<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 April 2, 2000

                                      OR

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

     For the transition period from __________ to __________

                       Commission File Number 000-21507

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

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

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

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

                            ______________________


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

     As of May 4, 2000 the number of outstanding shares of Common Stock, par
value $.0001 per share, of the Registrant was 20,431,029.

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

                          POWERWAVE TECHNOLOGIES, INC.
                                     INDEX

                                                                           Page
                                                                          ------
Part I.  Financial Information

     Item 1.  Financial Statements

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

          Consolidated Statements of Operations (Unaudited) for the
            three months ended April 2, 2000 and April 4, 1999             4

          Consolidated Statements of Cash Flows (Unaudited) for the
            three months ended April 2, 2000 and April 4, 1999             5

          Notes to Consolidated Financial Statements (Unaudited)           6-9


     Item 2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                    10-25

     Item 3.  Quantitative and Qualitative Disclosures About Market Risk   26


Part II.  Other Information


     Item 6.  Exhibits and Reports on Form 8-K                             27



Signatures                                                                 28


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

                                       2
<PAGE>

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

<TABLE>
<CAPTION>
                                                                               April 4,       January 2,
                                                                                 2000            2000
                                                                             ------------    ------------
<S>                                                                          <C>             <C>
ASSETS:                                                                       (Unaudited)

Current Assets:
  Cash and cash equivalents................................................     $ 83,795        $ 76,671
  Accounts receivable, net of allowance for doubtful accounts of $3,931 and
   $2,988 at April 2, 2000 and January 2, 2000, respectively...............       59,884          47,476
  Inventories, net.........................................................       31,521          31,696
  Prepaid expenses and other current assets................................        2,785           2,449
  Notes receivable.........................................................           70           7,045
  Prepaid income taxes.....................................................        2,943              --
  Deferred tax assets......................................................        5,888           5,888
                                                                                --------        --------
     Total current assets..................................................      186,886         171,225

Property and equipment.....................................................       48,742          45,286
Less accumulated depreciation and amortization.............................      (14,330)        (12,354)
                                                                                --------        --------
  Net property and equipment...............................................       34,412          32,932
                                                                                --------        --------
Intangible assets, net.....................................................       13,452          14,344
Deferred tax assets........................................................        4,507           4,507
Other non-current assets...................................................        2,399              30
                                                                                --------        --------
TOTAL ASSETS...............................................................     $241,656        $223,038
                                                                                ========        ========

LIABILITIES AND SHAREHOLDERS' EQUITY:

Current Liabilities:
  Accounts payable.........................................................     $ 28,472        $ 30,128
  Accrued expenses and other liabilities...................................       17,889          19,399
  Current portion of long-term debt........................................           46             125
  Income taxes payable.....................................................           --           3,007
                                                                                --------        --------
     Total current liabilities.............................................       46,407          52,659

Long-term debt, net of current portion.....................................           50              --
Other non-current liabilities..............................................          628             600
                                                                                --------        --------
     Total liabilities.....................................................       47,085          53,259
                                                                                --------        --------
Shareholders' Equity:
  Preferred Stock, $.0001 par value, 5,000 shares authorized and no shares
    Outstanding............................................................           --              --
  Common Stock, $.0001 par value, 40,000 shares authorized, 20,391 shares
    issued and outstanding at April 2, 2000 and 20,163 shares issued and
    outstanding at January 2, 2000.........................................      135,251         120,785
  Retained earnings........................................................       59,320          48,994
                                                                                --------        --------
     Total shareholders' equity............................................      194,571         169,779
                                                                                --------        --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................................     $241,656        $223,038
                                                                                ========        ========
</TABLE>

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

                                       3
<PAGE>

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

<TABLE>
<CAPTION>

                                                          Three Months Ended
                                                      --------------------------
                                                        April 2,      April 4,
                                                          2000          1999
                                                      ------------  ------------
<S>                                                   <C>           <C>
Net sales............................................   $103,854       $56,024
Cost of sales........................................     71,397        41,010
                                                        --------       -------
Gross profit.........................................     32,457        15,014
Operating expenses:
  Sales and marketing................................      5,065         3,578
  Research and development...........................      9,008         5,295
  General and administrative.........................      3,585         2,691
                                                        --------       -------
Total operating expenses.............................     17,658        11,564

Operating income.....................................     14,799         3,450
Other income (expense), net..........................      1,210          (219)
                                                        --------       -------

Income before income taxes...........................     16,009         3,231
Provision for income taxes...........................      5,683         1,179
                                                        --------       -------

Net income...........................................   $ 10,326       $ 2,052
                                                        ========       =======
Basic earnings per share.............................   $   0.51       $  0.11
                                                        ========       =======
Diluted earnings per share...........................   $   0.48       $  0.11
                                                        ========       =======
Basic weighted average common shares.................     20,312        18,005
                                                        ========       =======
Diluted weighted average common shares...............     21,428        18,584
                                                        ========       =======
</TABLE>

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

                                       4
<PAGE>

                          POWERWAVE TECHNOLOGIES, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                        Three Months Ended
                                                                               ----------------------------------
                                                                                  April 2,            April 4,
                                                                                     2000               1999
                                                                               ---------------    ---------------
<S>                                                                            <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income................................................................          $ 10,326           $  2,052
  Adjustments to reconcile net income to net cash provided by
  operating activities:
    Depreciation and amortization...........................................             3,401              2,175
    Change in provision for doubtful accounts...............................               943                 --
    Change in provision for inventory reserves..............................             1,704                200
    Compensation costs related to stock options.............................                22                  8
    Loss on disposal of property, plant and equipment.......................                57                 --
  Changes in current assets and liabilities:
    Accounts receivable.....................................................           (13,351)             1,233
    Inventories.............................................................            (1,529)            (2,198)
    Prepaid expenses and other current assets...............................              (336)                70
    Prepaid income taxes....................................................            (2,943)                --
    Accounts payable........................................................            (1,656)             2,691
    Accrued expenses and other liabilities..................................            (1,510)              (470)
    Income taxes payable....................................................             7,701                973
  Other non-current assets..................................................            (2,369)               175
  Other non-current liabilities.............................................                28                 32
                                                                               ---------------    ---------------
      Net cash provided by operating activities.............................               488              6,941

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment........................................            (3,984)            (1,602)

CASH FLOW FROM FINANCING ACTIVITIES:
  Payment received on notes receivable......................................             6,975                 --
  Principal payments on long-term debt......................................               (89)           (23,625)
  Issuance of Common Stock..................................................               654             58,129
  Proceeds from exercise of stock options...................................             3,080                858
                                                                               ---------------    ---------------
      Net cash provided by financing activities.............................            10,620             35,362
                                                                               ---------------    ---------------
NET INCREASE IN CASH AND CASH EQUIVALENTS...................................             7,124             40,701
CASH AND CASH EQUIVALENTS, beginning of period..............................            76,671             13,307
                                                                               ---------------    ---------------
CASH AND CASH EQUIVALENTS, end of period....................................          $ 83,795           $ 54,008
                                                                               ===============    ===============

SUPPLEMENTAL CASH FLOW INFORMATION:
  Cash paid for:
    Interest................................................................          $      9           $    936
                                                                               ===============    ===============
    Income taxes............................................................          $    925           $    258
                                                                               ===============    ===============

NON CASH ITEMS:
    Tax benefit related to stock option exercises...........................          $ 10,492           $  1,529
                                                                               ===============    ===============
    Tax benefit related to issuance of Common Stock under the Employee
     Stock Purchase Plan....................................................
                                                                                      $    216           $     81
                                                                               ===============    ===============
  Acquisition of property and equipment through capital leases..............          $     60           $   --
                                                                               ===============    ===============
</TABLE>

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

                                       5
<PAGE>

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


Basis of Presentation

  The accompanying consolidated financial statements have been prepared by
Powerwave Technologies, Inc. ("Powerwave" or the "Company") without audit
(except for balance sheet information as of January 2, 2000) in accordance with
generally accepted accounting principles for interim financial information and
with instructions to Form 10-Q and Article 10 of Regulation S-X.  In the opinion
of management, all adjustments (consisting only of normal recurring accruals)
considered necessary for a fair presentation have been included.  The
accompanying consolidated financial statements do not include certain footnotes
and financial presentations normally required under generally accepted
accounting principles and, therefore, should be read in conjunction with the
audited consolidated financial statements included in the Company's Annual
Report on Form 10-K for the fiscal year ended January 2, 2000.  The accounting
policies followed by the Company are set forth in Note 2 of the Notes to
Consolidated Financial Statements in the Company's Annual Report on Form 10-K
for the fiscal year ended January 2, 2000.

  The results of operations for the three months ended April 2, 2000, are not
necessarily indicative of the results to be expected for the entire fiscal year
ended December 31, 2000 (fiscal year 2000).  For further information on
additional factors that may affect future results, please refer to the
"Management Discussion and Analysis of Financial Condition and Results of
Operations" under Item 2 and the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended January 2, 2000.

Earnings Per Share

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

  The following details the calculation of basic and diluted earnings per share:

<TABLE>

                                                                   April 2,                    April 4,
                                                                     2000                        1999
                                                               ----------------            ----------------
<S>                                                            <C>                         <C>
                                                                (In thousands except for per share amounts)
  Basic:....................................................
    Basic weighted average common shares....................             20,312                      18,005
    Net income..............................................            $10,326                     $ 2,052
                                                                        -------                     -------
    Basic earnings per share................................            $  0.51                     $  0.11
                                                                        =======                     =======

  Diluted:
    Basic weighted average common shares....................             20,312                      18,005
    Potential common shares.................................              1,116                         579
                                                                        -------                     -------
    Diluted weighted average common shares..................             21,428                      18,584
    Net income..............................................            $10,326                     $ 2,052
                                                                        -------                     -------
    Diluted earnings per share..............................            $  0.48                     $  0.11
                                                                        =======                     =======
</TABLE>


New Accounting Pronouncements

                                       6
<PAGE>

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

Segment Information

  Utilizing the management approach, the Company has broken down its business
based upon the RF frequency in megahertz ("MHz"), in which the product is
utilized in, i.e., 800 to 1000 MHz ("Cellular"), 1800 to 2000 MHz  ("PCS"), 400
to 450 MHz ("LMR") and over 2000 MHz ("Other").  We do not allocate operating
expenses to these segments, nor do we allocate specific assets to these
segments. Therefore, segment information reported includes only net sales, cost
of sales and gross profit (loss).

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

                                      Cellular     PCS         LMR         Other     Total
                                     ---------   -------   -----------   ---------  --------
<S>                                  <C>         <C>       <C>           <C>        <C>
Three months ended April 2, 2000
Net sales.........................     $75,586   $28,268   $      --     $     --   $103,854
Cost of sales.....................     $48,824    22,573          --           --     71,397
                                       -------   -------   ----------    ---------  --------
Gross profit......................     $26,762   $ 5,695   $      --     $     --   $ 32,457
                                       =======   =======   ==========    =========  ========

Three months ended April 4, 1999
Net sales.........................     $38,953   $16,802        $ 269    $     --   $ 56,024
Cost of sales.....................      27,933    12,134          943          --     41,010
                                       -------   -------   ----------    ---------  --------
Gross profit (loss)...............     $11,020   $ 4,668        $(674)   $     --   $ 15,014
                                       =======   =======   ==========    =========  ========
</TABLE>

  The following schedule presents an analysis of Powerwave's net sales based
upon the geographic location to which a product was shipped.  North American
sales include sales to the United States, Canada and Mexico.  Asian sales
include sales to South Korea and all locations in Asia.  Europe and other
International sales include sales to Europe and all other foreign countries.
Shipments to Canada were $24.3 million and $24.0 million for the quarters ended
April 2, 2000 and April 4, 1999, respectively.  Shipments to Mexico were $2.6
million and $0.0 million for the quarters ended April 2, 2000 and April 4, 1999,
respectively.  For the quarters ended April 2, 2000 and April 4, 1999, shipments
to South Korea were $7.8 million and $9.8 million, respectively.

<TABLE>
<CAPTION>

                                   North             Europe and Other
                                 American    Asia     International       Total
                                 --------   ------    -------------     --------
<S>                              <C>        <C>      <C>                <C>
   Sales for the three months
    ended April 2, 2000.......   $81,678    $7,831        $14,345       $103,854
   Sales for the three months
    ended April 4, 1999.......   $39,294    $9,837        $ 6,893       $ 56,024
</TABLE>

  Total accounts receivable as of April 2, 2000, include 76% from United States
based customers, 15% from customers located in France and 5% from customers
located in South Korea.

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

  The Company's product sales have historically been concentrated in a small
number of customers.  During the quarter ended April 2, 2000 sales to five
customers totaled $84.5 million, or approximately 81% of sales.  For the quarter
ended April 4, 1999 sales to four customers totaled $48.3 million, or
approximately 86% of sales.

                                       7
<PAGE>

Stock Option Plans

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

<TABLE>
<CAPTION>
                                                                           Number of       Number of
                                                                            Options         Options
                                                                          Exercisable    Available for
                                     Number of           Price per           as of        Grant as of
                                       Shares             Share          April 2, 2000   April 2, 2000
                                     ----------   -------------------    -------------   -------------
<S>                                  <C>          <C>                    <C>             <C>
     Balance at January 2, 2000      2,487,851         $ 2.47-$ 76.94
      Granted                          269,300         $46.25-$158.94
      Exercised                       (326,218)        $ 2.47-$ 31.75
      Cancelled                        (13,152)        $ 4.00-$ 99.94
                                     ---------
     Balance at April 2, 2000        2,417,781         $ 2.47-$158.94        436,579         710,977
                                     =========                               =======         =======
</TABLE>

  During the quarters ended April 2, 2000 and April 4, 1999, the Company
recorded compensation expense related to stock options of approximately $22 and
$8, respectively.  The remaining unamortized compensation expense as of April
2, 2000 was approximately $212 and will be amortized through September 2003.

Employee Stock Purchase Plan

  The sixth offering under the Powerwave's Employee Stock Purchase Plan (the
"Purchase Plan") concluded on January 31, 2000, with 21,537 shares of the
Company's Common Stock purchased under the Purchase Plan at a price per share of
$30.38.  At April 2, 2000 there were rights to purchase approximately 5,100
shares of Common Stock outstanding under the Purchase Plan's seventh offering,
which will conclude on July 31, 2000.

The HP Acquisition

  On October 9, 1998, Powerwave completed the purchase of Hewlett-Packard
Company's ("HP") RF power amplifier business and its manufacturing and research
and development facility in Folsom, California and its production equipment and
manufacturing lines located in Malaysia, for a total purchase price of
approximately $65.9 million (the "HP Acquisition"). Approximately $57.4 million
of the total purchase price was paid to HP in cash, approximately $1.1 million
was in acquisition costs and the balance related to assumed liabilities. This
business was part of HP's Wireless Infrastructure Division and was focused on
the design and manufacture of RF power amplifiers for wireless communications,
including cellular, PCS and wireless local loop ("WLL"). Since the acquisition
date, we have transferred both the Folsom and Malaysian production equipment and
manufacturing lines to our Irvine, California facility. We have sold the Folsom
facility and have established a new research and development facility in El
Dorado Hills, California.

  The HP Acquisition was accounted for as a purchase and, accordingly, the total
purchase price was allocated to the assets acquired and liabilities assumed at
their estimated fair values in accordance with Accounting Principles Board
Opinion No. 16.  The purchase price was allocated to tangible assets acquired of
approximately $34.7 million, developed technology of $11.5 million, in-process
research and development of $12.4 million, other intangible assets of $2.7
million and goodwill of approximately $4.6 million.  The Company's consolidated
financial statements for the year ended January 3, 1999 include a charge of
$12.4 million for the write-off of acquired in-process research and development
expenses associated with the HP Acquisition.  The in-process research and
development expenses arose from new product projects that were under development
at the date of the acquisition and expected to eventually lead to new products
but had not yet established technological feasibility and for which no future
alternative use was identified.  The valuation of the in-process research and
development projects was based upon the discounted expected future net cash
flows of the products over the products expected life, reflecting the estimated
stage of completion of the projects and an estimate of the costs to complete the
projects.  New product development projects underway at HP at the time of the
acquisition included, among others, single carrier CDMA technology, ultra-linear
technology for use in multi-carrier RF power amplifiers and advanced linear

                                       8
<PAGE>

power module technology for use in next generation wireless communications. We
estimated that these projects were approximately 75% complete at the date of the
acquisition in October 1998 and estimated that the cost to complete these
projects would aggregate approximately $2.5 million and would be incurred over a
two-year period. We discontinued further development on the single carrier CDMA
project as of January 2, 2000. We incurred approximately $0.4 million of
research and development expenses related to the remaining two projects during
the first quarter of 2000, and since the date of the acquisition have incurred a
total of $2.2 million of research and development expenses related to all three
projects. As of April 2, 2000, we believe that the remaining development
projects are approximately 95% complete. For more information on the HP
Acquisition, please refer to Note 17 of Notes to Consolidated Financial
Statements in the Company's Annual Report on Form 10-K for the fiscal year ended
January 2, 2000.

Subsequent Event

  On April 26, 2000, Powerwave's shareholders approved an amendment to the
Company's Amended and Restated Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 40,000,000 to 135,000,000 and
effect a three-for-one stock split of Powerwave's Common Stock.  The effective
date of the three-for-one stock split is May 15, 2000. Powerwave's Common Stock
will begin trading at its split-adjusted price on the Nasdaq market on May 16,
2000.  Share and per share amounts included in this Form 10-Q do not reflect the
effect of the amendment to the Company's Amended and Restated Certificate of
Incorporation.
                                       9
<PAGE>

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

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

Results of Operations

  The following table summarizes our results of operations as a percentage of
net sales for the three months ended April 2, 2000 and April 4, 1999.
<TABLE>
<CAPTION>
                                      As a Percentage of Net Sales
                                           Three Months Ended
                                     ------------------------------
                                         April 2,        April 4,
                                            2000            1999
                                           -----           -----
<S>                                  <C>            <C>
Net sales                                  100.0%          100.0%
Cost of sales                               68.8            73.2
                                           -----           -----
Gross profit                                31.2            26.8
Operating expenses:
     Sales and marketing                     4.9             6.4
     Research and development                8.7             9.4
     General and administrative              3.4             4.8
                                           -----           -----
Total operating expenses                    17.0            20.6
                                           -----           -----

Operating income                            14.2             6.2
Other income (expense), net                  1.2            (0.4)
                                           -----           -----

Income before income taxes                  15.4             5.8
Provision for income taxes                   5.5             2.1
                                           -----           -----

Net income                                   9.9%            3.7%
                                           =====           =====

</TABLE>
Three months ended April 2, 2000 and April 4, 1999

Net Sales

  Our net sales are derived primarily from the sale of RF power amplifiers for
use in wireless communications networks.  Sales increased by 85.4% to $103.9
million for the quarter ended April 2, 2000 from $56.0 million for the quarter
ended April 4, 1999.  The growth in revenue was due to increased sales of our
cellular and PCS products.  For the quarter ended April 2, 2000, total sales of
cellular products (including both single and multi-carrier RF power amplifiers
and racks) accounted for approximately 73% of revenues or $75.6 million,
compared to approximately 70% of revenues or $39.0 million for the quarter ended
April 4, 1999.  Sales of RF power amplifiers and associated products for PCS
networks (consisting mainly of single carrier RF power amplifiers) accounted for
approximately 27% of revenues or $28.3 million for the first quarter of 2000,
compared to approximately 30% or $16.8 million for the first quarter in 1998.
Sales of Land Mobile Radio ("LMR") amplifiers accounted for no revenues for the
quarter ended April 2, 2000, compared to approximately 0.5% of revenues or $0.3
million for the quarter ended April 4, 1999.  The reduction of sales of LMR
products is due to both our divestiture of certain LMR products and our
strategic decision to no longer focus resources on this area.

  Total international sales (excluding North American sales) accounted for
approximately 21% of revenues or $22.2 million for the quarter ended April 2,
2000, compared with approximately 30% or $16.7 million for the quarter ended
April 4, 1999. Total Asian sales (which predominately includes sales to South
Korea) decreased to $7.8 million for the quarter ended April 2, 2000 from $9.8
million for the quarter ended April 4, 1999.  Total Asian sales accounted for
approximately 8% of revenues in the first quarter of 2000 compared to
approximately 18% of

                                       10
<PAGE>

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

  For the first quarter ended April 2, 2000, total sales to Nortel Networks
Corporation and related entities ("Nortel") accounted for approximately 41% of
revenues and sales to LM Ericsson Telephone Company ("Ericsson") accounted for
over 10% of the revenues for the quarter.  We cannot guarantee that we will
continue to be successful in attracting new customers or retaining or increasing
business with our existing customers.  In addition, we believe that a
significant portion of our business with OEMs, such as Ericsson, Lucent
Technologies, Inc. ("Lucent") and Nortel, is dependent upon the development
schedules of wireless network operators who are purchasing infrastructure
equipment from such OEMs and on such OEMs strategy concerning the outsourcing of
RF power amplifiers. A number of factors may cause delays in wireless
infrastructure deployment schedules for both North American and international
deployments, including deployments in Brazil, Asia, South America and other
areas.  Such factors include economic or political problems in the wireless
operator's operating region, delays in government approvals required for system
deployment, and reduced subscriber demand for wireless services.  In addition, a
number of factors may cause OEMs to alter their outsourcing strategy concerning
RF power amplifiers, which could cause such OEMs to reduce or eliminate their
demand for external supplies of RF power amplifiers or shift their demand to
alternative suppliers.   Such factors include lower perceived internal
manufacturing costs and competitive reasons to remain vertically integrated.
Due to the possible uncertainties associated with wireless infrastructure
deployments and OEM demand, we have experienced and expect to continue to
experience significant fluctuations in demand from our OEM customers.  Such
fluctuations could significantly reduce our revenues and/or operating income
which could harm our business, financial condition and results of operations.
See "Additional Factors That May Affect Future Results --A Significant Amount of
Our Revenues Comes from a Few Customers; --There are Many Risks Associated With
International Operations; and --Our Quarterly Results Fluctuate Significantly."

Gross Profit

  Cost of sales consists primarily of raw materials, assembly and test labor,
overhead and warranty costs.  Gross profit margins for the first quarter of
fiscal 2000 and 1999 were 31.2% and 26.8%, respectively. The increase in gross
margins during the first quarter of 2000 as compared to the first quarter of
1999 was primarily due to the final closure of the acquired Folsom manufacturing
facility in the fourth quarter of 1999 and the resulting improvements in
manufacturing operating cost.  In addition, the first quarter of fiscal 2000 saw
improved manufacturing efficiency in labor and overhead costs, as the
manufacturing workforce which significantly increased during 1999, gained more
experience. Also during the first quarter of 2000, sales of multi-carrier RF
power amplifier products accounted for a greater percentage of product sales
when compared to the first quarter of 1999.  Our single carrier RF power
amplifier products have traditionally carried lower margins than our multi-
carrier RF power amplifier products.  While we continue to strive for
manufacturing and engineering cost reductions to offset pricing pressures on our
products, we cannot guarantee that these cost reduction or redesign efforts will
keep pace with price declines and cost increases. If we are unable to reduce our
costs through our manufacturing and/or engineering efforts, our gross margins
and profitability may be adversely affected. For a discussion of the effects of
declining average sales prices on our business, see "Additional Factors That May
Affect Future Results--Our Average Sales Prices are Declining."

  As part of the HP Acquisition, we completed an allocation of the purchase
price of the acquisition to both the tangible and intangible assets and
liabilities acquired in the acquisition.  The purchase price allocation is
included in our financial statements for the fiscal year ended January 3, 1999,
and includes an allocation of $11.5 million to developed technology acquired and
$0.2 million to workforce.  These amounts were capitalized and are being

                                       11
<PAGE>

amortized on a straight-line basis over five and ten years, respectively, and
are included in cost of sales. For both the quarter ended April 2, 2000 and the
quarter ended April 4, 1999, approximately $0.6 million was amortized and
included in cost of sales. As an additional part of the HP Acquisition, we
assumed certain specific liabilities from HP related to the acquired business,
including certain warranty obligations. During the first quarter ended April 2,
2000, and the first quarter ended April 4, 1999 we incurred warranty expenses of
approximately $0.2 million and $0.1 million, respectively, which were offset
against specific liabilities assumed in the acquisition. For more information
concerning the purchase price allocation associated with the HP Acquisition, see
Note 17 of the Notes to Consolidated Financial Statements in our Annual Report
on Form 10-K for the fiscal year ended January 2, 2000.

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

Operating Expenses

  Sales and marketing expenses consist primarily of sales commissions, salaries,
other expenses for sales and marketing personnel, travel expenses, charges for
customer demonstration units, reserves for credit losses and trade show
expenses.  Sales and marketing expenses increased by 42% to $5.1 million for the
quarter ended April 2, 2000 from $3.6 million for the quarter ended April 4,
1999.  As a percentage of sales, sales and marketing expenses were 4.9% and 6.4%
for the quarters ended April 2, 2000 and April 4, 1999, respectively.  The
increase in sales and marketing expenses in absolute dollars was primarily
attributable to increases in the sales and marketing staff, and increased sales
commissions related to increased product sales.

  Research and development expenses include ongoing RF power amplifier design
and development expenses, as well as those design expenses associated with
reducing the cost and improving the manufacturability of existing RF power
amplifiers. Current programs include cellular, PCS, WLL products and next
generation "3G" products. Research and development expenses increased by 70% to
$9.0 million for the quarter ended April 2, 2000 from $5.3 million for the
quarter ended April 4, 1999. Research and development expenses as a percentage
of sales for the quarters ended April 2, 2000 and April 4, 1999 were 8.7% and
9.4%, respectively. The actual increase in research and development expenses was
primarily due to increased staffing and associated engineering costs related to
continued new product development and existing product enhancement efforts. We
anticipate that we will continue operating at a higher expense level for
research and development because we intend to continue to emphasize investment
in research and development programs in future periods and continue to pursue
several existing programs acquired as part of the HP Acquisition.

  As part of the HP Acquisition, we acquired new product projects that were
under development at the date of the acquisition and were expected to eventually
lead to new products but such projects had not yet established technological
feasibility and no future alternative use was identified at the time of the
acquisition.  New product development projects underway at HP at the time of the
acquisition included, among others, single carrier CDMA technology, ultra-linear
technology for use in multi-carrier RF power amplifiers and advanced linear
power module technology for use in next generation wireless communications. We
estimated that these projects were approximately 75% complete at the date of the
acquisition in October 1998 and estimated that the cost to complete these
projects would aggregate approximately $2.5 million and would be incurred over a
two-year period. We discontinued further development on the single carrier CDMA
project as of January 2, 2000.  We incurred approximately $0.4 million of
research and development expenses related to the remaining two projects during
the first quarter of 2000, and since the date of the acquisition have incurred a
total of $2.2 million of research and development expenses related to all three
projects.  As of April 2, 2000, we believe that the remaining development
projects are approximately 95% complete.

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<PAGE>

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

  General and administrative expenses consist primarily of salaries and other
expenses for management, finance, information systems, facilities maintenance
and human resources.  General and administrative expenses increased by 33% to
$3.6 million for the quarter ended April 2, 2000, from $2.7 million for the
quarter ended April 4, 1999.  General and administrative expenses as a
percentage of sales were 3.4% and 4.8%, respectively. The increase in general
and administrative expenses in absolute dollars is primarily attributable to
increased staffing costs associated with supporting our increased revenues and
personnel. As part of the purchase price allocation of the HP Acquisition, an
allocation of approximately $4.6 million, reflecting the value of goodwill
acquired, was capitalized on our balance sheet.  Approximately $0.1 million of
goodwill amortization expense has been included in general and administrative
expenses for both the quarter ended April 2, 2000 and the quarter ended April 4,
1999.

  As part of the purchase price allocation associated with the HP Acquisition,
we recorded liabilities related to moving and relocation costs associated with
the planned closure of the Folsom manufacturing facility, which was completed by
December 1999. During the first quarter ended April 2, 2000, we paid
approximately $0.1 million related to these moving and relocation costs.  As of
April 2, 2000, no amounts remain of this liability.

Other Income (Expense)

  We earned $1.2 million of other income, net, during the first quarter of 2000
compared to $0.2 million of other expense, net, incurred in the first quarter of
1999. Other income consists primarily of interest income, net of any interest
expense.  As part of the HP Acquisition, we borrowed $25.0 million under a
secured credit facility in October 1998.  During the first quarter of 1999, we
had interest expense of approximately $0.6 million related primarily to this
debt incurred to fund the HP Acquisition.  We repaid this credit facility in
full in March 1999 with the proceeds from the sale of shares of our Common Stock
in March 1999.

Provision for Income Taxes

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


Liquidity and Capital Resources

  We have historically financed our operations primarily through a combination
of cash on hand, cash provided from operations, equipment lease financings,
available borrowings under bank lines of credit and both private and public
equity offerings.  As of April 2, 2000, we had working capital of $140.5
million, including $83.8 million in cash and cash equivalents as compared with
working capital of $118.6 million at January 2, 2000, which included $76.7
million in cash and cash equivalents.

  Net accounts receivable increased to $59.9 million at April 2, 2000 from $47.5
million at January 2, 2000, primarily due to increased sales volume during the
first quarter of 2000 as compared to the fourth quarter of 1999.  Net inventory
decreased slightly to $31.5 million at April 2, 2000 from $31.7 million at
January 2, 2000.  Cash provided by operating activities was approximately $0.5
million for the three months ended April 2, 2000, compared with  $6.9 million
for the three months ended April 4, 1999.   The decrease in cash flow from
operating activities is primarily due to the increase in net accounts
receivable, which offset the increase in net income.

                                       13
<PAGE>

     Capital expenditures were approximately $4.0 million and $1.6 million for
the first three months of 2000 and 1999, respectively. The majority of the
capital spending during both periods represents spending on electronic test
equipment utilized in our manufacturing and research and development areas.

     As part of the HP Acquisition, we acquired HP's manufacturing and research
and development facility in Folsom, California. Of the purchase price, a total
net value of $8.1 million was allocated to land, land improvements and
buildings. On July 15, 1999, we sold the Folsom facility for approximately $8.4
million. We received approximately $0.925 million in cash (before expenses) and
an interest free note for $7.475 million due December 31, 1999. The note was
secured by the land, land improvements and building. In exchange for the
interest free note, the buyer entered into a rent-free lease with us of the
Folsom facility through December 31, 1999. In December 1999, the note receivable
on the Folsom facility was amended to extend the maturity date to January 27,
2000 and to apply an annual interest rate of 8% beginning December 31, 1999. The
buyer of the Folsom facility made an additional principal payment of $500,000 on
December 30, 1999, and prepaid the future interest due on the note. The
remaining principal balance of $6.975 million was paid on January 27, 2000.

     Net cash provided by financing activities was approximately $10.6 million
for the first quarter of 2000 compared with $35.4 million of cash provided by
financing activities for the first quarter of 1999. During the first quarter of
1999, we received net proceeds of approximately $57.8 million from a public
offering of 2.3 million shares of our Common Stock. We utilized approximately
$22.8 million of these proceeds to retire bank debt associated to the HP
Acquisition.

     We had cash and cash equivalents of $83.8 million at April 2, 2000,
compared with $76.7 million at January 3, 1999. We regularly review our cash
funding requirements and attempt to meet those requirements through a
combination of cash on hand, cash provided by operations, available borrowings
under any credit facilities, financing through equipment lease transactions, and
possible future public or private debt and/or equity offerings. We invest our
excess cash in short-term, investment-grade money market instruments.

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


Disclosure About Foreign Currency Risk

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

                                       14
<PAGE>

in a foreign currency, our results of operations and gross margins may be
affected by changes in currency exchange rates.

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


European Monetary Union

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

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

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

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


Additional Factors That May Affect Our Future Results

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

     .  the ability to add new customers to reduce our dependence on any one
        customer while maintaining our existing customers;
     .  the ability to increase demand for our products from major wireless
        infrastructure OEMs;
     .  the ability to produce products which meet the quality standards of both
        our existing and potential new customers;
     .  industry specific factors, including slowdown in demand for wireless
        communications and RF power amplifiers;
     .  worldwide and regional economic downturns and unfavorable political
        conditions;
     .  the ability to timely develop and produce commercially viable products
        at competitive prices;

                                       15
<PAGE>

     .  the ability to manage rapid change in demand for our products;
     .  the availability and cost of components;
     .  the ability to finance our activities and maintain our financial
        liquidity;
     .  the ability of our products to operate and be compatible with various
        OEMs' base station equipment;
     .  the ability to manage expense levels;
     .  the ability to manage future product repairs; and
     .  the ability to accurately anticipate customer demand.


A Significant Amount of Our Revenues Comes from a Few Customers

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

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

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

     For the three months ended April 2, 2000, our largest customer was Nortel,
which accounted for approximately 41% of our net sales. For fiscal 1999, a total
of five customers accounted for approximately 80% of our total revenue. The loss
of any of our customers, or a significant loss, reduction or rescheduling of
orders from any of our customers, would have a material adverse effect on our
business, results of operations and financial condition. The risks related to
our customer concentration were magnified in 1998 due to certain of our
customer's geographic concentration in South Korea which experienced an economic
and financial crisis during 1998. For the first quarter of 2000, our South
Korean customers including Hyundai, LGIC and Samsung, accounted for $7.8
million, or approximately 8% of our total net sales. During 1999 our South
Korean customers accounted for approximately 21% of our total net sales or
$62.2 million.

     We believe that continued purchases of our products by OEMs depends upon
many factors, including the OEMs' view of utilizing third party suppliers of RF
power amplifiers and their current view of wireless infrastructure deployments
and could be significantly reduced due to any delays of such deployments. A
number of factors may cause delays in wireless infrastructure deployments,
including the following such factors:

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

     In addition, from time to time OEMs may purchase products from us on a
large quantity basis over a short period of time which may cause demand for our
products to change rapidly. Due to these and other possible uncertainties
associated with wireless infrastructure deployments and OEMs purchasing
strategies, we may experience significant fluctuations in demand from our OEM
customers. Such fluctuations could cause a significant increase in demand which
could exceed our production capacity, which could negatively impact our ability
to meet customers' demands as well as could potentially impact product quality.
Alternatively, such fluctuations could

                                       16
<PAGE>

cause a significant reduction in revenues which could have a material adverse
effect on our business, results of operations and financial condition. We cannot
guarantee that a major customer will not reduce, delay or eliminate purchases
from us, which could have a material adverse effect on our business, results of
operations and financial condition.

  Our Quarterly Results Fluctuate Significantly

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

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

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

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

     Due to these factors, we believe that our past results are not reliable
indicators of our future performance. Current operating profitability may fall,
and future revenues and operating results may not meet the expectations of

                                       17
<PAGE>

public market analysts and investors. In either case, the price of our Common
Stock could significantly decline. See "--Our Stock Price Has Been and May
Continue to Be Volatile."

  Our Average Sales Prices are Declining

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

     We anticipate that single carrier RF power amplifier products will continue
to account for a large portion of our net sales going forward. Sales of single
carrier RF power amplifiers have been subject to intense price competition and
carry lower gross profit margins than multi-carrier RF power amplifier products.
If we cannot reduce manufacturing costs on our single carrier RF power
amplifiers and such RF power amplifiers account for an increased percentage of
net sales, our overall gross profit margins will fall.

  Our Failure to Manage Future Growth Could Have Adverse Effects

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

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

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

  We Must Retain Key Executives and Personnel

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

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

                                       18
<PAGE>

  There are Many Risks Associated With International Operations

     For the first three months of 2000, international revenues (excluding North
American sales) accounted for approximately 21% of our total net sales. For
fiscal years 1999, 1998 and 1997, international revenues (excluding North
American sales) accounted for approximately 33%, 41% and 84% respectively, of
our net sales. We currently expect that international revenues will continue to
account for a significant percentage of our revenues for the foreseeable future.
Therefore, the following risks associated with international operations could
have a material adverse effect on our performance:

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

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

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

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

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

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

     .  failure of local governments or foreign countries to allow construction
        of new wireless communications systems;

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<PAGE>

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

  We Previously Have Had a Reliance Upon the South Korean Market

     Three of our customers, Hyundai, LGIC and Samsung, are based in South Korea
and collectively accounted for approximately 21% of our net sales for fiscal
1999. For fiscal 1998, customers based in South Korea collectively accounted for
approximately 30% of our net sales and they accounted for approximately 83% of
our net sales for fiscal 1997. These customers have purchased products primarily
for deployment in the South Korean digital cellular and PCS networks.

     The build-out of the South Korean digital cellular networks began in 1995
with two independent service providers offering digital CDMA service beginning
in 1996. In contrast, the build-out of the South Korean PCS networks began in
the first quarter of 1997 with four service providers. We provided multi-carrier
cellular RF power amplifiers starting from the initial stages of the digital
cellular network buildout in South Korea. During 1997, we began shipping, in
volume, PCS single carrier RF power amplifiers for use in the new PCS networks
being built in South Korea. Sales to our South Korean customers for the South
Korean PCS networks represented substantially all of our PCS sales during fiscal
1997 and approximately 86% of our PCS sales for the first nine months of fiscal
1998. Since 1998, our South Korean PCS Sales have significantly declined while
our non-South Korean PCS sales have significantly increased.

     The delay, postponement and cancellation of the build-out of the South
Korean digital wireless networks which occurred during 1998, did have an adverse
effect on our revenues and results of operations during fiscal 1998. The
economic and financial crisis in Asia and South Korea caused a reduction in the
value of the South Korean Won when compared to the U.S. dollar. This reduction
in purchasing value caused a reduction in South Korean wireless service
operators' demand for our products. Our South Korean customers pay for products
with U.S. dollars. As such, the strengthening of the U.S. dollar as compared to
the South Korean Won during 1998, increased the effective cost of our products
by at times as much as 100% or more for our South Korean customers. The
resulting significant increase in the local currency cost of such products made
them less attractive to our customers. Additionally, due to the economic
problems the South Korean banking network faced in 1998, it became more
difficult for local operating companies to raise additional financing to support
the increased costs of their infrastructure buildout. These types of economic
problems experienced in Asia have also been encountered in other areas of the
world where we operate, such as Brazil in South America.

     Due to the numerous factors involved, we are unable to predict when, if
ever, these networks will be completed pursuant to the South Korean wireless
network operators' original build-out projections. In addition, we are unable to
predict what levels such sales will be in fiscal 2000.

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

  We Depend on Single Sources for Key Components

     A number of the parts used in our products are available from only one or a
limited number of outside suppliers due to unique component designs as well as
certain quality and performance requirements. To take advantage of

                                       20
<PAGE>

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

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

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

  The Market in Which We Operate is Highly Competitive

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

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

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

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

                                       21
<PAGE>

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

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

     The markets in which we compete are characterized by:

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

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

     To develop new products, we invest in the research and development of RF
power amplifiers for wireless communications networks. We target our research
and development efforts on major wireless network deployments worldwide, which
cover a broad range of frequency and transmission protocols. In addition, we are
currently working on products for third generation networks as well as
development projects for products requested by our customers. In spite of our
efforts, the deployment of a wireless network may be delayed which could cause a
particular research or development effort to not generate a revenue producing
product. Additionally, the new products we develop may not achieve market
acceptance or may not be manufacturable at competitive prices in sufficient
volumes. We cannot guarantee the success of our research and development
efforts.

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

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

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

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

     We have had quality problems with our products in the past and may have
similar problems in the future. We have replaced components in some products in
accordance with our product warranties. We believe that our overall relationship
with our customers is good and that they consider our products to be of good
quality. We also believe that our customers will demand increasingly stringent
product performance and reliability, particularly in domestic markets. We cannot
provide any assurance that our product designs will remain successful or that
they will keep pace with technological developments, evolving industry standards
and new communications protocols. We may fail to adequately improve product
quality and meet the quality standards of our customers, which could cause us to

                                       22
<PAGE>

lose such customers. Design problems could damage relationships with existing
and prospective customers and could limit our ability to market our products to
large wireless infrastructure manufacturers, many of which build their own, high
quality RF power amplifiers and have stringent quality control standards. See
"--Many Wireless Infrastructure Manufacturers have Internal RF Power Amplifier
Production Capabilities."

  The Sales Cycle for Our Products is Lengthy

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

  Many Wireless Infrastructure Manufacturers have Internal RF Power Amplifier
  Production Capabilities

     Many of the leading wireless infrastructure equipment manufacturers
internally manufacture their own RF power amplifiers. We believe that our
existing customers continuously evaluate whether to manufacture their own RF
power amplifiers. Certain of our customers regularly produce RF power amplifiers
in an attempt to replace products manufactured by us. We believe that this
practice will continue. In addition, LGIC, one of our customers, previously
entered into a joint venture manufacturing arrangement with one of our
competitors. In the event that our customers manufacture their own RF power
amplifiers, such customers could reduce or eliminate their purchases of our
products. We cannot guarantee that our current customers will continue to rely,
or expand their reliance, on us as an external source of supply for their RF
power amplifiers.

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

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

     We rely upon trade secrets to protect our intellectual property. We execute
confidentiality and non-disclosure agreements with our employees and limit
access to and distribution of our proprietary information. We hold a total of
three U.S. Patents for various aspects of our technology. In addition, we have
applied for several additional U.S. and international patents for various
aspects of our proprietary technology. These efforts allow us to rely upon the
knowledge and experience of our management and technical personnel, to market
our existing products and to develop new products. The departure of any of our
management and technical personnel, the breach of their confidentiality and non-
disclosure obligations to us or the failure to achieve our intellectual property
objectives may have a material adverse effect on our business, financial
condition and results of operations.

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

                                       23
<PAGE>

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

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

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

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

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

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

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

  Government Regulation of the Communications Industry

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

     The enactment by governments of new laws or regulations or a change in the
interpretation of existing regulations could adversely affect the market for our
products. Recent deregulation of international communications industries along
with RF spectrum allocations made by the FCC have increased the potential demand
for our products. We cannot guarantee that the trend toward deregulation and
current regulatory developments favorable to the promotion of new and expanded
wireless services will continue or that other future regulatory changes will
have a positive impact on us. The increasing demand for wireless communications
has exerted pressure on regulatory bodies worldwide to adopt new standards for
such products, generally following

                                       24
<PAGE>

extensive investigation and deliberation over competing technologies. In the
past, the delays inherent in this governmental approval process have caused, and
may in the future cause, the cancellation, postponement or rescheduling of the
installation of communications systems by our customers. These delays could have
a material adverse effect on our business, results of operations and financial
condition.

  Our Stock Price Has Been and May Continue to Be Volatile

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

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

  Risk of Litigation

     We are subject to various legal proceedings from time to time as part of
our business. In July 1998, lawsuits were filed by certain of our stockholders
against us and certain of our present and former directors and officers. These
lawsuits were consolidated and an amended complaint was filed in December 1998.
The stockholders bringing this lawsuit seek to represent a class consisting of
all persons who purchased our Common Stock between June 4, 1997 and January 16,
1998. The lawsuit alleges, among other things, that we (and certain of our
present and former officers and directors) violated federal securities laws by
making misrepresentations designed to artificially inflate our stock price and
allow certain individuals to sell their Common Stock at artificially inflated
prices. The parties have reached an agreement in principle to settle the lawsuit
entirely within the limits of the Company's first layer insurance policy
coverage. We and our directors and officers have denied and continue to deny
each and all of the plaintiffs' allegations in the lawsuit, and the settlement
agreement will expressly provide that the settlement is not in any manner to be
construed as an admission of wrongdoing. The written settlement is being
negotiated by the parties, and will be subject to approval by the Court. Until
such Court reviews and approval is obtained, we cannot assume that these matters
are resolved. Therefore, at this time, the final outcome of these proceedings is
not determinable.

     In September 1999, a lawsuit was filed against us by a former customer. The
lawsuit alleges, among other things, that we sold defective LMR products to this
customer from 1994 to 1998. The lawsuit seeks direct damages in the amount of
$1.6 million as well as unspecified punitive damages. We deny these allegations
of wrongdoing and intend to vigorously defend against the claims made in this
lawsuit. The lawsuit is currently in the document discovery stage and a trial
date has been set for September 2000. At this time the outcome of the
proceedings is not determinable.

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

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<PAGE>

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

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

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

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

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

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

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<PAGE>

                          PART II.  OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

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

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

27.1       Financial Data Schedule.


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

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<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:    May 5, 2000                     By: /s/    Kevin T. Michaels
     -------------------                 ---------------------------------------
                                                    Kevin T. Michaels
                                         Senior Vice President, Finance and
                                         Chief Financial Officer

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