such customer's ability to meet their
payment obligations to us.  Although we currently believe that our international
customers have the ability to meet all of their obligations to us, there can be
no assurance that they will continue to be able meet such obligations.   We
regularly monitor the credit worthiness of our international customers and make
credit decisions based on both prior sales experience with such customers as
well as current financial performance and overall economic conditions.   We may
decide in the future to offer certain foreign customers extended payment terms
and/or sell certain products or services in the local currency of such
customers.  If we sell products or services in a foreign currency, our results
of operations and gross margins may be affected by changes in currency exchange
rates.

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


European Monetary Union

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

                                       18
<PAGE>

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

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

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


New Accounting Pronouncements

  In June 1998, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
which we are required to adopt effective in our fiscal year 2001. SFAS No. 133
will require us to record all derivatives on the balance sheet at fair value. We
do not currently engage in foreign currency or interest rate hedging activities
and we will continue to evaluate the effect of adopting SFAS No. 133. We will
adopt SFAS No. 133 in our fiscal year 2001.

  In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial
Statements, which the Company is required to adopt no later than the fourth
fiscal quarter of fiscal years beginning after December 15, 1999.  The Company
is in the process of determining the effect of adopting SAB No. 101.


Additional Factors That May Affect Our Future Results

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

  .  the ability to add new customers to reduce our dependence on any one
     customer while maintaining our existing customers;
  .  the ability to increase demand for our products from major wireless
     infrastructure OEMs;
  .  the ability to produce products which meet the quality standards of both
     our existing and potential new customers;
  .  industry specific factors, including slowdown in demand for wireless
     communications and RF power amplifiers;
  .  worldwide and regional economic downturns and unfavorable political
     conditions;
  .  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 availability and cost of components;
  .  the ability to finance our activities and maintain our financial liquidity;
  .  the ability of our products to operate and be compatible with various OEMs'
     base station equipment;
  .  the ability to manage expense levels;
  .  the ability to manage future product repairs; and
  .  the ability to accurately anticipate customer demand.

                                       19
<PAGE>

A Significant Amount of Our Revenues Comes from a Few Customers

  We sell most of our products to a small number of customers, and we expect
that this will continue.  We believe that our future success depends upon our
ability to broaden our customer base and maintain relationships with major
wireless original equipment manufacturers, or OEMs, such as, Ericsson, Hyundai
Electronics Industries Co. ("Hyundai"), LG Information & Communications, Ltd.
("LGIC"), 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"), BellSouth Cellular
Corp. ("Bellsouth") and Verizon Wireless ("Verizon Wireless").

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

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

  For the six months ended July 2, 2000, our largest customer was Nortel, which
accounted for approximately 44% of our net sales.  For fiscal 1999, a total of
five customers accounted for approximately 80% of our total revenue.  The loss
of any of our customers, or a significant loss, reduction or rescheduling of
orders from any of our customers, would have a material adverse effect on our
business, results of operations and financial condition.  The risks related to
our customer concentration were magnified in 1998 due to certain of our
customer's geographic concentration in South Korea which experienced an economic
and financial crisis during 1998.  For the first six months of 2000, our South
Korean customers including Hyundai, LGIC and Samsung, accounted for  $14.9
million, or approximately 7% of our total net sales. During 1999, our South
Korean customers accounted for approximately 21% of our total net sales or $62.2
million.

  We believe that continued purchases of our products by OEMs depends upon many
factors, including the OEMs' view of utilizing third party suppliers of RF power
amplifiers and their current view of wireless infrastructure deployments and
could be significantly reduced due to any delays of such deployments.  A number
of factors may cause delays in wireless infrastructure deployments, including
the following 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 purchases from us, which could have a
material adverse effect on our business, results of operations and financial
condition.

 Our Quarterly Results Fluctuate Significantly

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

                                       20
<PAGE>

  . variations in the timing, cancellation, or rescheduling of customer orders
    and shipments;
  . variations in manufacturing costs, capacities and efficiencies;
  . capacity and production constraints, including constraints associated with
    single-source component suppliers;
  . delays in qualification by customers of new products or redesigns or delays
    in qualification of new production facilities;
  . product failures and associated in-field service support costs;
  . cancellations or reductions of customer orders and shipments due to economic
    slowdowns in the  customers' operating regions, 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;
  . warranty expenses;
  . the availability and cost of components;
  . the timing, availability and sale of new products by us or our competitors;
  . changes in the mix of products having differing gross margins;
  . changes in average sales prices;
  . long sales cycles associated with our products;
  . variations in product development and other operating expenses;
  . discounts given to certain customers for large volume purchases; 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 harmed 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, we believe that 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 significantly decline.  See "--Our Stock Price Has Been and May
Continue to Be Volatile."

 Our Average Sales Prices are Declining

  Our average sales prices have declined, and we anticipate that the average
sales prices for our products will continue to decline and negatively impact our
gross profit margins.  Wireless service providers are placing increasing price
pressure on wireless infrastructure manufacturers, which in turn has resulted in
downward pricing pressure on our products.  Competition among third-party
suppliers also has increased the downward price pressure on our products.  Since
wireless infrastructure manufacturers frequently negotiate supply arrangements
far in

                                       21
<PAGE>
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 continue to
account for a large portion of our net sales going forward.  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.


 Our Failure to Manage Future Growth Could Have Adverse Effects

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

  . effectively expand, train and manage our work force, particularly in
    response to fluctuations in demand for various products;
  . manage production and inventory levels to meet product demand and new
    product introductions;
  . expand production capacity while maintaining a high quality level;
  . obtain additional production equipment on short lead times in order to meet
    increases in production demand;
  . 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.

  We are not able to guarantee that we will be able to achieve any or all of the
above factors in an appropriate manner.  Any failure to manage growth
effectively could have a material adverse effect on our business, financial
condition and results of operations.

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

  On May 31, 2000 we acquired a 360,000 square foot facility located on
approximately 22 acres of land for $35.3 million. Approximately 85,000 square
feet are being sublet to an unrelated third party, with the remaining 275,000
square feet available for us. This facility requires substantial re-design and
building improvements before we can relocate our operations to it. Therefore, we
currently expect to begin the transition of our manufacturing operations to this
new facility in the third quarter of 2000, and to have all of our manufacturing
operations relocated to this facility within the next nine months. We also are
planning to relocate our administrative departments, as well as our Southern
California engineering and sales and marketing operations to this new facility
within a similar time frame. Moving our manufacturing operations to a new
facility entails numerous risks to our business operations, including the risk
that we will not complete the moves on schedule; that we will not obtain
recertification on our production lines in a timely manner from our customers
who require production line qualifications; that the costs to re-design and
improve the facility will escalate and exceed our current expectations; that the
new facility will not function properly and that we will not achieve the desired
benefits from consolidating our operations at one facility. If any of these or
other risks occur they could have a material adverse affect on our business,
financial condition and results of operations.

                                       22
<PAGE>
 We Must Retain Key Executives and Personnel

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

  We believe that our success depends upon the knowledge and experience of our
management and technical personnel and our ability to market our existing
products and to develop new products.   We do not have non-compete agreements
with our employees who are employed on an at-will basis.  Therefore, employees
may leave us and go to work for a competitor.  We have had employees leave us
and go to work for competitors.  While we believe that we have adequately
protected our proprietary technology, and we will take all legal measures to
protect it, the use of our processes by a competitor could have a material
adverse effect on our business, financial condition and results of operations.

 There are Many Risks Associated With International Operations

  For the first six months of 2000, international revenues (excluding North
American sales) accounted for approximately 19% of our total net sales. For
fiscal years 1999, 1998 and 1997, international revenues (excluding North
American sales) accounted for approximately 33%, 41% and 84% respectively, of
our net sales.  We currently expect that international revenues will continue to
account for a significant percentage of our revenues for the foreseeable future.
Therefore, the following risks associated with international operations could
have a material adverse effect on our performance:

  . compliance with multiple and potentially conflicting regulations, including
    export requirements, tariffs, import duties and other barriers, and health
    and safety requirements;
  . differences in intellectual property protections;
  . difficulties in staffing and managing foreign operations;
  . 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 above risks
actually occurs, there may be a material adverse effect on our business,
financial condition and results of operations.

                                       23
<PAGE>
 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.

  We Depend on Single Sources for Key Components and Key Equipment

  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 material 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, our business, results of operations and financial condition could
be harmed.

  The RF power amplifier business which we acquired in the HP Acquisition
utilized certain custom components manufactured by HP for certain products. We
had a one-year supply commitment from HP for these components which has expired
and we have begun sourcing certain components from new suppliers, as well as we
have redesigned products to no longer utilize such components. If we were
requested to produce a large quantity of products which utilized such custom
components, our ability to produce such older products is limited.

  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

                                       24
<PAGE>
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.

  A majority of the specialized test equipment that we utilize in both our
development programs and on our production lines come from a limited number of
suppliers, and in some cases from sole suppliers. Due to the current overall
level of demand in the wireless industry for test equipment, we have experienced
and expect to continue to experience delays and shortages of specialized test
equipment. The failure to obtain the required specialized test equipment in the
required time periods could cause a development program to fall behind schedule,
which could cause a customer to cancel such program or could cause a production
schedule to fall behind a customer requested schedule, which could result in
cancellations of the customer order. If either event were to happen, such event
could have a material adverse effect on our business, results of operations and
financial condition.

 We Previously Have Relied Upon the South Korean Market

  Three of our customers, Hyundai, LGIC and Samsung, are based in South Korea
and collectively accounted for approximately 7% of our net sales for the first
six months of fiscal 2000. Historically, we have had a larger exposure to the
South Korean market. For fiscal year 1999 customers based in South Korea
collectively accounted for approximately 21% of our net sales and they accounted
for approximately 30% of our net sales for fiscal 1998, and approximately 83% of
net sales for fiscal 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
second 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 fiscal
1997 and approximately 86% of our PCS sales for the first nine months of fiscal
1998. Since 1998, our South Korean PCS Sales have significantly declined while
our non-South Korean PCS sales have significantly increased.

  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 fiscal 1998. 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 the South Korean banking
network faced in 1998, it became more difficult for local operating companies to
raise additional financing to support the increased costs of their
infrastructure buildout. These types of economic problems experienced in Asia
have also 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 levels such sales will be in fiscal 2000.

  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 harm 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., 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 and technologies than we have. We may not be able to successfully
increase our market penetration or our overall share of the RF power amplifier
market. Our results of operations could be adversely impacted if we are unable
to effectively increase our share of the RF power amplifier market.

  Our future success depends largely upon the rate at which wireless
infrastructure manufacturers incorporate our products into their systems. A
substantial portion of the present worldwide production of RF power amplifiers
is captive within the internal manufacturing operations of leading wireless
infrastructure manufacturers such as Ericsson, Lucent, Motorola, Nokia and
Samsung. These companies regularly evaluate whether to manufacture their own RF
power amplifiers rather than purchase them from us. 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. In addition, we are
currently working on products for third generation networks as well as
development projects for products requested by our

                                       26
<PAGE>

customers. In spite of our efforts, the deployment of a wireless network may be
delayed which could cause a particular research or development effort to not
generate a revenue producing product. Additionally, the new products we develop
may not achieve market acceptance or may not be manufacturable at competitive
prices in sufficient volumes. We cannot guarantee the success of our research
and development efforts.

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

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

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

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

  We have had quality problems with our products in the past and may have
similar problems in the future. We have replaced components in some products in
accordance with our product warranties. We believe that our overall relationship
with our customers is good and that they consider our products to be of good
quality. We also believe that our customers will demand increasingly stringent
product performance and reliability, 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 regularly produce 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. We hold a total of
four U.S. Patents for various aspects of our technology.  In addition, we have
applied for several additional U.S. and international patents for various
aspects of our proprietary technology.  These efforts assist us in relying 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.  We have had employees leave us and go to work for competitors.
While we believe that we have adequately protected our proprietary technology,
and we will take all legal measures to protect it, the use of our processes by a
competitor could have a material adverse effect on our business, financial
condition and results of operations.

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

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

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

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

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

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

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<PAGE>

  .  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;
   . if systems or devices relying on or incorporating our products are
     determined to be defective or malfunction and cause loss of service or
     property damage and such malfunction is determined to be caused by our
     products, we could be held liable in a property 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 RF spectrum allocations made by the FCC have increased the potential demand
for our products.  We cannot guarantee that the trend toward deregulation and
current regulatory developments favorable to the promotion of new and expanded
wireless services will continue or that other future regulatory changes will
have a positive impact on us.  The increasing demand for wireless communications
has exerted pressure on regulatory bodies worldwide to adopt new standards for
such products, generally following extensive investigation and deliberation over
competing technologies.  In the past, the delays inherent in this governmental
approval process have caused, and may in the future cause, the cancellation,
postponement or rescheduling of the installation of communications systems by
our customers.  These delays could have a material adverse effect on our
business, results of operations and financial condition.

 Our Stock Price Has Been and May Continue to Be Volatile

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

  .  fluctuations in our results of operations or the operations of our
     competitors;
  .  failure of such results of operations to meet the expectations of stock
     market analysts and investors;
  .  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 stockholders
against us and certain of our present and former directors and officers. These
lawsuits were consolidated and an amended complaint was filed in December 1998.
The stockholders bringing this lawsuit seek to represent a class consisting of
all persons who purchased our Common Stock between June 4, 1997 and January 16,
1998. The lawsuit alleges, among other things, that we (and certain of our
present and former 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. The parties have reached an agreement in principle to settle the lawsuit
entirely within the limits of the Company's first layer insurance policy
coverage. We and our directors and officers have denied and continue to deny
each and all of the plaintiffs' allegations in the lawsuit, and the settlement
agreement will expressly provide that the settlement is not in any manner to be
construed as an admission of wrongdoing. The written settlement is being
negotiated by the parties, and will be subject to approval by the court. Until
such court reviews and approval is obtained, we cannot assume that these matters
are resolved. Therefore, at this time, the final outcome of these proceedings is
not 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 against the claims made in this
lawsuit.  The lawsuit is currently in the document discovery stage and a trial
date has been set for September 2000. At this time the outcome of the
proceedings is not determinable.

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

                                       30
<PAGE>

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

  It is our current policy to not enter into derivative financial instruments.
We do not currently have any significant foreign currency exposure since we do
not transact business in foreign currencies.  Due to this, we do not have any
significant overall currency exposure at July 2, 2000.

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

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

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

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

                                       31
<PAGE>

                          PART II.  OTHER INFORMATION


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

  The Company's Annual Meeting of Shareholders was held on April 26, 2000 in
Irvine, California.  A quorum was declared present for the meeting.  The
following matters were submitted to a vote of security holders, and all
proposals were approved by the majority of those voting or in the case of
proposal (2), by the majority of the shares outstanding as of the record date.

  (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 15,530,627 votes for 37,510 votes
                               withheld and no broker non-votes.
         John L. Clendenin     There were 15,530,627 votes for 37,510 votes
                               withheld and no broker non-votes.
         Bruce C. Edwards      There were 15,530,627 votes for 37,510 votes
                               withheld and no broker non-votes.
         David L. George       There were 15,530,627 votes for 37,510 votes
                               withheld and no broker non-votes.
         Eugene Goda           There were 15,530,627 votes for 37,510 votes
                               withheld and no broker non-votes.
         Carl W. Neun          There were 15,530,627 votes for 37,510 votes
                               withheld and no broker non-votes.
         Safi U. Qureshey      There were 15,530,627 votes for 37,510 votes
                               withheld and no broker non-votes.
         Andrew J. Sukawaty    There were 15,530,627 votes for 37,510 votes
                               withheld and no broker non-votes.

  (2)    The approval of an amendment to the Company's Amended and Restated
         Certificate of Incorporation to increase the number of authorized
         shares of Common Stock thereunder from 40,000,000 to 135,000,000 and to
         effect a three-for-one stock split of the Company's Common Stock. The
         proposal was approved by the shareholders.

         There were 14,725,686 votes cast in favor, 836,171 votes opposed, 6,280
         votes abstaining and no broker non-votes.

  (3)    The adoption of the 2000 Stock Option Plan and authorization of the
         issuance of 880,000 shares of Common Stock thereunder. The proposal was
         approved by the shareholders.

         There were 14,313,879 votes cast in favor, 1,228,197 votes opposed,
         26,061 votes abstaining and no broker non-votes.

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

         There were 15,549,406 votes cast in favor, 11,002 votes opposed, 7,729
         votes abstaining and no broker non-votes.


Item 6.  Exhibits and Reports on Form 8-K

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

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


3.1  Certificate of Amendment of Amended and Restated Certificate of
     Incorporation of Powerwave Technologies, Inc., a Delaware Corporation.

                                       32
<PAGE>

4.1   Powerwave Technologies, Inc. 2000 Stock Option Plan (the "2000 Plan")
      (incorporated by reference to Exhibit 4.1 to the Company's Form S-8 (File
      No. 333-38568) as filed with the Securities and Exchange Commission on
      June 5, 2000.)

4.2   Form of Stock Option Agreement for the 2000 Plan (incorporated by
      reference to Exhibit 4.2 to the Company's Form S-8 (File No. 333-38568) as
      filed with the Securities and Exchange Commission on June 5, 2000.)

10.1  Agreement for Purchase and Sale of Property and Joint Escrow Instructions
      by and between Boeing Realty Corporation and Powerwave Technologies, Inc.,
      dated as of May 9, 2000.(/1/). (incorporated by reference to Exhibit 2.1
      to the Company's Form 8-K as filed with the Securities and Exchange
      Commission on June 9, 2000.)

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

10.3  Loan Agreement dated as of May 26, 2000, by and among the Company,
      Comerica Bank-California, as Agent, and the lenders party thereto. (/1/).

10.4  Revolving Note dated as of May 26, 2000, pursuant to the Loan Agreement
      dated as of May 26, 2000 by and among the Company, Comerica Bank-
      California, as Agent, and the lenders party thereto.

27.1  Financial Data Schedule.

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

---------------------
(1) Schedules and attachments are omitted.  The Company shall furnish
    supplementally to the Securities and Exchange Commission a copy of any
    omitted schedule or attachment upon request.


      (b)  Items reported on Form 8-K in second quarter

      The Registrant filed a Form 8-K on June 9, 2000, with respect to the
purchase of real property from Boeing Realty Credit Corporation, reported under
Item 2.

                                       33
<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: August 14, 2000                  By: /s/  KEVIN T. MICHAELS
      ---------------                  -------------------------------------
                                                Kevin T. Michaels
                                       Senior Vice President, Finance and
                                       Chief Financial Officer


                                       34