<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 September 27, 1998

                                      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) 757-0530
                                        
                               ---------------- 
                                        
     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  YES [X]   NO [_]

     As of November 10, 1998, the number of outstanding shares of Common Stock,
par value $.0001 per share, of the Registrant was 17,247,519.

================================================================================
<PAGE>
 
                         POWERWAVE TECHNOLOGIES, INC.
                                     INDEX

                                                                          Page
                                                                          ----
Part I.  Financial Information
 
         Item 1.  Financial Statements
 
                  Consolidated Balance Sheets at September 27, 1998 
                   (Unaudited) and December 28, 1997                        2
 
                  Consolidated Statements of Income (Unaudited) for 
                   the three and nine months ended September 27, 
                   1998 and September 28, 1997                              3
 
                  Consolidated Statements of Cash Flows (Unaudited) 
                   for the nine months ended September 27, 1998 and 
                   September 28, 1997                                       4
 
                  Notes to Consolidated Financial Statements (Unaudited)    5-6
 

         Item 2.  Management's Discussion and Analysis of Financial 
                  Condition and Results of Operations                       7-27


Part II. Other Information
 
         Item 1.  Legal Proceedings                                         28
                                                                      
         Item 4.  Submission of Matters to a Vote of Security Holders       28

         Item 5.  Other Information                                         29

         Item 6.  Exhibits and Reports on Form 8-K                          29
                                                                      
Signatures                                                                  30


This Quarterly Report on Form 10-Q includes certain forward-looking statements
as defined within the Private Securities Litigation Reform Act of 1995.  Such
forward-looking statements are subject to risks and uncertainties which could
cause actual results to differ materially from those projected or implied.  The
realization of such forward-looking statements may be impacted by certain
important factors which are discussed in "Additional Factors That May Affect
Future Results" under Item 2, "Management's Discussion and Analysis of Financial
Condition and Results of Operations."  The Company undertakes no obligation to
publicly release the result of any revisions to these forward-looking statements
which may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events. 

                                       1
<PAGE>
 
                         POWERWAVE TECHNOLOGIES, INC.

                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
 
                                                                   September 27,    December 28,
ASSETS:                                                                1998            1997
                                                                   -------------   -------------
Current Assets:                                                     (Unaudited)
<S>                                                                <C>             <C>
  Cash and cash equivalents                                        $ 52,408,642    $ 67,433,168   
  Accounts receivable, net of allowance for doubtful                                              
   accounts of $854,953 and $769,068 at September 27,                                         
   1998 and December 28, 1997, respectively                          14,834,228      11,967,327   
  Inventories, net                                                   10,345,351       8,844,177   
  Prepaid expenses and other current assets                           1,113,070       1,221,426   
  Deferred tax assets                                                 3,082,977       3,082,977   
                                                                   ------------    ------------   
    Total current assets                                             81,784,268      92,549,075    
 
Property and equipment                                               14,199,326      11,019,767
Accumulated depreciation and amortization                            (4,556,570)     (2,643,022)
                                                                   ------------    ------------
  Net property and equipment                                          9,642,756       8,376,745
Other assets                                                          3,515,923         757,235
                                                                   ------------    ------------
TOTAL ASSETS                                                       $ 94,942,947    $101,683,055
                                                                   ============    ============
 
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
  Accounts payable                                                 $  6,717,641    $  9,607,335
  Accrued expenses and other liabilities                              5,720,730      10,249,125
  Income taxes payable                                                3,197,196       4,674,027
  Current portion of long-term debt                                     523,349         507,140
                                                                   ------------    ------------
    Total current liabilities                                        16,158,916      25,037,627
 
Long-term debt                                                          257,237         658,630
Deferred tax liabilities                                                289,426         289,426
Other non-current liabilities                                           391,247         217,720
                                                                   ------------    ------------
TOTAL LIABILITIES                                                    17,096,826      26,203,403
 
Shareholders' Equity:
Preferred Stock, $.0001 par value, 5,000,000 shares
 authorized and no shares outstanding                                         -               -
Common Stock, $.0001 par value, 40,000,000 shares
 authorized, 17,955,748 shares issued and 17,245,743 shares
 outstanding at September 27, 1998 and 17,773,713 shares issued
 and 17,263,713 shares outstanding at December 28, 1997              64,701,438      64,800,529
Retained earnings                                                    35,902,182      31,695,283
Less treasury stock at cost                                         (22,757,499)    (21,016,160)
                                                                   ------------    ------------
    Total shareholders' equity                                       77,846,121      75,479,652
                                                                   ------------    ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                         $ 94,942,947    $101,683,055
                                                                   ============    ============
</TABLE>

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

                                       2
<PAGE>
 
                          POWERWAVE TECHNOLOGIES, INC.
                       CONSOLIDATED STATEMENTS OF INCOME
                                  (Unaudited)

<TABLE>
<CAPTION>
                                    Three Months Ended            Nine Months Ended
                               ----------------------------  ----------------------------
                               September 27,  September 28,  September 27,  September 28,
                                   1998           1997           1998           1997
                               -------------  -------------  -------------  -------------
<S>                            <C>            <C>            <C>            <C>
                                                                            
Net sales                       $16,455,993    $34,348,637    $60,204,957    $81,950,958
Cost of sales                    10,696,558     20,564,797     37,058,872     48,949,665
                                -----------    -----------    -----------    -----------
Gross profit                      5,759,435     13,783,840     23,146,085     33,001,293
Operating expenses:                                                         
  Sales and marketing             2,147,400      2,341,062      6,341,231      6,062,878
  Research and development        2,938,184      3,341,570      8,845,430      7,937,823
  General and administrative      1,329,140      1,360,628      3,769,511      3,321,944
                                -----------    -----------    -----------    -----------
Total operating expenses          6,414,724      7,043,260     18,956,172     17,322,645
                                -----------    -----------    -----------    -----------
                                                                            
Operating income (loss)            (655,289)     6,740,580      4,189,913     15,678,648
Other income, net                   845,393        719,838      2,435,125      1,763,719
                                -----------    -----------    -----------    -----------
                                                                            
Income before income taxes          190,104      7,460,418      6,625,038     17,442,367
Provision for income taxes           69,388      2,760,357      2,418,139      6,553,499
                                -----------    -----------    -----------    -----------
                                                                            
Net income                      $   120,716    $ 4,700,061    $ 4,206,899    $10,888,868
                                ===========    ===========    ===========    ===========
                                                                            
Basic earnings per share        $       .01    $       .27    $       .25    $       .65
                                                                            
Diluted earnings per share      $       .01    $       .26    $       .25    $       .63
                                                                            
Weighted average common                                                     
  shares - basic                 17,188,138     17,649,028     17,154,501     16,714,375
                                                                            
Weighted average common                                                     
  shares - diluted               17,347,032     18,071,665     17,388,952     17,218,415
 
</TABLE>

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

                                       3
<PAGE>
 
                          POWERWAVE TECHNOLOGIES, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                              Nine Months Ended
                                                        ----------------------------
                                                        September 27,  September 28,
                                                             1998          1997     
                                                        -------------  -------------
<S>                                                     <C>            <C>          
CASH FLOWS FROM OPERATING ACTIVITIES:                                               
  Net income                                            $  4,206,899    $10,888,868 
  Adjustments to reconcile net income to net cash                                   
   (used in) provided by operating activities:                                      
   Depreciation and amortization                           1,983,782      1,166,617 
   Change in provision for doubtful accounts receivable       85,885         15,498 
   Change in provision for inventory reserves               (463,911)       551,901 
   Compensation costs related to stock options                25,361         31,254 
  Changes in current assets and current liabilities:                                
   Accounts receivable                                    (2,952,787)    (6,202,009)
   Inventories                                            (1,037,262)    (4,189,675)
   Prepaid expenses and other current assets                 108,356       (495,982)
   Accounts payable                                       (2,889,694)     5,840,979 
   Accrued expenses and other liabilities                 (4,528,395)     4,089,366 
   Income taxes payable                                     (893,752)     3,778,498 
  Other non-current assets                                  (258,688)      (572,123)
  Other non-current liabilities                              173,527        148,113 
                                                        ------------    ----------- 
  Net cash (used in) provided by operating activities     (6,440,679)    15,051,305 
                                                        ------------    ----------- 
CASH FLOWS FROM INVESTING ACTIVITIES:                                               
  Purchase of property and equipment                      (3,249,788)    (5,153,628)
  Purchase of long-term investments                       (2,500,000)             - 
                                                        ------------    ----------- 
  Net cash used in investing activities                   (5,749,788)    (5,153,628)
                                                        ------------    ----------- 
CASH FLOW FROM FINANCING ACTIVITIES:                                                
  Principal payments on long-term debt                      (385,184)      (332,067)
  Proceeds from sale of property and equipment                     -      1,847,508 
  Issuance of Common Stock                                   651,584     24,895,815 
  Repurchase of Common Stock                              (3,740,570)             - 
  Proceeds from exercise of stock options                    640,111      1,438,332 
                                                        ------------    ----------- 
  Net cash (used in) provided by financing activities     (2,834,059)    27,849,588 
                                                        ------------    ----------- 
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS     (15,024,526)    37,747,265 
CASH AND CASH EQUIVALENTS, beginning                      67,433,168     32,386,331 
                                                        ------------    ----------- 
CASH AND CASH EQUIVALENTS, ending                       $ 52,408,642    $70,133,596 
                                                        ============    =========== 
SUPPLEMENTAL CASH FLOW INFORMATION:                                                 
  Cash paid for:                                                                    
    Interest                                            $     95,252    $    72,380 
                                                        ============    =========== 
    Income taxes                                        $  3,311,881    $ 2,775,000 
                                                        ============    =========== 
NON-CASH ITEMS:                                                                     
 Tax benefit related to stock options                   $    540,483    $ 3,353,307 
                                                        ============    =========== 
 Acquisition of property and equipment                                              
   through capital leases                               $          -    $   804,591 
                                                        ============    =========== 
 Tax benefit related to sale of shares purchased                                    
   under the Employee Stock Purchase Plan               $     42,596    $   177,029 
                                                        ============    =========== 
</TABLE>

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

                                       4
<PAGE>
 
                         POWERWAVE TECHNOLOGIES, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
                              September 27, 1998

Basis of Presentation

  The accompanying consolidated financial statements have been prepared by the
Company without audit (except for balance sheet information as of December 28,
1997) 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 December 28,
1997.  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 December 28, 1997.

  The results of operations for the three and nine months ended September 27,
1998, are not necessarily indicative of the results to be expected for the
entire fiscal year ended January 3, 1999, (fiscal year 1998).  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 December 28, 1997.

Earnings Per Share

  Effective December 28, 1997, the Company has adopted SFAS No. 128, Earnings
per Share, which replaces the presentation of "Primary" earnings per share with
"Basic" earnings per share and the presentation of "Fully Diluted" earnings per
share with "Diluted" earnings per share.  Prior periods have been restated to
reflect the change in presentation.

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

New Accounting Pronouncements

  The Company has adopted SFAS No. 130, Reporting Comprehensive Income, for the
quarterly periods beginning in fiscal year 1998.  For the three and nine month
periods ended September 27, 1998, the Company has no reportable differences
between net income and comprehensive income.  Therefore, no statement of
comprehensive income has been presented.

  For the current fiscal year ending January 3, 1999 the Company will adopt SFAS
No. 131, Disclosures About Segments of an Enterprise and Related Information.
SFAS No. 131, which is based on the management approach to segment reporting,
establishes requirements to report selected segment information quarterly and to
report entity-wide disclosures about products and services, major customers and
the material countries in which the entity holds assets and reports revenue.
The Company is reviewing the impact of such disclosures on its consolidated
financial statements.

                                       5
<PAGE>
 
Stock Option Plans

  The following is a summary of stock option transactions under the Company's
stock option plans, including the 1995 Stock Option Plan, the 1996 Stock
Incentive Plan, and the 1996 Director Stock Option Plan, for the nine months
ended September 27, 1998:

<TABLE>
<CAPTION>
                                                              Number of
                                                              Options
                                                              Exercisable
                                Number of       Price per     as of
                                 Shares          Share        September 27, 1998
                                ---------    --------------   ------------------
<S>                             <C>          <C>              <C>
Balance at December 28, 1997    1,698,614     $ 2.47-$40.56
Granted                         1,271,050     $12.94-$19.56
Exercised                        (224,630)    $ 2.47-$16.25
Canceled                         (374,627)    $ 4.67-$40.56
                                ---------     
Balance at September 27, 1998   2,370,407     $ 2.47-$31.75    607,913
                                =========                      =======
</TABLE>

Employee Stock Purchase Plan
 
  The third offering under the Company's Employee Stock Purchase Plan (the
"Purchase Plan") concluded on July 31, 1998, with the purchase of 33,944 shares
of the Company's Common Stock under the Purchase Plan.  At September 27, 1998
there were rights to purchase approximately 16,000 shares of Common Stock
outstanding under the Purchase Plan's fourth offering, which will conclude on
January 31, 1999.

Subsequent Event

  On October 9, 1998 the Company completed the previously announced acquisition
of Hewlett-Packard Company's radio frequency power amplifier business and its
manufacturing facility in Folsom, California.  The cash price paid was
approximately $57.4 million. The Company financed this acquisition utilizing
borrowings of $25 million under a new $35 million secured credit facility which
was dated as of September 30, 1998. The Company utilized its existing cash
balances for the remainder of the cash purchase price paid.

                                       6
<PAGE>
 
Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.

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

Results of Operations

  The following table summarizes the Company's results of operations as a
percentage of net sales for the three and nine months ended September 27, 1998
and September 28, 1997.

<TABLE>
<CAPTION>
 
                                                               Percentage of Net Sales
                                            Three Months Ended                     Nine Months Ended
                                    ------------------------------------   -----------------------------------
                                    September 27,       September 28,      September 27,      September 28,
                                         1998               1997                1998               1997
                                    --------------   -------------------   --------------   ------------------
<S>                                 <C>              <C>                   <C>              <C>
Net sales                               100.0%             100.0%              100.0%              100.0%
Cost of sales                            65.0               59.9                61.5                59.7
                                        -----              -----               -----               -----
Gross profit                             35.0               40.1                38.5                40.3
Operating expenses:                                                                       
    Sales and marketing                  13.0                6.8                10.5                 7.4
    Research and development             17.9                9.7                14.7                 9.7
    General and administrative            8.1                4.0                 6.3                 4.1
                                        -----              -----               -----               -----
Total operating expenses                 39.0               20.5                31.5                21.2
                                        -----              -----               -----               -----
Operating income (loss)                  (4.0)              19.6                 7.0                19.1
Other income, net                         5.1                2.1                 4.0                 2.2
                                        -----              -----               -----               -----
Income before income taxes                1.1               21.7                11.0                21.3
Provision for income taxes                0.4                8.0                 4.0                 8.0
                                        -----              -----               -----               -----
Net income                                0.7%              13.7%                7.0%               13.3%
                                        =====              =====               =====               =====
</TABLE>

Three months ended September 27, 1998 and September 28, 1997

Net Sales

  The Company's net sales are derived primarily from the sale of radio frequency
("RF") power amplifiers for use in wireless communications networks.  Sales
decreased by 52.1% to $16.5 million for the quarter ended September 27, 1998
from $34.3 million for the quarter ended September 28, 1997.  The decrease in
revenue was primarily attributable to decreased sales of the Company's personal
communications services ("PCS") products, as well as reduced sales of its
Company's cellular multi-carrier amplifiers. The decrease in PCS sales and
cellular multi-carrier sales was mainly due to the ongoing economic crisis in
South Korea, which has significantly reduced South Korean wireless service
operators' demand for the Company's products.  For the quarter ended September
27, 1998, cellular multi-carrier amplifiers (including racks) accounted for
approximately 78.8% of revenues or $13.0 million, compared to approximately
52.5% or $18.0 million for the quarter ended September 28, 1997. PCS products
(including racks) accounted for approximately 15.2% of revenues or $2.5 million
for the third quarter of 1998, compared to 43.3% or $14.9 million for the third
quarter of 1997.  Sales of Land Mobile Radio ("LMR") amplifiers accounted for
approximately 6.0% of revenues or $1.0 million for the quarter ended September
27, 1998, compared to approximately 4.2% of revenues or $1.4 million for the
quarter ended September 28, 1997.

                                       7
<PAGE>
 
  For 1997 and the first nine months of 1998, the majority of the Company's
single carrier PCS amplifiers were being utilized in the deployment of the new
PCS networks being built in South Korea and a majority of the Company's cellular
multi-carrier amplifiers sold during 1997 were also being utilized in the
deployment of the digital cellular CDMA networks in South Korea.  During the
first nine months of 1998, the percentage of the Company's multi-carrier
amplifiers sold for use in cellular systems of wireless network operators in
both North America and other international markets outside of Asia continued to
increase as compared to the first nine months of 1997.  Due to the economic and
financial crisis that has impacted South Korea and Asia in general, the
deployments of both the digital cellular CDMA networks and the PCS networks in
South Korea have been significantly delayed during the first nine months of
1998.  Given the continuing unstable economic environment within South Korea and
Asia in general, the Company is unable to estimate the level of future
deployments of these networks or when such deployments can be expected to be
completed.  The reduction and stoppage of these deployments during the first
nine months of 1998 did have an adverse effect on the Company's revenue and
business with its South Korean customers and its results of operations.  The
continued delay or cancellation of these deployments will have an adverse effect
on the Company's business, results of operations and financial condition.  For
additional information see "Additional Factors That May Affect Future Results -
Customer Concentration; Reliance upon South Korean Market and Growth of Wireless
Services Market and Risks of Doing Business in International Markets"

  Total international sales (excluding North American sales), primarily to
customers in South Korea, accounted for approximately 46.9% of revenues or $7.7
million for the quarter ended September 27, 1998, compared with approximately
87.3% or $30.0 million for the quarter ended September 28, 1997.  Total sales to
customers in South Korea accounted for approximately 36.8% of revenues or $6.1
million for the quarter ended September 27, 1998 compared to approximately 86.0%
of revenues or $29.5 million for sales to South Korean customers for the quarter
ended September 28, 1997.  The decrease in sales to customers in South Korea is
a result of the ongoing economic crisis in South Korea and Asia in general,
which has reduced South Korean wireless service operators' demand for the
Company's products.  During the first nine months of 1998, the Company has
experienced postponed, rescheduled and cancelled orders from its South Korean
customers.  At this time, the Company is unable to predict when, if ever, its
South Korean customers will take delivery of their postponed and rescheduled
orders.  Due to these issues and the overall economic crisis in Asia, the
Company currently anticipates that its percentage of revenues from South Korean
sales will continue to decline.  See "Additional Factors That May Affect Future
Results - Customer Concentration; Reliance upon South Korean Market and Growth
of Wireless Services Market and Risks of Doing Business in International 
Markets"

  Sales to customers in countries outside of South Korea, primarily in North
America, increased approximately 116.3% to $10.4 million for the quarter ended
September 27, 1998 from $4.8 million for the quarter ended September 28, 1997.
Sales to two customers in North America, (in alphabetical order) BellSouth
Cellular Corp. and Metawave Communications Corporation each of which accounted
for more than 10% of the Company's sales, collectively accounted for $6.6
million or 40.2% of revenues for the third quarter of 1998, compared to $3.0
million or 8.6% for the same two customers in the third quarter of 1997. There
can be no assurance that the Company will continue to be successful in both
attracting new customers as well as retaining and or increasing business with
existing Korean and non-Korean customers.  In addition, the Company believes
that a significant portion of its business with original equipment manufacturers
("OEMs"), such as LM Ericsson Telephone Company, Metawave Communications
Corporation and Northern Telecom Limited, is dependent upon the deployment
schedules of wireless network operators who are purchasing infrastructure
equipment from such OEMs.  These are for both North American and international
deployments, including deployments in South America.  A number of factors may
cause delays in wireless infrastructure deployments, including such factors as
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.  Due to the possible uncertainties
associated with wireless infrastructure deployments, the Company has experienced
and expects to continue to experience significant fluctuations in demand from
its OEM customers.  Such fluctuations could cause a significant reduction in
revenues which could have a material adverse effect on the Company's business,
results of operations and financial condition. See "Additional Factors That May
Affect Future Results - Customer Concentration; Risks of Doing Business in
International Markets and Fluctuations in Quarterly Results."

                                       8
<PAGE>
 
Gross Profit

  Cost of sales consists primarily of raw materials, assembly and test labor,
overhead and warranty costs.  Gross profit margins for the third quarter of
fiscal 1998 and 1997 were 35.0% and 40.1%, respectively.  The decrease in gross
margins is a result of a increased labor and overhead costs associated with the
significant reduction in sales to the Company's South Korean customers.  The
Company anticipates that in the near-term it will continue to experience
significant labor and overhead costs due to its reduced sales level. These costs
are currently anticipated to have a negative impact on the Company's future
gross margins.  While the Company continues to strive for manufacturing cost
reductions to offset pricing pressures on its products, there can be no
assurance that these cost reduction efforts will keep pace with price declines
and cost increases.  If the Company is unable to obtain cost reductions, its
gross margins and profitability will continue to be adversely affected.  For a
discussion of the effects of declining average sales prices on the Company's
business, see "Additional Factors That May Affect Future Results - Declining
Average Sales Prices."

  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.  In addition, with
expected slowdowns in demand for wireless infrastructure equipment from the
Asian markets, pricing competition among suppliers to the remaining world
markets is expected to intensify.  Due to these competitive pressures, the
Company expects that the average sales prices of its products will continue to
decrease.  The Company has introduced new products at lower sales prices which
has impacted the average sales prices of the Company's products. Future pricing
actions by the Company and its competitors may also adversely impact the
Company's gross profit margins and profitability, which could also result in
decreased liquidity and adversely affect the Company's business, results of
operations and financial condition. For a discussion of the impact of new
products on the Company's business, see "Additional Factors That May Affect
Future Results - Rapid Technological Change; Dependence on New Products."

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 decreased by 8.3% to $2.1 million for
the quarter ended September 27, 1998 from $2.3 million for the quarter ended
September 28, 1997.  As a percentage of sales, sales and marketing expenses were
13.0% and 6.8% for the quarters ended September 27, 1998 and September 28, 1997,
respectively.  The increase in sales and marketing expenses as a percentage of
sales is primarily attributable to the reduced level of sales for the third
quarter of 1998 compared to the third quarter of 1997.

  Research and development expenses include ongoing amplifier design and
development expenses, as well as those design expenses associated with reducing
the cost and improving the manufacturability of existing amplifiers.  Research
and development expenses decreased by 12.1% to $2.9 million for the quarter
ended September 27, 1998 from $3.3 million for the quarter ended September 28,
1997.  Research and development expenses as a percentage of sales were 17.9% and
9.7%, respectively.  The decrease in actual research and development expenses
was due to lower spending for non-personnel related expenses such as materials,
tools and supplies. The Company intends to continue to emphasize investment in
research and development programs in future periods with current programs
covering PCS, cellular and wireless local loop products.

  General and administrative expenses consist primarily of salaries and other
expenses for management, finance, facilities maintenance and human resources.
General and administrative expenses decreased by 2.3% to $1.3 million for the
quarter ended September 27, 1998, from $1.4 million for the quarter ended
September 28, 1997.  General and administrative expenses as a percentage of
sales were 8.1% and 4.0%, respectively. The increase in general and
administrative expenses as a percentage of sales is primarily attributable to
the reduced level of sales for the third quarter of 1998 compared to the third
quarter of 1997.

                                       9
<PAGE>
 
Other Income

  The Company earned other income, net, of $0.8 million in the third quarter of
1998 compared to $0.7 million for the third quarter of 1997.  Other income
consists primarily of interest income, net of any interest expense.  The
Company's cash balances are invested in short-term, investment-grade money
market instruments.

Provision for Income Taxes

  The Company's effective tax rate was 36.5% and 37.0% for the quarters ended
September 27, 1998 and September 28, 1997, respectively.

Nine months ended September 27, 1998 and September 28, 1997

Net Sales

  Sales decreased 26.5% to $60.2 million for the nine months ended September 27,
1998 from $82.0 million for the nine months ended September 28, 1997. The
decrease in revenue was primarily attributable to decreased sales of the
Company's products to its South Korean customers, due to the continuing economic
crisis in South Korea and Asia in general.  Sales of PCS products decreased
79.2% to $6.2 million for the nine months ended September 27, 1998 from $29.8
million for the nine months ended September 28, 1997.  This decrease in PCS
sales was mainly due to a reduction in South Korean wireless service operators'
demand for the Company's products.  LMR sales decreased from $4.6 million in the
first nine months of 1997 to $2.7 million in the first nine months of 1998.
Sales of cellular multi-carrier amplifiers increased 7.9% to $51.3 million for
the nine months ended September 27, 1998 from $47.5 million for the nine months
ended September 27, 1997. The increase in sales of cellular multi-carrier
amplifiers was due to an increase in sales to non-Korean wireless network
operators and OEMs, which offset a decrease in sales to the Company's South
Korean customers.   For the nine months ended September 27, 1998, cellular
multi-carrier amplifiers (including racks) accounted for approximately 85.2% of
revenues or $51.3 million, compared to approximately 58.0% or $47.5 million for
the nine months ended September 28, 1997. PCS products (including racks)
accounted for approximately 10.3% of revenues or $6.2 million for the first nine
months of 1998, compared to 36.3% or $29.8 million for the first nine months in
1997.  Sales of LMR amplifiers accounted for approximately 4.5% of revenues or
$2.7 million for the nine months ended September 27, 1998, compared to
approximately 5.7% of revenues or $4.6 million for the nine months ended
September 28, 1997.

  Total international sales (excluding North American sales), primarily to
customers in South Korea, accounted for 43.2% of revenues or $26.0 million for
the nine months ended September 27, 1998, compared with 87.3% or $71.5 million
for the nine months ended September 28, 1997. Total sales to customers in South
Korea accounted for approximately 38.1% or $22.9 million for the nine months
ended September 27, 1998, compared to approximately 86.1% or $70.5 million for
the nine months ended September 28, 1997.  Total sales to customers outside of
South Korea increased approximately 226.4% to $37.3 million for nine months
ended September 27, 1998 from $11.4 million for the nine months ended September
28, 1997.  Sales to three customers in North America, (in alphabetical order)
BellSouth Cellular Corp., Metawave Communications Corporation and Northern
Telecom Limited, each of which accounted for more than 10% of the Company's
sales, collectively accounted for $27.9 million or 46.4% of revenues for the
first nine months of 1998, compared to $4.6 million or 5.6% for the same three
customers in the first nine months of 1997. See "Additional Factors That May
Affect Future Results - Customer Concentration."

Gross Profit

  The gross profit margins as a percentage of sales for nine months ended
September 27, 1998 and September 28, 1997 were 38.5% and 40.3%, respectively.
The decrease in gross margins during the first nine months of 1998 is primarily
due to declining average sales prices as well as increased labor and overhead
costs associated with the significant reduction in sales to the Company's South
Korean customers and the Company's decision to not materially reduce its
employment levels during this period. The Company anticipates that in the near-
term it will continue to experience significant labor and overhead costs due to
its reduced sales level.  These costs are currently anticipated to have a
negative impact on the Company's future gross margins.  For a discussion of the
effects of

                                       10
<PAGE>
 
declining average sales prices on the Company's business, see "Additional
Factors That May Affect Future Results - Declining Average Sales Prices."

Operating Expenses

  Sales and marketing expenses increased by 4.6% to $6.3 million for the nine
months ended September 27, 1998 from $6.1 million for the nine months ended
September 28, 1997.  As a percentage of sales, sales and marketing expenses were
10.5% and 7.4% for the nine months ended September 27, 1998 and September 28,
1997, respectively. The increase in sales and marketing expenses is primarily
attributable to increases in sales commission costs and increased head count.

  Research and development expenses increased by 11.4% to $8.8 million for the
nine months ended September 27, 1998 from $7.9 million for the nine months ended
September 28, 1997.  Research and development expenses as a percentage of sales
were 14.7% and 9.7%, respectively.  The increase in research and development
expenses was primarily attributable to increased staffing and associated
engineering costs related to continued new product development and existing
product enhancement efforts.

  General and administrative expenses increased by 13.5% to $3.8 million for the
nine months ended September 27, 1998, from $3.3 million for the nine months
ended September 28, 1997.  General and administrative expenses as a percentage
of sales were 6.3% and 4.1%, respectively.  The increase in general and
administrative expenses was primarily attributable to increased staffing costs.

Other Income

  The Company earned other income, net, of $2.4 million for the nine months
ended September 27, 1998 compared to $1.8 million for the nine months ended
September 28, 1997.  Other income consists primarily of interest income, net of
any interest expense.  The increase in other income is attributable to the
Company's increased average cash position maintained during the first nine
months of 1998 compared to the average cash balances maintained during the first
nine months of 1997.  The larger cash balances are due to the Company's
secondary Common Stock offering completed in July 1997.  The larger cash
balances were invested in short-term, investment-grade money market instruments.

Provision for Income Taxes

  The Company's effective tax rate was 36.5% and 37.6% for the nine months ended
September 27, 1998 and September 28, 1997, respectively.

Liquidity and Capital Resources

  The Company has historically financed its operations primarily through a
combination of cash on hand, cash provided from operations, equipment lease
financings, available borrowings under its bank line of credit and both private
and public equity offerings.  As of September 27, 1998, the Company had working
capital of $65.6 million, including $52.4 million in cash and cash equivalents
as compared with working capital of $67.5 million at December 28, 1997, which
included $67.4 million in cash and cash equivalents.  Net accounts receivable
increased to $14.8 million at September 27, 1998 from $12.0 million at December
28, 1997.  During the first nine months of 1998, the Company sold a larger
percentage of its products to its non-Korean customers, primarily in North
America.  These customers typically pay on longer payment terms than the
Company's South Korean customers have historically paid.  In addition, due to
the Asian economic crisis, the Company has provided extended payment terms to
its South Korean customers.  The Company anticipates that its accounts
receivable collection periods will continue to increase with the reduction in
revenue from its South Korean customers and the expansion of its Non-Korean
customer base.   Net inventory increased to $10.3 million at September 27, 1998,
from $8.8 million at December 28, 1997.

                                       11
<PAGE>
 
  Cash used in operations was approximately $6.4 million for the nine months
ended September 27, 1998, compared with cash provided by operations of $15.1
million for the nine months ended September 28, 1997.  The negative cash flow
from operations for the first nine months of 1998 is primarily attributable to
an increase in accounts receivable and inventories from December 28, 1997 to
September 27, 1998, as well as a decrease in accounts payable, other accrued
liabilities and income taxes payable.

  Capital expenditures were approximately $3.2 million for the first nine months
of 1998 compared with $5.2 million in the first nine months of 1997.  No amounts
were financed through capital leases in the first nine months of 1998 compared
to approximately $.8 million in the first nine months of 1997. The majority of
the capital spending during both periods represents spending on electronic test
equipment utilized in the Company's manufacturing and research and development
areas.

  On April 28, 1998 the Company purchased $2.5 million of 13.75% Senior Secured
Bridge Notes due April 28, 2000 ("The Notes") from Metawave Communications
Corporation in a private offering.  The total amount raised in the offering was
$29.0 million.  The Notes initially accrue interest at a rate of 13.75% per
annum and interest is payable semi-annually.  The Notes contain provisions to
increase the rate of interest during the life of the Notes if the Notes are not
repaid prior to maturity.  The Notes are secured by certain assets of Metawave
Communications Corporation and mature on April 28, 2000.  For the first nine
months of 1998, Metawave Communications Corporation accounted for more than 10%
of the Company's revenues.

  Cash used in financing activities was $2.8 million for the first nine months
of 1998 compared with $27.8 million provided by financing activities for the
first nine months of 1997.  The majority of cash used in financing activities
for the first nine months of 1998 was for the repurchase of 300,000 shares of
the Company's Common Stock at a total cost of $3.7 million. As of September 27,
1998, the Company had repurchased a total of 810,000 shares of its Common Stock
at a total cost of approximately $12.5 million.  The Company is authorized to
repurchase up to one million shares of its Common Stock.  The majority of the
cash provided by financing activities for the first nine months of 1997 resulted
from the sale of 1,000,000 shares of Common Stock in the Company's secondary
offering.  Net proceeds received by the Company were approximately $20.6
million. In addition, the Company received net proceeds of $3.9 million from the
sale of 360,000 shares of Common Stock in January 1997, which was associated
with the Company's December 1996 initial public offering of Common Stock.

  On August 21, 1997, the Company entered into a $10 million unsecured revolving
credit agreement.  The Company was required to pay a commitment fee equal to .1%
per annum on the average daily unused portion of the facility.  The commitment
fee was payable quarterly in arrears.  The agreement allowed the Company to
borrow at the bank's reference rate (8.5% at September 27, 1998) or the bank's
LIBOR rate plus 1.25% per annum, all at the Company's option. On July 28, 1998,
the Company amended the credit agreement to extend the termination date of the
agreement from July 31, 1998 to September 30, 1998. The Company was in
compliance with all covenants contained in the amended credit agreement at
September 27, 1998 and no amounts were outstanding under the facility.  The
agreement was terminated on September 30, 1998.

  The Company had cash and cash equivalents of $52.4 million at September 27,
1998, compared with $67.4 million at December 28, 1997.  The Company regularly
reviews its cash funding requirements and attempts to meet those requirements
through a combination of cash on hand, cash provided by operations, available
borrowings under any credit facilities, financing through equipment lease
transactions and possible future public or private debt and/or equity offerings.
The Company invests its excess cash in short-term, investment-grade money market
instruments.

  On August 31, 1998, the Company announced that it signed a definitive
agreement with Hewlett-Packard Company ("HP") under which the Company would
acquire HP's radio frequency power amplifier business and its manufacturing
facility in Folsom, California.  The acquisition would include certain assets
and liabilities, operations and the business related to the design, manufacture
and marketing of RF power amplifiers for use in wireless communications.  The
acquisition was completed on October 9, 1998 and the cash price paid was
approximately $57.4 million. The Company financed the acquisition utilizing $25
million of a new $35 million secured credit facility.  This credit facility is
secured by a pledge of all of the Company's assets and contains various
financial

                                       12
<PAGE>
 
operating covenants. The Company utilized its existing cash balances for the
remainder of the cash purchase price paid on October 9, 1998.

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

Disclosure About Foreign Currency Risk

  Historically, a majority of the Company's revenues have been derived from
international sources, with the Company's customers in South Korea accounting
for the significant majority of such revenues.  With the reduction in sales to
customers in South Korea, the Company is pursuing new customers in various
domestic and international locations where new deployments or upgrades to
existing wireless communication networks are planned.  Such international
locations include South America, where there has been instability in several of
the region's currencies.  While the Company currently invoices all of its
customers in U.S. dollars, changes in the value of the U.S. dollar versus the
local currency in which the Company's products are sold, along with the economic
and political conditions of such foreign countries, could adversely affect the
Company's business, results of operations and financial condition.  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 the Company.  While the Company currently believes that its international
customers have the ability to meet all of their obligations to the Company,
there can be no assurance that they will continue to be able meet such
obligations.  The Company regularly monitors the credit worthiness of its
international customers and makes credit decisions based on both prior sales
experience with such customers as well as current financial performance and
overall economic conditions.  Due to competitive reasons, the Company may decide
in the future to offer certain foreign customers extended payment terms and/or
sell certain products or services in the local currency of such customers.

  Certain countries in Asia, including South Korea, continue to experience
weaknesses in their currencies, banking systems and equity markets.  These
weaknesses have adversely affected South Korean wireless service operators'
demand for the Company's products.  The Company's foreign customers currently
pay for the Company's products with U.S. dollars.  As such, the recent
strengthening of the U.S. dollar as compared to such foreign currencies as the
South Korean Won, has effectively increased the cost of the Company's products
by as much as 100% or more for its South Korean customers.  The 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 the
Company's future sales and gross margins.  For further discussion of the risks
associated with the Company's international sales, see "Additional Factors That
May Affect Future Results  Risks of Doing Business in International Markets."

Year 2000 Compliance

  In the next two years, many companies will face a potentially serious
information systems (computer) problem because many software applications and
operational programs written in the past may not properly recognize calendar
dates beginning in the Year 2000.  This problem could force computers or
machines which utilize date dependent software to either shut down or provide
incorrect data or information.  The Company has examined its computer systems
and contacted its software and hardware providers to determine whether the
Company's software applications and computer systems are compliant with the Year
2000. The Company has completed an upgrade to its computer operating system such
that the Company has been assured by its software and hardware providers that
its computer systems are fully compliant with the Year 2000.  It is not possible
to quantify the aggregate cost to the Company of such upgrades since they were
part of the software and hardware providers normal upgrades to the

                                       13
<PAGE>
 
Company's systems. The costs for upgrading the Company's information systems
have been funded through the Company's operating cash flows.

  While the Company believes that its information systems are fully Year 2000
compliant, the Company intends to continue to review its information systems for
any possible problems, as well as monitor its key suppliers and customers for
any impact that the Year 2000 may have on their information systems which could
then impact the Company.  During the remainder of 1998, the Company intends to
contact all of its significant suppliers and customers to request verification
that such suppliers and customers are Year 2000 compliant.  Software sold with
the Company's products is Year 2000 compliant and is not date dependent.  In
addition, the equipment utilized by the Company in its manufacturing process is
not date dependent.

  The Company does not believe that there will be significant issues or costs
associated with its products related to Year 2000 compliance; however, there can
be no assurance that such products do not contain undetected errors or defects
associated with Year 2000 date functions or that there exists heretofore
undetected aspects of the Company's manufacturing process which could be
impacted by the Year 2000.  Although the Company is not currently aware of any
material operational issues or costs associated with preparing its products,
manufacturing processes or internal information systems for the Year 2000, there
can be no assurance that the Company will not experience unanticipated negative
consequences and/or material costs caused by undetected errors or defects in the
technology used in its products, manufacturing processes or internal information
systems, which are comprised predominantly of third party software and hardware.
The Company does not currently anticipate that the Year 2000 programming issue
will have a material impact on its business, results of operations or financial
condition.

  Should the Company not be completely successful in mitigating internal and
external Year 2000 risks, the result could be a system failure or
miscalculations causing disruptions of operations, including among other things,
a temporary inability to process transactions, manufacture products, send
invoices or engage in similar normal business activities at the Company or its
vendors and suppliers.  The Company believes that under a worse case scenario,
it could continue the majority of its normal business activities on a manual
basis.

  With regards to the assets, equipment and facility the Company acquired from
Hewlett-Packard Company on October 9, 1998, the Company is currently evaluating
any information systems, equipment and software included in the acquisition for
their Year 2000 compliance.  The Company anticipates having this review
completed by year-end 1998.

Additional Factors That May Affect Future Results

  Future operating results may be impacted by a number of factors that could
cause actual results to differ materially from those stated herein, which
reflect management's current expectations.  These factors include worldwide and
regional economic and political conditions, industry specific factors, the
Company's ability to add new customers to reduce its dependence on existing
customers, the Company's ability to finance its activities and maintain its
financial liquidity, the Company's ability to timely develop and produce
commercially viable products at competitive prices, the Company's ability to
produce products which meet the quality standards of both existing and potential
new customers, the Company's ability to manage multiple manufacturing facilities
and the costs of operating such facilities, the Company's continued success in
the design of new RF amplifier products and its ability to redesign existing
amplifier products and manufacture in quantity such new products, the ability of
the Company's products to operate and be compatible with various OEMs' base
station equipment, the availability and cost of components, the Company's
ability to manage expense levels, and the Company's ability to accurately
anticipate customer demand.

Customer Concentration

  A small number of customers account for a substantial majority of the
Company's net sales.  Although the Company is attempting to expand its customer
base, the Company expects that a limited number of customers will continue to
represent a substantial portion of the Company's net sales for the foreseeable
future.  The Company believes that its future success depends upon its ability
to broaden its customer base.  For the nine months ended September 27, 1998,
four of the Company's South Korean customers, Hyundai Electronics Industries Co.

                                       14
<PAGE>
 
("Hyundai"), LG Information & Communications, Ltd. ("LGIC"), Samsung Electronics
Co. Ltd. ("Samsung") and SK Global Co., Ltd. ("SK Global") accounted for $22.8
million or approximately 37.9% of the Company's net sales, which was down
significantly from the comparable nine month period in 1997 when net sales to
three South Korean customers (Hyundai, LGIC and Samsung) accounted for $70.5
million or approximately 86.1% of net sales.  Demonstrating the risks associated
with the Company's dependence on a limited number of customers, the Company's
reduction in revenues to all South Korean-based customers of approximately $47.6
million during the first nine months of 1998, as compared to the first nine
months of 1997, accounted for approximately 79.1% of the Company's total
revenues during the first nine months of 1998.  If the Company is unable to
continue to replace the revenues of its South Korean based customers with those
from other non-Asian based customers, such failure will have a material adverse
effect on the Company's business, results of operations and financial condition.
While the Company has had some success in replacing its lost South Korean
business during the first nine months of 1998, there can be no assurance that
the Company will continue to be successful in attracting and retaining new
customers.  As part of the Company's efforts to expand its customer base, and
reflecting the significant reduction in the Company's South Korean revenues, the
Company had three non-Korean customers each accounting for more than 10% of
revenues for the first nine months of 1998.  These customers are, in
alphabetical order, BellSouth Cellular Corp., Metawave Communications
Corporation and Northern Telecom Limited.  For the nine months ended September
27, 1998, these three customers in total accounted for approximately $27.9
million or 46.4% of the Company's net sales.   There can be no assurance that
these customers will continue to purchase the same quantities of product from
the Company or that they will increase their purchases from the Company.  If any
of these three customers significantly reduce their purchases from the Company,
such reduction could have a material adverse effect on the Company's business,
results of operations and financial condition.

  A limited number of large OEMs account for a majority of RF power amplifier
purchasers in the wireless infrastructure market, and the Company's success will
be dependent upon its ability to establish and maintain relationships with these
types of customers.  The Company believes that a significant portion of its
business with OEMs, such as LM Ericsson Telephone Company, Lucent Technologies,
Inc., Metawave Communications Corporation and Northern Telecom Limited, is
dependent upon the deployment schedules of wireless network operators who are
purchasing infrastructure equipment from such OEMs.  Therefore, continued
purchases of the Company's products by such OEMs is dependent upon the OEMs
current view of the deployment and could be significantly reduced due to any
delays of such deployments.  A number of factors may cause delays in wireless
infrastructure deployments, including such factors as 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 also purchase
products on a large quantity basis over a short period of time which may cause
demand for the Company's products to fluctuate significantly.  Due to the
possible uncertainties associated with wireless infrastructure deployments and
OEMs purchasing strategies, the Company may experience significant fluctuations
in demand from its OEM customers.  Such fluctuations could cause a significant
reduction in revenues which could have a material adverse effect on the
Company's business, results of operations and financial condition.  There can be
no assurance that a major customer will not reduce, delay or eliminate its
purchases from the Company, which could have a material adverse effect on the
Company's business, results of operations and financial condition.  In addition,
major customers also have significant leverage and may attempt to change the
terms, including pricing, payment and product delivery schedules, upon which the
Company and such customers do business, thereby adversely affecting the
Company's business, results of operations and financial condition.  Further, one
or more of these customers may determine to manufacture amplifiers internally,
thus reducing or eliminating its purchases from the Company and possibly
becoming a direct competitor of the Company. See "--Internal Amplifier
Production Capabilities of OEMs."  As a result, the Company's success will
depend upon its ability to expand its customer base and, in particular, to
successfully market its products to OEMs for wireless networks and have its
products chosen over any internally designed or manufactured products.

  The Company currently sells products to its major customers under purchase
orders which are usually placed with short-term delivery requirements.  As such,
while the Company receives periodic order forecasts from its major customers,
such 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, the Company maintains
significant work-in-progress and raw materials inventory as well as maintaining
increased levels of technical production staff to meet estimated order
forecasts.  The recent significant reduction in sales to the Company's South
Korean customers has caused the Company to maintain higher levels of inventory
than it originally planned and

                                       15
<PAGE>
 
to maintain employee levels above the level required for current production
requirements. While the Company currently believes that it has managed these
increases effectively, there can be no assurance that it will continue to be
able to do so. To the extent its major customers purchase less than the
forecasted amounts or cancel or delay existing purchase orders, the Company will
have higher levels of inventory than otherwise needed, increasing the risk of
obsolescence, and the Company will have increased levels of production staff to
support such forecasted orders. Such higher levels of inventory and increased
employee levels would reduce the Company's liquidity and could have a material
adverse effect on the Company's business, results of operations and financial
condition. In addition, in the event the Company's major customers desire to
purchase products in excess of the forecasted amounts, the Company may not have
sufficient inventory or manufacturing capacity to fill such increased orders,
which could have a material adverse effect on the Company's relationships and
future business with its customers.

Reliance upon South Korean Market and Growth of Wireless Services Market

  Four of the Company's customers, Hyundai, LGIC, Samsung and SK Global
collectively accounted for approximately 37.9% of the Company's net sales for
the first nine months of 1998 and three of these customers, Hyundai, LGIC and
Samsung accounted for approximately 86.1% of net sales for the first nine months
of 1997.  These customers have purchased products for deployment in the South
Korean digital cellular and PCS networks.  During fiscal 1995, 1996, 1997, and
the first nine months of 1998, Hyundai, LGIC and Samsung purchased multi-carrier
linear RF power amplifiers for installation in the build-out of the South Korean
digital cellular networks.  The delay, postponement or cancellation of the
build-out of the South Korean digital cellular networks which occurred during
the first nine months of 1998 has had an adverse effect on the Company's
revenues and results of operations during the first nine months of 1998.  The
continued delay or termination of the continued implementation of the South
Korean digital cellular networks would have a material adverse effect on the
Company's business, results of operations and financial condition. In addition,
the Company currently believes that the previously planned build-out phase of
the South Korean digital cellular networks has stopped.  Full deployment was
originally estimated to be completed by the end of 1998.  The Company is
currently unable to predict when, if ever, the originally scheduled build-out of
these networks will be completed.  Accordingly, while the Company has continued
to sell reduced quantities of its product to its South Korean customers, the
Company's sales directly related to the South Korean digital cellular networks
are anticipated to decrease significantly.

  In contrast to the South Korean digital cellular networks, the build-out of
the South Korean PCS networks began in the first quarter of 1997.  During 1997,
the Company began shipping, in volume, PCS single carrier amplifiers for use in
the new PCS networks being built in South Korea.  Sales to the Company's South
Korean customers for the South Korean PCS networks represented substantially all
of the Company's PCS sales during 1997 and approximately 85.8% of the Company's
PCS sales for the first nine months of 1998.  The delay, postponement and
cancellation of the build-out of the South Korean PCS networks which occurred
during the first nine months of 1998, did have an adverse effect on the
Company's revenues and results of operations during the first nine months of
1998.  The continued delay, termination or early completion of the
infrastructure build-out of the South Korean PCS networks would continue to have
a material adverse effect on the Company's business, results of operations and
financial condition.  Further, even if these networks are developed as
originally anticipated, there can be no assurance that the Company's PCS
products will continued to be purchased by the Company's South Korean customers
or that such products will achieve market acceptance outside of South Korea, or
be capable of being manufactured at competitive prices in sufficient volumes.
In the event that the Company's PCS products are not timely developed or do not
gain market acceptance or are not capable of being manufactured at competitive
costs, the Company's business, results of operations and financial condition
would be materially adversely affected.

  During the fourth quarter of 1997, certain Asian countries, including South
Korea, began to experience weaknesses in their currencies, banking systems and
equity markets.  The deteriorating economic and currency conditions throughout
Asia led South Korea, along with several other Asian countries, including
Indonesia and Thailand, to request economic support from the International
Monetary Fund in December 1997.  During this time, the Company's South Korean
customers continued to order and take delivery of products from the Company and
continued to make timely payments to the Company for amounts owed.  However,
during the first nine months of 1998, economic and currency conditions in Asia
and South Korea have continued to deteriorate which has negatively impacted
overall market conditions within South Korea.  As a result, the Company has
experienced

                                       16
<PAGE>
 
postponed, rescheduled and cancelled orders from its South Korean customers for
both the cellular and PCS networks in South Korea.

  The weakness in the equivalent U.S. dollar value of the South Korean Won has
adversely affected South Korean wireless service operators' demand for the
Company's products.  The Company's South Korean customers pay for the Company's
products with U.S. dollars.  As such, the strengthening of the U.S. dollar as
compared to the South Korean Won, which began in the fourth quarter of 1997 and
has continued during the first nine months of 1998, has increased the effective
cost of the Company's products by as much as 100% or more for its South Korean
customers.  This increase in cost to the Company's South Korean OEM customers is
being passed along to the South Korean wireless service providers in the form of
increased costs for infrastructure equipment.  The significant increase in the
local currency cost of such products makes them less attractive to such
customers.  Additionally, due to the economic problems facing the South Korean
banking network, it has become more difficult for local operating companies to
raise additional financing to support the increased costs of their
infrastructure buildout.

  Therefore, the Company currently believes that the completion of the buildout
of the South Korean wireless networks is dependent upon a stabilization of
economic, currency and banking conditions within South Korea.  It is currently
anticipated that the continued deployment of both the cellular and PCS digital
networks will be delayed until such time that economic conditions become
stabilized from a long-term perspective.  Accordingly, the Company is unable to
predict when, if ever, these networks will be completed pursuant to the South
Korean wireless network operators' original build-out projections.  In any
event, sales related to these networks are anticipated to continue to decrease
significantly during the remainder of 1998, and the Company is unable to predict
what level, if any, such sales will be for 1999.

  Hyundai, LGIC and Samsung have also been marketing wireless infrastructure
equipment for installation in networks outside of the South Korean market.
There can be no assurance that such customers will be successful in obtaining
new business outside of South Korea or that, if successful, they will continue
to purchase amplifiers from the Company.  Any significant decrease in the
Company's sale of amplifiers to these customers, without an offsetting increase
in sales to other customers, would have a material adverse effect on the
Company's business, results of operations and financial condition.

  A substantial majority of the Company's revenues are derived from the sale of
RF power amplifiers for wireless communications networks, and the future success
of the Company depends to a considerable extent upon the continued growth and
increased availability of cellular and other wireless communications services,
including PCS, in the United States and internationally.  There can be no
assurance that either subscriber use or the implementation of wireless
communications services will continue to grow, or that such factors will create
demand for the Company's products.  The Company believes that continued growth
in the use of wireless communications services depends on significant reductions
in infrastructure capital equipment cost per subscriber and corresponding
reductions in wireless service pricing.  While in the United States the Federal
Communications Commission ("FCC") has adopted regulations requiring local phone
companies to reduce the rates charged to cellular carriers for connection to
their wireline networks, it is anticipated that wireless service rates will
remain higher than rates charged by traditional wireline companies.  The growth
in the implementation of wireless communications services is dependent upon both
developed countries, such as the United States, allowing continued deployment of
new networks, and less developed foreign countries deploying wireless
communications networks as opposed to constructing wireline infrastructures.
Foreign countries or local government authorities may decline to construct
wireless communications systems, place moratoriums on building base stations or
terminate or delay construction of such systems for a variety of reasons,
including environmental issues, political unrest, economic downturns, the
availability of favorable pricing for other communications services, the
availability and cost of related equipment or other delays in the implementation
of these systems, in which event demand for the Company's products will be
similarly reduced or delayed, which would materially adversely affect the
Company's business, results of operations and financial condition.  See "--Risks
of Doing Business in International Markets."

Risks of Doing Business in International Markets

  For fiscal years 1995, 1996 and 1997, and the first nine months of 1998,
international revenues (excluding North American sales) accounted for
approximately 67%, 77%, 84% and 43% respectively, of the Company's net

                                       17
<PAGE>
 
sales. The Company expects that international revenues and revenues derived from
sales to OEMs for infrastructure deployments in international locations will
continue to account for a significant percentage of the Company's net sales for
the foreseeable future. As a result, the Company is subject to various risks,
including political and economic instability, the difficulty of administering
business globally, compliance with multiple and potentially conflicting
regulatory requirements such as export requirements, tariffs and other barriers,
differences in intellectual property protections, health and safety
requirements, difficulties in staffing and managing foreign operations, longer
accounts receivable cycles, currency exchange fluctuations, restrictions against
the repatriation of earnings, export control restrictions, overlapping or
differing tax structures, political and economic instability and general trade
restrictions. If any of these risks materializes, it could have a material
adverse effect on the Company's business, results of operations and financial
condition. In particular, a large portion of the Company's existing customers
and potential new customers are servicing new markets in developing countries
that the Company's customers expect will deploy wireless communications networks
as an alternative to the construction of a wireline infrastructure or may
require upgrades to existing wireless communication networks. Such international
locations include South America and Asia as well as Europe. If such countries
decline to construct wireless communication systems, or construction of such
systems are delayed for any of a variety of reasons, including business and
economic conditions, delays in government or administrative approvals or changes
in economic stability due to factors such as increased inflation and political
turmoil, such delays could have a material adverse effect on the Company's
business, results of operations and financial condition. In recent years, a
substantial majority of the Company's net sales resulted from the sale of
products to three companies in South Korea, where future sales are dependent
upon favorable business and economic conditions, as well as trade relations with
the United States and a lack of political conflicts with North Korea.

  Beginning during the fourth quarter of 1997 and continuing during the first
nine months of 1998, economic conditions deteriorated throughout the Asia-
Pacific region, causing reductions in local exchange rates throughout the region
and general financial market uncertainty. Countries in Asia, including South
Korea, have experienced weaknesses in their currencies, banking systems and
equity markets.  During the first nine months of 1998, these weaknesses have
adversely affected both the Company's South Korean customers' demand for the
Company's products and their ability to pay for the products in U.S. dollars.
The Company's foreign customers currently pay for the Company's products with
U.S. dollars.  As such, the strengthening of the U.S. dollar as compared to such
foreign currencies as the South Korean Won, has effectively increased the local
currency price of the Company's products by as much as 100% or more for its
South Korean customers.  The significant increase in the local currency cost of
such products makes them less attractive to such customers.  Additionally, due
to the economic problems facing the South Korean banking system, it has become
more difficult for South Korean operating companies to raise additional US
dollar financing to support the increased costs of purchasing the Company's
products.  Accordingly, changes in exchange rates, and in particular a
strengthening of the U.S. dollar, may negatively impact the Company's future
sales, gross margins, results of operations and financial condition.

   In addition, during the last year, there have been press reports of
deteriorating living conditions within North Korea, which could lead to civil
unrest possibly resulting in potential military conflicts with South Korea.
There have also been press reports of military conflicts between North and South
Korea, which could potentially escalate into a large-scale conflict.  Recently,
with the deteriorating economic conditions within South Korea, there have been
press reports of protesting and striking South Korean workers.  Any conflict,
either political or military, between North and South Korea or within South
Korea alone, could have a material adverse effect on the Company's business,
results of operations and financial condition.   Any significant change in the
South Korean economy or the deterioration of United States trade relations or
the economic or political stability of other foreign locations in which the
Company sells its products would have a material adverse effect on the Company's
business, results of operations and financial condition.

  During the first nine months of 1998, the Company has increased its sales
efforts to both potential customers in South America and to OEMs for possible
deployment to customers in South America.  There has been instability in several
of the region's currencies and political governments, which could cause delays
or cancellations of planned deployments in the region.  Any significant delay in
the deployments of wireless networks due to these factors could have a material
adverse effect on the Company's business, results of operations and financial
condition. During the third quarter of fiscal 1998, the Company believes that
large interest rate fluctuations impacted customer demand in

                                       18
<PAGE>
 
Brazil. Any continued economic fluctuations or worsening economic conditions
could have a material adverse effect on the Company's business, results of
operations and financial condition.

  The Company's foreign sales are generally invoiced in U.S. dollars.
Accordingly, the Company does not currently engage in foreign currency hedging
transactions.  However, as the Company further expands its international
operations, the Company may be paid in foreign currencies and exposure to losses
in foreign currency transactions may increase.  The Company may choose to limit
such exposure by the purchase of forward foreign exchange contracts or similar
hedging strategies.  There can be no assurance that a currency hedging strategy
would be successful in avoiding exchange-related losses.  In addition, if the
relative value of the U.S. dollar in comparison to the currency of the Company's
foreign customers should increase, the resulting effective price increase of the
Company's products to such foreign customers could result in decreased sales
which could have a material adverse impact on the Company's business, results of
operations and financial condition. The increasing value of the U.S. dollar in
comparison of the weakening of an international customer's local currency and
associated weakening of such customer's local banking system, may negatively
impact such customer's ability to meet their payment obligations to the Company.
During a time of uncertain economic and banking conditions, such as the current
situation in South Korea, there can be no assurance that such customers will
continue to be able meet such obligations.  The Company regularly monitors the
credit worthiness of its international customers and makes credit decisions
based on both prior sales experience with such customers as well as current
financial performance and overall economic conditions.  Due to competitive
reasons, the Company may decide to offer certain foreign customers extended
payment terms and or sell certain products or services in the local currency of
such customers.  There can be no assurance that the Company's review of its
customers credit worthiness will be accurate or that such review will prevent
the Company from incurring significant losses if such customers default on their
payment obligations to the Company.  If the Company's international customers
default on payment terms or are unable to make payment to the Company in U.S.
dollars, the resulting payment shortages would have a material adverse effect on
the Company's business, results of operations and financial condition.

Fluctuations in Quarterly Results

  The Company has experienced, and expects to continue to experience,
significant fluctuations in sales and operating results from quarter to quarter.
Quarterly results fluctuate due to a number of factors, any of which could have
a material adverse effect on the Company's business, results of operations and
financial condition.  In particular, the Company's quarterly results of
operations can vary due to the timing, cancellation, or rescheduling of customer
orders and shipments; cancellations or rescheduling of customer orders and
shipments due to economic slowdowns in the Company's 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; variations in manufacturing
capacities, efficiencies and costs; the availability and cost of components;
capacity and production constraints associated with single source component
suppliers; the timing, availability and sale of new products by the Company;
product failures and associated in-field service support costs; changes in the
mix of products having differing gross margins; warranty expenses; changes in
average sales prices; long sales cycles associated with the Company's products;
and variations in product development and other operating expenses.  The
Company's quarterly revenues are also affected by volume discounts given to
certain customers for large volume purchases over a given period of time.  In
addition, the Company's quarterly results of operations are influenced by
competitive factors, including pricing, availability and demand for the
Company's and competitor's amplifier products.  A large portion of the Company's
expenses are fixed and difficult to reduce in a short period of time.  If net
sales do not meet the Company's expectations, the Company's fixed expenses would
exacerbate the effect of such net sales shortfall.  Furthermore, announcements
by the Company or its competitors regarding new products and technologies could
cause customers to defer purchases of the Company's products.  In addition,
while the Company receives periodic order forecasts from its major customers,
such customers have no binding obligation to purchase the forecasted amounts.
See "--Customer Concentration."  Order deferrals and cancellations by the
Company's customers, declining average sales prices, changes in the mix of
products sold, delays in the Company's introduction of new products and longer
than anticipated sales cycles for the Company's products have in the past
adversely affected the Company's quarterly results of operations.  There can be
no assurance that the Company's quarterly results of operations will not be
similarly adversely affected in the future.

                                       19
<PAGE>
 
  Due to the foregoing factors, the Company believes that period-to-period
comparisons of its operating results are not necessarily meaningful and that
such comparisons cannot be relied upon as indicators of future performance.
There can be no assurance that the Company will maintain its current
profitability in the future or that future revenues and operating results will
not be below the expectations of public market analysts and investors.  In
either case, the price of the Company's Common Stock could be materially
adversely affected.  See "--Possible Volatility of Stock Price."

Declining Average Sales Prices

  The Company has experienced, and expects to continue to experience, declining
average sales prices for its products.  Wireless infrastructure OEMs have come
under increasing price pressure from cellular service providers and PCS service
providers, which in turn has resulted in downward pricing pressure on the
Company's products.  In addition, competition among third-party suppliers has
increased the downward pricing pressure on the Company's products.  Since
wireless infrastructure OEMs frequently negotiate supply arrangements far in
advance of delivery dates, the Company must often commit to price reductions for
its products before it knows how, or if, cost reductions can be obtained.  In
addition, average sales prices are affected by price discounts negotiated for
large volume purchases by certain customers over a given period of time.  To
offset declining average sales prices, the Company believes that in the near
term it must achieve manufacturing cost reductions, and in the longer term the
Company must develop new products that incorporate advanced features and that
can be manufactured at lower cost or sold at higher average sales prices.  If,
however, the Company is unable to achieve such cost reductions or product
improvements, the Company's gross margins would decline, and such decline could
have a material adverse effect on the Company's business, results of operations
and financial condition.

  During the fourth quarter of 1997 and continuing through the first nine months
of 1998, countries in Asia, including South Korea, experienced weaknesses in
their currencies, banking systems and equity markets. This continued market
uncertainty and economic instability in South Korea has significantly impacted
demand for the Company's products within South Korea during the first nine
months of 1998.  As a result, the Company experienced postponed, rescheduled and
cancelled orders from its South Korean customers during the first three quarters
of 1998.  If the Company's remaining outstanding orders with its South Korean
customers or any other major customers are significantly reduced, delayed or
cancelled, the resulting loss of volume purchasing could adversely effect the
Company's ability to achieve manufacturing cost reductions in the form of price
discounts for large volume purchases of components.  Any reduction in the
Company's ability to obtain manufacturing cost reductions would have a material
adverse affect on the Company's business, results of operations and financial
condition.

  Due to the economic problems facing Asia, the Company currently anticipates
that demand for wireless infrastructure equipment throughout Asia will continue
to decrease during 1998 and remain reduced going forward. Any additional
reduction in demand could cause suppliers of wireless infrastructure equipment,
including RF power amplifiers, to increase their sales and marketing efforts in
the remaining markets outside of Asia.  Any possible increase in competition in
the sale of RF power amplifiers could cause increased price competition which
could lead to further declining average sales prices for the Company's products.
If the Company is unable to offset further declining average sales prices of its
products through cost reductions or product improvements, the Company's gross
margins will decline, and such decline could have a material adverse effect on
the Company's business, results of operations and financial condition.

  In the fourth quarter of 1996, the Company introduced single carrier
amplifiers for PCS networks, and such products accounted for an increased
percentage of the Company's net sales during 1997.   Since that time, sales of
single carrier amplifiers have been subject to intense price competition and
tend to carry lower gross margins than multi-carrier amplifier products.
Although the sale of PCS amplifiers accounted for a smaller percentage of sales
during the first nine months of 1998 compared to 1997, the Company believes that
single carrier amplifier products will eventually account for a larger portion
of the Company's net sales in 1998. In addition, the Company's recently
completed acquisition of the HP amplifier business includes all single carrier
business with no existing multi-carrier RF amplifier business.  Therefore, the
expected increase in the percentage of single carrier products in the Company's
overall sales mix will have an adverse effect on the Company's gross margins.
In addition, with the Company's reduced sales and production level of its single
carrier PCS products during the first nine months of

                                       20
<PAGE>
 
1998, the Company has had difficulty reducing the cost of materials for such
products. In the event that the Company is unable to reduce the manufacturing
costs of its single carrier amplifiers and such amplifiers account for an
increased percentage of net sales, the Company's overall gross margins will be
materially adversely affected.

Management of Growth; HP Acquisition; Dependence Upon Key Personnel

  The growth in the Company's business has placed, and is expected to continue
to place, a significant strain on the Company's management and operations.  The
Company's ability to compete effectively and to manage future expansion of its
operations, including its recent acquisition of the HP amplifier business, will
require the Company to continue to improve its financial and management
controls, reporting systems and procedures on a timely basis and effectively
expand, train and manage its work force.  In particular, the Company must
carefully manage production and inventory levels and product quality to meet
increasing product demand and new product introductions.  Inaccuracies in demand
forecasts or abrupt changes in customer orders in the environment in which the
Company operates can quickly result in either insufficient or excessive
inventories and disproportionate overhead expenses.  Any degradation in product
quality could adversely impact production rates, product delivery schedules and
overhead expenses associated with product support.  While the Company works to
implement a number of new financial and management controls and attempts to
improve reporting systems and procedures, there can be no assurance that such
actions will prevent the Company from encountering inappropriate inventory
levels, disproportionate overhead expenses and reductions in product quality and
production rates. During the last twelve months, the Company has hired a
significant number of employees, including engineers, production technicians and
sales and marketing employees to meet demand forecasts.  In the event that the
Company's new personnel are unable to work effectively as a team or achieve
desired production levels and product quality or if the Company's demand
forecasts are incorrect, or the Company's customers cancel or delay existing
orders, the Company's business, results of operations and financial condition
could be materially adversely affected.  There can be no assurance that the
Company will be able to continue to attract and retain qualified personnel
necessary for the development of its business.  In addition, there can be no
assurance that the Company will be able to effectively manage the HP business or
combine that business into its existing business. The Company's failure to
manage growth effectively or manage the HP acquisition would have a material
adverse effect on the Company's business, results of operations and financial
condition.

  Due to the specialized nature of the Company's business, the Company is highly
dependent on the continued services of, and on its ability to attract and
retain, qualified technical, marketing and managerial personnel.  Competition
for such 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 the Company's business, results of operations and financial
condition.

Dependence on Single Sources for Key Components

  The Company currently procures, and expects to continue to procure, certain
components from single source manufacturers due to unique component designs as
well as certain quality and performance requirements.  In addition, in order to
take advantage of volume pricing discounts, the Company purchases certain
customized components for its products from single sources.  The Company has
experienced, and may in the future experience, shortages of single-sourced
components.  In such event, the Company may have to make adjustments to both
product designs and production schedules.  If such single-sourced components
were to become unavailable in sufficient quantities or were to become available
only on terms unsatisfactory to the Company, the Company would be required to
purchase comparable components from other sources and "retune" its products to
function properly with the replacement components or redesign its products to
use other components, either of which could result in delays in production and
delivery.  If for any reason the Company could not obtain comparable replacement
components in sufficient volume from other sources or could not expeditiously
retune its products to operate with the replacement components, or redesign its
products to use other components, the Company's business, results of operations
and financial condition could be adversely affected.  In addition, if the
Company were unable to obtain sufficient quantities of single-sourced components
used in the manufacture of its RF power amplifiers, resulting delays or
reductions in product shipments could occur and could have a material adverse
affect on the Company's business, results of operations and financial condition,
including a material adverse effect on the Company's relationships with its
customers as well as potential customers.

                                       21
<PAGE>
 
  The amplifier business which the Company acquired from HP in October 1998
utilizes certain custom components manufactured by HP. While the Company has
secured supply commitments over the next twelve months, the Company is expected
to begin sourcing such components from new suppliers.  If the Company is
unsuccessful in adding such new suppliers, such failure could have a material
adverse effect on the Company's business, results of operations and financial
condition.

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

Competition

  The wireless infrastructure equipment industry is extremely competitive and is
characterized by rapid technological change, new product development, product
obsolescence, evolving industry standards and significant price erosion over the
life of a product.  The principal elements of competition in the Company's
market include performance, functionality, reliability, pricing, quality, the
ability to design products which can be efficiently manufactured in volume
production, time-to-market delivery capabilities and standards compliance.
While the Company believes that overall it competes favorably with respect to
the foregoing elements, there can be no assurance that it will be able to
continue to do so.

  Currently, the Company competes primarily with AML Communications, Inc., M/A-
COM, Inc. (a subsidiary of AMP, Inc.), Microwave Power Devices, Inc. and
Spectrian Corporation, in addition to the amplifier manufacturing operations
captive within certain of the leading wireless infrastructure OEMs. The Company
also competed with Avantek, a division of Hewlett-Packard Company, until the
Company's recent purchase of the assets of this division on October 9, 1998.
Certain of the Company's current and potential competitors have significantly
greater financial, technical, manufacturing, sales, marketing and other
resources than the Company and have achieved greater name recognition for their
existing products and technologies than has the Company.

  The Company's success depends in part upon the rate at which wireless
infrastructure OEMs incorporate the Company's products into their systems.  The
Company believes that a substantial portion of the present worldwide production
of amplifiers is captive within the internal manufacturing operations of a small
number of wireless infrastructure OEMs and that the amplifiers manufactured by
these OEMs are offered for sale as part of their wireless systems.  These OEMs
include, among others, LM Ericsson Telephone Company ("Ericsson"), Lucent
Technologies, Inc. ("Lucent"), Motorola Corporation ("Motorola"), Nokia
Corporation ("Nokia") and Northern Telecom Limited ("Nortel").  In addition,
Samsung, a significant customer of the Company, manufacturers power amplifiers
in addition to purchasing such components from the Company.  The Company
believes that these OEMs, as well as other customers of the Company,
continuously evaluate whether to manufacture their own RF power amplifiers
rather than purchase them from third-party vendors such as the Company.  These
and other large manufacturers of wireless infrastructure equipment could also
determine to offer and sell their power amplifiers to other OEMs or customers of
the Company and compete directly with the Company.  In addition, these or other
OEMs may enter into joint ventures or strategic relationships with the Company's
competitors, in which event the Company's ability to sell products to such OEMs
could be reduced or eliminated.  See "--Internal Amplifier Production
Capabilities of OEMs."

  The Company has experienced significant price competition and expects price
competition in the sale of RF power amplifiers to increase.  No assurance can be
given that the Company's competitors will not develop new technologies or
enhancements to existing products or introduce new products that will offer
lower prices or superior performance features.  The Company expects its
competitors to offer new and existing products at prices necessary to gain or
retain market share.  Several of the Company's competitors have substantial
financial resources, which may enable them to withstand sustained price
competition or a downturn in the market.  There can be no assurance that the
Company will be able to compete successfully in the pricing of its products, or
otherwise, in the future.

                                       22
<PAGE>
 
Rapid Technological Change; Dependence on New Products

  The markets in which the Company and its customers compete are characterized
by rapidly changing technology, evolving industry standards and communications
protocols, and continuous improvements in products and services.  The Company's
future success depends on its ability to enhance its current products and to
develop and introduce in a timely manner new products that keep pace with
technological developments, industry standards and communications protocols,
compete effectively on the basis of price, performance and quality, adequately
address OEM customer and end-user customer requirements and achieve market
acceptance.  The Company believes that to remain competitive in the future it
will need to continue to develop new products, which will require the investment
of significant financial resources in new product development. During the first
nine months of 1998, the Company continued to invest significant resources in
the development and manufacture of RF power amplifiers for PCS networks and
expects to continue to invest significant resources in this area.  There can be
no assurance that the deployment of PCS networks will not be delayed or that the
Company's PCS-based products will achieve widespread market acceptance or be
capable of being manufactured at competitive prices in sufficient volumes.  In
the event the Company's PCS products are not timely and economically developed
or are not produced in sufficient quantities or do not gain widespread market
acceptance, the Company's business, results of operations and financial
condition would be materially adversely affected.

  In addition to its PCS development efforts, the Company continues to develop
improvements and additions to its cellular line of amplifier products, including
the Company's multi-carrier linear cellular amplifiers. Any delays in
commencement of commercial shipments of these products may result in customer
dissatisfaction and delay or loss of product revenues, which could have a
material adverse effect on the Company's business, results of operations and
financial condition.  No assurance can be given that the Company's product
development efforts will be successful, or that its new products will achieve
customer acceptance or that its customers' products and services will achieve
market acceptance.  If a significant number of development projects do not
result in manufacturable new products or product enhancements within anticipated
time-frames, the Company's business, results of operations and financial
condition could be materially adversely affected.  Any failure by the Company to
anticipate or respond adequately to technological developments and customer
requirements, or any significant delays in product development, introduction or
deliveries, could result in a loss of competitiveness and reduced net sales.
While the Company maintains an active development program to attempt to improve
its product offerings, there can be no assurance that such efforts will be
successful or that other companies or institutions will not develop and
commercialize products based on new technologies that are superior in
performance or cost-effectiveness to the Company's products.  There can also be
no assurance that the Company's products will not be rendered obsolete by the
introduction and acceptance of new communications protocols.

  As part of the Company's recently announced acquisition of the HP amplifier
business, the Company intends to incorporate existing HP designs into its
product line as well as redesign certain HP products.  Any delays or failures in
the redesign of these products or the inability to produce commercial quantities
of such redesigned or new products based on such designs, could result in
customer dissatisfaction and the delay or loss of product revenues, which could
have a material adverse effect on the Company's business, results of operations
and financial condition. No assurance can be given that the Company's product
development efforts associated with the HP acquisition will be successful, or
that its new products will achieve customer acceptance or that its customers'
products and services will achieve market acceptance.  Any failure by the
Company to adequately manage the technical development efforts associated with
the HP acquisition could result in a loss of competitiveness and could have a
material adverse effect on the Company's business, results of operations and
financial condition.

No Assurance of Product Manufacturability, Quality or Reliability

  Manufacturing the Company's products is an extremely complex process and
requires significant time and expertise to tune the products to meet customers'
specifications.  The ability of the Company to cost-effectively manufacture its
RF power amplifier products in volume is substantially dependent upon the
Company's ability to tune these products to meet specifications in an efficient
manner.  In this regard, the Company is dependent upon its staff of trained
technicians and engineers.  If the Company is unable to design its products to
minimize the manual tuning process or if the Company were unable to attract
additional trained technicians, or were to lose the services of a number of its
trained technicians, the Company's business, results of operations and financial
condition would

                                       23
<PAGE>
 
be materially adversely affected. The Company has been required to replace
certain components in some of its products in accordance with warranty
provisions under which the products were sold. The Company recently introduced
single carrier RF power amplifiers for PCS networks and anticipates that it will
continue to introduce new-generation RF power amplifiers products for both
cellular and PCS networks. Companies involved in the development and manufacture
of new products which contain complex technologies often encounter difficulties
in performance and reliability and encounter delays in product introduction and
volume shipments. The Company believes that customers will demand increasingly
stringent product performance, quality and reliability. The Company has in the
past experienced, and may from time to time in the future experience, quality
problems with its products. If any of these problems were to occur on a
significant level, the Company could experience increased costs, delays in or
cancellations of, or rescheduling of, orders or deliveries and product returns,
any of which could damage relationships with current customers and have a
material adverse effect on the Company's business, results of operations and
financial condition. There can be no assurance that the Company's product
designs will continue to be successful or will keep pace with technological
developments, evolving industry standards and communications protocols, and
allow for continuous improvements in product quality and meet the quality
standards of customers. Any potential design problems could damage relationships
with both existing and prospective customers and, in particular, could limit the
Company's ability to market its products to large OEMs, many of which
manufacture power amplifiers internally and have stringent quality control
standards. See "--Internal Amplifier Production Capabilities of OEMs."

  As part of the Company's acquisition of the HP amplifier business, the Company
will be required to master and utilize the complex manufacturing processes
utilized by HP.  There can be no assurance that the Company will be successful
in handling the HP manufacturing processes.  If the Company is unsuccessful in
reproducing or managing the HP manufacturing processes, such failure could have
a material adverse effect on the Company's business, results of operations and
financial condition.

Internal Amplifier Production Capabilities of OEMs

  Many of the leading wireless infrastructure equipment manufacturers internally
manufacture their own RF power amplifiers, and the Company believes that its
existing customers continuously evaluate whether to manufacture their own
amplifiers.  Certain customers of the Company have produced internally designed
amplifiers in an attempt to replace products manufactured by the Company.  The
Company expects that this practice will continue.  In addition, LGIC, one of the
Company's customers, has entered into a joint venture manufacturing arrangement
with one of the Company's competitors.  In the event that customers of the
Company do manufacture their own amplifiers, such customers could reduce or
eliminate their purchases of the Company's products.  There can be no assurance
that the Company's current customers will continue to rely, or expand their
reliance, on the Company as an external source of supply for their RF power
amplifiers, or that other wireless telecommunications OEMs such as Lucent,
Ericsson, Motorola, Nokia and Nortel will become and remain customers of the
Company.  OEMs with internal manufacturing capabilities could also sell
amplifiers externally to other OEMs, thereby competing directly with the
Company.  In addition, even if the Company were successful in selling its
products to these OEMs, it is anticipated that such OEMs would demand price and
other concessions based on their ability to manufacture amplifiers internally.
There can be no assurance that the Company will continue to enter into supply
contracts with OEMs on terms that are acceptable to the Company, if at all, or
that such contracts will not be terminated on short notice.  Any significant
loss of sales to current customers, not offset by sales to other customers,
would have a material adverse effect on the Company's business, results of
operations and financial condition.  If, for any reason, the Company's major
customers decide to produce their RF power amplifiers internally or through
joint ventures with other competitors, or require the Company to participate in
joint venture manufacturing with such OEM, the Company's business, results of
operations and financial condition could be materially adversely affected.

  The Company's customers and other wireless infrastructure equipment
manufacturers are protective of their intellectual property, which may
contribute to certain manufacturers deciding to not seek RF power amplifiers
from external sources.  While the Company takes measures to ensure the
confidentiality of intellectual property disclosed to the Company by its
customers or developed by the Company for such customers, the appearance of a
close working relationship with a particular customer may adversely affect the
Company's ability to establish or maintain a relationship with, or sell products
to, competitors of the particular customer.  If the Company's major customers

                                       24
<PAGE>
 
decide not to purchase products from the Company due to the Company's
relationship to other customers, the Company's business, results of operations
and financial condition could be materially adversely affected.

Proprietary Technology; Risk of Third-Party Claims of Infringement

  The Company relies primarily upon trade secrets to protect its intellectual
property.  The Company generally enters into confidentiality and non-disclosure
agreements with its employees and limits access to and distribution of its
proprietary information.  In addition, the Company has applied for several U.S.
and international patents for its proprietary  technology and regularly examines
various aspects of its technology for possible patent applications.  During the
third quarter of 1998, the Company was granted its first U.S. patent covering an
aspect of its multi-carrier technology.  The Company believes that its success
depends upon the knowledge and experience of its management and technical
personnel and its ability to market its existing products and to develop new
products.

  The Company's ability to compete successfully and achieve future revenue
growth will depend, in part, on its ability to protect its proprietary
technology and operate without infringing upon the rights of others.  There can
be no assurance that the Company will be able to successfully protect its
intellectual property or that the Company's intellectual property or proprietary
technology will not otherwise become known or be independently developed by
competitors.  In addition, the laws of certain countries in which the Company's
products are or may be sold may not protect the Company's products and
intellectual property rights to the same extent as the laws of the United
States.  The inability of the Company to protect its intellectual property and
proprietary technology could have a material adverse effect on its business,
results of operations and financial condition.  As the number of patents,
copyrights and other intellectual property rights in the Company's industry
increases, and as the coverage of these rights and the functionality of the
products in the market further overlap, the Company believes that its products
may increasingly become the subject of infringement claims.  The Company may in
the future be notified that it is infringing upon certain patent or other
intellectual property rights of others.  Although the Company has not received
any such notification to date and there are no pending or threatened
intellectual property lawsuits against the Company, there can be no assurance
that such litigation or infringement claims will not occur in the future.  Such
litigation or claims could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's business,
results of operations and financial condition.  A third party claiming
infringement may also be able to obtain an injunction or other equitable relief,
which could effectively block the ability of the Company or its customers to
distribute, sell or import into the United States allegedly infringing products.
If it appears necessary or desirable, the Company may seek licenses under
patents or other rights from third parties covering intellectual property that
the Company is allegedly infringing.  No assurance can be given, however, that
any such licenses could be obtained on terms acceptable to the Company, if at
all.  The failure to obtain the necessary licenses or other rights could have a
material adverse effect on the Company's business, results of operations and
financial condition.

Risks Associated with Developing Technologies; Product Liability

  If wireless telecommunications systems or other systems or devices that rely
on or incorporate the Company's products are determined, perceived or alleged to
create a health risk, the Company could be named as a defendant, and held
liable, in product liability lawsuits commenced by individuals alleging that the
Company's products harmed them.  The occurrence of any such event could have a
material adverse effect on the Company's business, results of operations and
financial condition.  Any alleged health or environmental risk could also lead
to a delay or prohibition against the installation of wireless networks which
could have a material adverse effect on the Company's business, results of
operations and financial condition.  In addition, an inability to maintain
insurance at an acceptable cost or to otherwise protect against potential
product liability could inhibit the commercialization of the Company's products
and have a material adverse effect on the Company's business, results of
operations and financial condition.  Further, the installation of base stations
for wireless networks may be delayed or prohibited by various environmental
regulations.  Any such delay or prohibition would have a material adverse effect
on the Company's business, results of operations and financial condition.

                                       25
<PAGE>
 
Environmental Regulations

  The Company is subject to a variety of local, state and federal government
regulations relating to the storage, discharge, handling, emission, generation,
manufacture and disposal of toxic or other hazardous substances used to
manufacture the Company's products.  Certain of the Company's products are also
subject to regulation of emissions by the FCC and similar government agencies.
The Company believes that it is currently in compliance in all material respects
with such regulations and that it has obtained all necessary environmental
permits and licenses to conduct its business.  The failure to comply with
current or future regulations could result in the imposition of substantial
fines on the Company, suspension of production, alteration of its manufacturing
processes or cessation of operations.  Corrective action may require the Company
to acquire expensive remediation equipment or to incur substantial expenses.
Any failure by the Company to control the use, disposal, removal or storage of,
or to adequately restrict the discharge of, or assist in the cleanup up,
hazardous or toxic substances, could subject the Company to significant
liabilities, including joint and several liability under certain statutes.  The
imposition of such liabilities could materially adversely affect the Company's
business, results of operations and financial condition.  In addition, the
installation of base stations by wireless service providers may be delayed or
restricted by various environmental regulations, land use restrictions and
zoning ordinances.  Any such delay or restriction could have a material adverse
effect on the Company's business, results of operations and financial condition.

Government Regulation of Communications Industry

  Radio frequency transmissions and emissions, and certain equipment used in
connection therewith, are regulated in the United States, Canada and
internationally.  Regulatory approvals generally must be obtained by the Company
in connection with the manufacture and sale of its products, and by the
Company's customers to operate the Company's products.  The FCC has adopted new
regulations that impose more stringent radio frequency emissions standards on
the communications industry and there can be no assurance that the Company and
its customers will not be required to alter the manner in which radio signals
are transmitted or otherwise alter the equipment transmitting such signals,
which could materially adversely affect the Company's products and markets. The
Company is also subject to regulatory requirements in international markets
where the Company is less prominent than local competitors and may have fewer
opportunities to participate in the formation of regulatory and standards
policies.  The enactment by federal, state, local or international governments
of new laws or regulations or a change in the interpretation of existing
regulations could adversely affect the market for the Company's products.
Although recent liberalization of international communications industries along
with recent radio frequency spectrum allocations made by the FCC have increased
the potential demand for the Company's products by providing users of those
products with opportunities to establish new PCS networks, there can be no
assurance 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 the
Company. The increasing demand for wireless communications has exerted pressure
on regulatory bodies worldwide to adopt new standards for such products,
generally following extensive investigation and deliberation over competing
technologies.  The delays inherent in this governmental approval process have in
the past caused, and may in the future cause, the cancellation, postponement or
rescheduling of the installation of communications systems by the Company's
customers.  These delays could have a material adverse effect on the Company's
business, results of operations and financial condition.

Possible Volatility of Stock Price

  The stock market has from time to time experienced significant price and
volume fluctuations that are 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 have
and may continue to adversely affect the market price of the Company's Common
Stock.  Factors such as fluctuations in the Company's results of operations,
failure of such results of operations to meet the expectations of stock market
analysts and investors, changes in the economic outlook of the markets into
which the Company sells it products (such as South Korea), changes in stock
market analyst recommendations regarding the Company and or its competitors, the
timing and announcements of technological innovations or new products by the
Company, or its competitors, developments with respect to patents and
proprietary rights, timing and announcements of developments related to the
Company's customers, results of operations of certain of the Company's
competitors, government regulation, political or

                                       26
<PAGE>
 
economic instability in countries in which the Company sells its products,
changes in the wireless communications industry generally and general market
conditions may have a significant adverse effect on the market price of the
Company's Common Stock.

                                       27
<PAGE>
 
                          PART II.  OTHER INFORMATION
                                        
Item 1.   Legal Proceedings

  The Company may be subject, from time to time, to various legal proceedings
relating to claims arising out of its operations in the ordinary course of its
business.  On July 16, 1998, a lawsuit was filed in the United States District
Court for the Central District of California, Southern Division, by a
shareholder of the Company, against the Company and certain of its present
directors and officers.  A similar suit was filed on July 29, 1998. The
shareholder in each suit purports to represent a class consisting of all persons
who purchased Common Stock of the Company between June 4, 1997 and January 16,
1998.  These lawsuits allege, among other things, that the defendants violated
federal securities laws by making alleged misrepresentations which the
plaintiffs claim were designed to artificially inflate the Company's stock price
and enable the individual defendants to sell their stock at artificially
inflated prices.  The Company, its directors and officers deny the allegations
of wrong doing in the complaints and intend to vigorously defend against the
claims made in the lawsuits.

  The Company is not currently a party to any other legal proceedings, the
adverse outcome of which, individually or in the aggregate, management believes
would have a material adverse effect on the business, financial condition or
results of operations of the Company.

Item 2.   Submission of Matters to a Vote of Security Holders

  The Company's Annual Meeting of Shareholders was held on August 4, 1998 in
Irvine, California.  A quorom was declared present for the meeting.  The
following matters were submitted to a vote of security holders, and all
proposals were approved by the majority of those voting.

  (1)  The election of the following 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.
<TABLE> 
       <C>                  <S>
       Gregory M. Avis      There were 15,706,408 votes for and 142,745 votes withheld.
       John L Clendenin     There were 15,706,308 votes for and 142,845 votes withheld.
       Alfonso G. Cordero   There were 15,706,408 votes for and 142,745 votes withheld.
       Bruce C. Edwards     There were 15,706,408 votes for and 142,745 votes withheld.
       David L George       There were 15,706,408 votes for and 142,745 votes withheld.
       Eugene Goda          There were 15,706,408 votes for and 142,745 votes withheld.
       Andrew J. Sukawaty   There were 15,693,208 votes for and 155,945 votes withheld.
</TABLE> 
  (2)  An amendment to the Company's 1996 Stock Incentive Plan to increase the
       number of shares of Common Stock issuable thereunder from 1,500,000 to
       3,000,000.  The proposal was approved by the shareholders.

       There were 7,484,554 votes cast in favor, 2,296,699 votes opposed and
       249,687 votes abstaining.

  (3)  An amendment to the Company's 1996 Director Stock Option Plan to increase
       the number of shares of Common Stock issuable thereunder from 200,000 to
       400,000. The proposal was approved by the shareholders.

       There were 8,062,966 votes cast in favor, 1,810,058 votes opposed and
       250,712 votes abstaining.

                                       28
<PAGE>

Item 5.   Other Information

      Any shareholder desiring to submit a proposal for action at the 1999
Annual Meeting of Shareholders and possible inclusion in the Company's Proxy
Statement with respect to such meeting should arrange for such proposal to be
delivered to the Company's offices, Attn: Vice President, Finance and Secretary,
Powerwave Technologies, Inc., 2026 McGaw Avenue, Irvine, California 92614, no
later than February 18, 1999 in order to be considered for possible inclusion in
the Company's Proxy Statement relating to the Annual Meeting of Shareholders.
Matters pertaining to such proposals, including the number and length thereof,
eligibility of persons entitled to have such proposals included and other
aspects are regulated by the Securities Exchange Act of 1934, Rules and
Regulations of the Securities and Exchange Commission and other laws and
regulations to which interested persons should refer.

      On May 21, 1998 the Securities and Exchange Commission adopted an
amendment to Rule 14a-4, as promulgated under the Securities and Exchange Act of
1934, as amended. The amendment to Rule 14a-4(c)(1) governs the Company's use of
its discretionary proxy voting authority with respect to a shareholder proposal
which is not addressed in the Company's proxy statement. The new amendment
provides that if a proponent of a proposal fails to notify the Company at least
45 days prior to the month and day of mailing of the prior year's proxy
statement, then the Company will be allowed to use its discretionary voting
authority when the proposal is raised at the meeting.

     With respect to the Company's 1999 Annual Meeting of Stockholders, if the 
Company is not provided notice of a stockholder proposal, which the stockholder 
has not previously sought to include in the Company's proxy statement, by May 4,
1999, the Company will be allowed to use its voting authority as outlined.
 
Item 6.   Exhibits and Reports on Form 8-K

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

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

11.1    Computation of net income per share.

27.1    Financial Data Schedule.


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

                                       29
<PAGE>
 
                                   SIGNATURES
                                        
  Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                               POWERWAVE TECHNOLOGIES, INC.

Date: November 11, 1998                        By: /s/  Kevin T. Michaels
                                               -----------------------------
                                                        Kevin T. Michaels
                                                Vice President, Finance and
                                                Chief Financial Officer
 
 

                                       30