<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 March 31, 2002

                                       OR

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


     For the transition period from               to
                                   ---------------  -----------


                        Commission File Number 000-21507

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

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

                            1801 E. St. Andrew Place
                               Santa Ana, CA 92705
               (Address of principal executive offices, zip code)

       Registrant's telephone number, including area code: (714) 466-1000


                             ----------------------


     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 April 23, 2002, the number of outstanding shares of Common Stock, par
value $.0001 per share, of the Registrant was 65,410,265.

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

<PAGE>

                          POWERWAVE TECHNOLOGIES, INC.
                                      INDEX
<TABLE>
<CAPTION>

<S>                                                                                                               <C>
Part I.  Financial Information                                                                                    Page
                                                                                                                  ----
         Item 1.  Condensed Financial Statements

                           Condensed Consolidated Balance Sheets at March 31, 2002 (Unaudited) and
                                December 30, 2001                                                                  3

                           Condensed Consolidated Statements of Operations (Unaudited) for the three months
                                ended March 31, 2002 and April 1, 2001                                             4

                           Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
                                for the three months ended March 31, 2002 and April 1, 2001.                       5

                           Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months
                                ended March 31, 2002 and April 1, 2001                                             6

                           Notes to Condensed Consolidated Financial Statements (Unaudited)                        7-10

         Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations            11-28

         Item 3.  Quantitative and Qualitative Disclosures About Market Risk                                       29

Part II. Other Information

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

Signatures                                                                                                         31
</TABLE>

This Quarterly Report on Form 10-Q includes certain forward-looking statements
as defined within Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, relating to
revenue, revenue composition, demand and pricing trends, future expense levels,
trends in average selling prices and gross margins, the timing of and demand for
3G products and the level of expected capital expenditures. Such forward-looking
statements are based on the beliefs of, and estimates made by and information
currently available to the Company's management and are subject to certain
risks, uncertainties and assumptions. Any statements contained herein (including
without limitation statements to the effect that the Company or management
"estimates," "expects," "anticipates," "plans," "believes," "projects,"
"continues," "may," or "will," or statements concerning "potential" or
"opportunity" or variations thereof or comparable terminology or the negative
thereof) that are not statements of historical fact should be construed as
forward-looking statements. The actual results of Powerwave Technologies, Inc.
may vary materially from those expected or anticipated in these forward-looking
statements. The realization of such forward-looking statements may be impacted
by certain important unanticipated factors that are discussed in "Additional
Factors That May Affect Future Results" under Item 2, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" at pages 11-28.
Because of these and other factors that may affect Powerwave's operating
results, past performance should not be considered as an indicator of future
performance and investors should not use historical results to anticipate
results or trends in future periods. Powerwave undertakes no obligation to
publicly release the result of any revisions to these forward-looking statements
that may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events. Readers should carefully review
the risk factors described in this and other documents Powerwave files from time
to time with the Securities and Exchange Commission ("SEC"), including
subsequent Current Reports on Form 8-K, Quarterly Reports on Form 10-Q and
Annual Reports on Form 10-K. All reports filed with the SEC are available free
of charge via Edgar through the SEC website at www.sec.gov. In addition,
Powerwave provides copies of its Forms 8-K, 10-K and 10-Q, Proxy and Annual
Report at no charge to investors upon request and makes electronic copies of
such reports available through its website at www.powerwave.com/investor.html.

                                       2

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                    March 31,         December 30,
                                                                                       2002               2001
                                                                                 -----------------  -----------------
                                     ASSETS                                        (Unaudited)
<S>                                                                              <C>               <C>
Current Assets:
     Cash and cash equivalents .................................................    $  138,759         $  123,171
     Accounts receivable, net of allowance for doubtful accounts of $3,137 and
       $3,143 at March 31, 2002 and December 30, 2001, respectively ............        67,288             59,732
     Inventories ...............................................................        37,180             33,525
     Income taxes receivable ...................................................         6,805                 --
     Prepaid expenses and other current assets .................................         4,307              5,595
     Deferred tax assets .......................................................        10,707             10,707
                                                                                    ----------         ----------
          Total current assets .................................................       265,046            232,730


Property, plant and equipment ..................................................       145,241            144,540
Less accumulated depreciation and amortization .................................       (47,583)           (42,748)
                                                                                    ----------         ----------
     Net property, plant and equipment .........................................        97,658            101,792
                                                                                    ----------          ----------
Goodwill .......................................................................         4,852              4,739
Deferred tax assets ............................................................        11,910             21,194
Other non-current assets .......................................................         2,231              2,562
                                                                                    ----------         ----------
TOTAL ASSETS ...................................................................    $  381,697         $  363,017
                                                                                    ==========         ==========
</TABLE>

<TABLE>
<CAPTION>
                      LIABILITIES AND SHAREHOLDERS' EQUITY
<S>                                                                              <C>                <C>
Current Liabilities:
     Accounts payable ..........................................................    $   39,129         $   22,692
     Accrued expenses and other liabilities ....................................        19,737             20,928
     Current portion of long-term debt .........................................           529                659
     Income taxes payable ......................................................            --              2,196
                                                                                    ----------         ----------
          Total current liabilities ............................................        59,395             46,475

Long-term debt, net of current portion .........................................            35                239
Other non-current liabilities ..................................................            74                 68
                                                                                    ----------         ----------
          Total liabilities ....................................................        59,504             46,782
                                                                                    ----------         ----------

Commitments and Contingencies ..................................................            --                 --

Shareholders' Equity:
     Preferred Stock, $.0001 par value, 5,000 shares authorized and no shares
        issued and outstanding .................................................            --                 --
     Common Stock, $.0001 par value, 135,000 shares authorized, 65,389 shares
        issued and outstanding at March 31, 2002 and 65,081 shares issued and
        outstanding at December 30, 2001 .......................................       245,338            242,100
     Retained earnings .........................................................        76,855             74,135
                                                                                    ----------         ----------
          Total shareholders' equity ...........................................       322,193            316,235
                                                                                    ----------         ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .....................................    $  381,697         $  363,017
                                                                                    ==========         ==========
</TABLE>



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

                                       3

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                      Three Months Ended
                                                                                --------------------------------
                                                                                    March 31,       April 1,
                                                                                      2002            2001
                                                                                --------------------------------
<S>                                                                              <C>           <C>
Net sales ......................................................................   $  104,085     $   72,976
Cost of sales ..................................................................       85,382         68,383
                                                                                   ----------     ----------
Gross profit ...................................................................       18,703          4,593
Operating expenses:
     Sales and marketing .......................................................        3,541          4,976
     Research and development ..................................................        8,350         10,897
     General and administrative ................................................        3,613          6,158
                                                                                   ----------     ----------
            Total operating expenses ...........................................       15,504         22,031
                                                                                   ----------     ----------
Operating income (loss) ........................................................        3,199        (17,438)
Other income, net ..............................................................          687          2,546
                                                                                   ----------     ----------
Income (loss) before income taxes ..............................................        3,886        (14,892)
Provision (benefit) for income taxes ...........................................        1,166         (5,361)
                                                                                   ----------     ----------
Net income (loss) ..............................................................   $    2,720     $   (9,531)
                                                                                   ==========     ==========

Basic earnings (loss) per share ................................................   $      .04     $    (0.15)
                                                                                   ==========     ==========
Diluted earnings (loss) per share ..............................................   $      .04     $    (0.15)
                                                                                   ==========     ==========
Basic weighted average common shares ...........................................       65,233         63,697
                                                                                   ==========     ==========
Diluted weighted average common shares .........................................       66,675         63,697
                                                                                   ==========     ==========
</TABLE>



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

                                       4

<PAGE>

                          POWERWAVE TECHNOLOGIES, INC.
        CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                      Three Months Ended
                                                                                --------------------------------
                                                                                   March 31,       April 1,
                                                                                     2002            2001
                                                                                --------------------------------
<S>                                                                              <C>            <C>
Net income (loss) ..............................................................    $   2,720      $  (9,531)
                                                                                    ---------      ----------
Other comprehensive income (loss), net of tax:
   Reclassification of unrealized gains for amounts included in net
     income. ...................................................................           --           (276)
                                                                                    ---------      ----------
Other comprehensive income (loss) ..............................................           --           (276)
                                                                                    ---------      ----------
Comprehensive income (loss) ....................................................    $   2,720      $  (9,807)
                                                                                    =========      ==========
</TABLE>



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

                                       5

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                      Three Months Ended
                                                                              -----------------------------------
                                                                                 March 31,          April 1,
                                                                                    2002              2001
                                                                              -----------------  ----------------
<S>                                                                           <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income (loss) .......................................................    $  2,720           $ (9,531)
     Adjustments to reconcile net income (loss) to net cash provided by
     (used in) operating activities:
        Depreciation and amortization .......................................       5,272              7,363
        Provision for doubtful accounts .....................................          (3)                71
        Compensation costs related to stock options .........................          15                 15
        Loss on disposal of property, plant and equipment ...................         140                 --
        Gain on sale of available-for-sale securities .......................          --               (568)
    Changes in operating assets and liabilities:
        Accounts receivable .................................................      (7,553)            24,545
        Inventories .........................................................      (3,655)           (18,628)
        Prepaid expenses and other current assets ...........................       1,289              1,341
        Income taxes ........................................................       1,165             (4,822)
        Accounts payable ....................................................      16,437             (1,515)
        Accrued expenses and other liabilities ..............................      (1,191)            (4,386)
        Other non-current assets ............................................         (75)               164
        Other non-current liabilities .......................................           6               (180)
                                                                                 --------           --------
            Net cash provided by (used in) operating activities .............      14,567             (6,131)

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of property, plant and equipment ...............................      (1,018)           (16,679)
    Proceeds from the sale of property, plant and equipment .................          32                 --
    Proceeds from the sale of available-for-sale securities .................          --                568
    Payment received on notes receivable ....................................          --                 26
                                                                                 --------           --------
            Net cash used in investing activities ...........................        (986)           (16,085)

CASH FLOW FROM FINANCING ACTIVITIES:
    Principal payments on long-term debt ....................................        (334)               (60)
    Proceeds from the sale of stock under Employee Stock Purchase Plan ......       1,168              1,623
    Proceeds from exercise of stock options .................................       1,173              1,914
                                                                                 --------           --------
            Net cash provided by financing activities .......................       2,007              3,477
                                                                                 --------           --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........................      15,588            (18,739)
CASH AND CASH EQUIVALENTS, beginning of period ..............................     123,171            128,733
                                                                                 --------           --------
CASH AND CASH EQUIVALENTS, end of period ....................................    $138,759           $109,994
                                                                                 ========           ========

SUPPLEMENTAL CASH FLOW INFORMATION:
    Cash paid (received) for:
        Interest ............................................................    $     43           $     32
                                                                                 ========           ========
        Income taxes ........................................................    $     --              $(539)
                                                                                 ========           ========

NON CASH ITEMS:
     Tax benefit related to stock option exercises ..........................    $    867           $  2,116
                                                                                 ========           ========
     Tax benefit related to the issuance of Common Stock under the Employee
        Stock Purchase Plan .................................................    $     16           $     39
                                                                                 ========           ========
    Acquisition of property and equipment through capital leases ............    $     --           $    128
                                                                                 ========           ========
    Reclassification of unrealized gains for amounts included in net income,
       net of tax of $192 ...................................................    $     --           $    276
                                                                                 ========           ========
    Reversal of deferred tax liability on available-for-sale-securities .....    $     --           $    192
                                                                                 ========           ========
</TABLE>

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

                                       6

<PAGE>


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

Basis of Presentation

     The accompanying condensed consolidated financial statements of Powerwave
Technologies, Inc. ("Powerwave" or the "Company") have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and in accordance with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include certain footnotes and financial presentations normally required
under accounting principles generally accepted in the United States of America
for complete financial reporting. The interim financial information is
unaudited, but reflects all normal adjustments and accruals, which are, in the
opinion of management, considered necessary to provide a fair presentation for
the interim periods presented. The accompanying condensed consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements included in the Company's Annual Report on Form 10-K for the fiscal
year ended December 30, 2001.

     The results of operations for the three months ended March 31, 2002 are not
necessarily indicative of the results to be expected for the entire fiscal year
ending December 29, 2002 (fiscal year 2002). For further information on
additional factors that may affect future results, please refer to the
"Management Discussion and Analysis of Financial Condition and Results of
Operations" under Item 2 and the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended December 30, 2001.

Earnings (Loss) Per Share

     In accordance with Statement of Financial Accounting Standards No. 128,
Earnings Per Share ("SFAS 128"), basic earnings (loss) per share is based upon
the weighted average number of common shares outstanding. Diluted earnings
(loss) 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. Potential common shares
of 2,467,982 have been excluded from diluted weighted average common shares for
the three months ended April 1, 2001, as the effect would be anti-dilutive.

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

<TABLE>
<CAPTION>
                                                                                 March 31,         April 1,
                                                                                   2002              2001
                                                                              ----------------  ----------------
                                                                                (In thousands except for per
                                                                                       share amounts)
<S>                                                                           <C>               <C>
    Basic:
        Basic weighted average common shares ................................        65,233            63,697
        Net income (loss) ...................................................     $   2,720         $  (9,531)
                                                                                  ---------         ---------
        Basic earnings (loss) per share .....................................     $     .04          $  (0.15)
                                                                                  =========         =========
    Diluted:
        Basic weighted average common shares ................................        65,233            63,697
        Potential common shares .............................................         1,442                --
                                                                                  ---------         ---------
        Diluted weighted average common shares ..............................        66,675            63,697
        Net income (loss) ...................................................     $   2,720         $  (9,531)
                                                                                  ---------         ---------
        Diluted earnings (loss) per share ...................................     $     .04          $  (0.15)
                                                                                  =========         =========
</TABLE>

New Accounting Pronouncements

     In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets ("SFAS 142"). SFAS 142 addresses the financial accounting and
reporting for acquired goodwill and other intangible assets. Under SFAS 142, the
Company is no longer required to amortize goodwill and other intangible assets
with indefinite lives but will be required to subject


                                       7

<PAGE>


these assets to periodic testing for impairment. SFAS 142 supersedes APB Opinion
No. 17, Intangible Assets, effective for fiscal years beginning after December
15, 2001. The Company adopted SFAS 142 effective December 31, 2001 and such
adoption did not have a material impact on the Company's consolidated financial
statements.

     Statement of Financial Accounting Standards No. 143, Accounting for
Obligations Associated with the Retirement of Long-Lived Assets ("SFAS 143") was
issued by the FASB in August 2001. SFAS 143 establishes accounting standards for
the recognition and measurement of an asset retirement obligation and its
associated asset retirement cost. It also provides accounting guidance for legal
obligations associated with the retirement of tangible long-lived assets. SFAS
143 is effective for fiscal years beginning after June 15, 2002, with early
adoption permitted. The Company adopted SFAS 143 effective December 31, 2001 and
such adoption did not have a material impact on the Company's consolidated
financial statements.

     The FASB issued Statement of Financial Accounting standards No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS 144") in
October 2001. SFAS 144 establishes a single accounting model for the impairment
or disposal of long-lived assets and new standards for reporting discontinued
operations. SFAS 144 superseded Statement of Financial Accounting Standards No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of and APB Opinion No. 30, Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions. The
provisions of SFAS 144 are effective in fiscal years beginning after December
15, 2001 and, in general, are to be applied prospectively. The Company adopted
SFAS 144 effective December 31, 2001 and such adoption did not have a material
impact on the Company's consolidated financial statements.

Inventories

     Net inventories consist of the following:
<TABLE>
<CAPTION>
                                                                        March 31,       December 30,
                                                                           2002             2001
                                                                     ----------------  ---------------
<S>                                                                   <C>               <C>
  Parts and components .............................................     $  19,446         $ 14,436
  Work-in-process ..................................................         8,528            9,612
  Finished goods ...................................................         9,206            9,477
                                                                         ---------         --------
  Total                                                                  $  37,180         $ 33,525
                                                                         =========         ========
</TABLE>

     Inventories are net of an allowance for excess and obsolete inventory of
$10,884 and $11,114 as of March 31, 2002 and December 30, 2001, respectively.

Employee Stock Purchase Plan

     The tenth offering under Powerwave's Employee Stock Purchase Plan (the
"ESPP") concluded on January 31, 2002, with 76,400 shares of the Company's
Common Stock purchased under the ESPP at a price per share of $15.30. At March
31, 2002, there were rights to purchase approximately 46,000 shares of Common
Stock outstanding under ESPP's eleventh offering, which will conclude on July
31, 2002.

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, 1996 Director Stock Option Plan and the 2000 Stock Option Plan
for the three months ended March 31, 2002:

<TABLE>
<CAPTION>
                                            Number of                                               Weighted
                                         Option Shares       Price Per      Number of Options        Average
                                          Outstanding          Share           Exercisable        Exercise Price
                                          -----------          -----           -----------        --------------
    <S>                                  <C>              <C>               <C>                   <C>
    Balance at December 30, 2001 .......    8,022,211     $  0.82-$73.56        3,319,001             $13.54
                                                                                =========             ======
         Granted .......................      646,100     $12.87-$ 20.10
         Exercised .....................     (232,335)    $  2.19-$11.67
         Canceled ......................     (182,656)    $  6.40-$46.85
                                          -----------
    Balance at March 31, 2002 ..........    8,253,320     $  0.82-$73.56        3,562,682             $14.88
                                          ===========                           =========             ======
</TABLE>


                                       8

<PAGE>


     At March 31, 2002, a total of 1,208,714 shares were available for grant
under all of the Company's stock option plans.

     During the three months ended March 31, 2002 and April 1, 2001, the Company
recorded compensation expense related to stock options of approximately $15 and
$15, respectively. The remaining unamortized compensation expense as of March
31, 2002 was approximately $82 and will be amortized through September 2003.

Commitments and Contingencies

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

     Future minimum lease payments required under all operating leases at March
31, 2002 are payable as follows:


        Fiscal Year:
          Remainder of 2002 ........................................    $ 1,105
          2003 .....................................................      1,468
          2004 .....................................................      1,439
          2005 .....................................................      1,176
          2006 .....................................................      1,124
          Thereafter ...............................................        494
                                                                        -------
        Total future minimum lease payments ........................    $ 6,806
                                                                        =======

     The Company is subject to various legal proceedings from time to time as
part of its business. As of March 31, 2002, Powerwave is not currently party to
any legal proceedings, the adverse outcome of which, individually or in the
aggregate, the Company believes would have a material adverse effect on its
business, financial condition or results of operations.

Segment Information

       Powerwave operates in a single business segment as a designer and
manufacturer of radio frequency (RF) power amplifiers for wireless
telecommunications equipment. Net sales are derived primarily from the sale of
RF power amplifiers for use in wireless communications networks. The Company
reviews its revenues based upon the RF frequency in which the product is
utilized in, i.e. 800-1000 MHz commonly referred to as "Cellular", 1800-2000
MHz, commonly referred to as "PCS" and over 2000 MHz, which includes "3G"
frequency bands. Cost of sales, operating expenses and specific assets are not
tracked or allocated to these RF frequency ranges. The following schedule
presents an analysis of Powerwave's net sales based upon RF frequency range.

<TABLE>
<CAPTION>
                                                             800-1000     1800-2000       2000+
                                                                MHz          MHz           MHz         Total
                                                             --------     ---------      -------     ---------
<S>                                                          <C>          <C>            <C>         <C>
Net sales for the three months ended March 31, 2002 ......   $ 65,447      $ 20,396      $18,242     $ 104,085
Net sales for the three months ended April 1, 2001 .......   $ 46,373      $ 11,942      $14,661     $  72,976
</TABLE>

     The following schedule presents an analysis of Powerwave's net sales based
upon the geographic location of our customers. North American sales include
sales to the United States and Canada. 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. Sales to Canada were $30,991 and $10,226
for the three months ended March 31, 2002 and April 1, 2001, respectively. For
the three months ended March 31, 2002 and April 1, 2001, sales to South Korea
were $1,278 and $12,879, respectively.

<TABLE>
<CAPTION>
                                                                                          Europe and
                                                             North                           Other
                                                            American          Asia       International      Total
                                                           ----------       --------     -------------    ---------
<S>                                                        <C>              <C>          <C>              <C>
Net sales for the three months ended March 31, 2002 ....   $   79,813       $  1,609      $   22,663      $ 104,085
Net sales for the three months ended April 1, 2001 .....   $   40,792       $ 14,351      $   17,833      $  72,976
</TABLE>

                                       9

<PAGE>

     The majority of Powerwave's assets are located in the United States, in the
State of California. Total accounts receivable as of March 31, 2002 include 43%
from United States based customers, 36% from Canadian based customers, and 17%
from Finland based customers.

Customer Concentrations

     Powerwave's product sales have historically been concentrated in a small
number of customers. During the quarter ended March 31, 2002, sales to one
customer accounted for approximately 36% of net sales and sales to three other
customers each accounted for 10% or more of net sales. For the quarter ended
April 1, 2001, sales to one customer accounted for approximately 37% of net
sales and sales to three other customers accounted for 10% or more of net sales.
The loss of, or reduction in sales to any of these customers could have a
material adverse effect on the Company's business, financial condition and
results of operations

Supplier Concentrations

       Certain of the Company's products utilize components that are available
in the short-term only from a single or a limited number of sources. In
addition, in order to take advantage of volume pricing discounts, the Company
purchases certain customized components for its RF power amplifiers from single
sources. Any inability to obtain single-sourced components in the amounts needed
on a timely basis or at commercially reasonable prices could result in delays in
product introductions or interruption in product shipments or increases in
product costs, which could have a material adverse effect on the Company's
business, financial condition and results of operations until alternative
sources could be developed at a reasonable cost.

Related Party Transactions

    As of March 31, 2002, Powerwave had an outstanding unsecured note receivable
 from an officer of the Company in the amount of $1.4 million that relates to a
 bridge loan in connection with such officer's relocation to Southern
 California. The note bears no interest and is payable upon the earlier of (1)
 the sale of the officer's former principal residence, (2) termination of
 employment, or (3) August 20, 2002. The Company had no significant transactions
 with, receivables from or payables to, shareholders or officers of the Company
 other than that described above.

     The President and CEO of the Company, Bruce Edwards, is a member of the
Board of Directors of Metawave Communications Corporation ("Metawave"), a
supplier of "smart" antennas to the wireless communications market and a
customer of the Company. During the quarters ended March 31, 2002 and April 1,
2001, the Company had net sales to Metawave in the amounts of $1,424 and $3,772,
respectively. Total outstanding accounts receivable from Metawave were $596 and
$5,036 at March 31, 2002 and April 1, 2001, respectively.

Use of Estimates

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

Reclassifications

    Certain prior year amounts have been reclassified to conform to the current
quarter presentation.

                                       10

<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 condensed
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 Our Future Results."

Significant Accounting Policies

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

   Revenue Recognition

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

   Accounts Receivable

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

   Inventories

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

                                       11

<PAGE>

technological developments could have a significant impact on the value of our
inventory and our reported operating results. See "Additional Factors That May
Affect Future Results--We have experienced, and will continue to experience,
significant fluctuations in sales and operating results from quarter to
quarter... and --The wireless communications infrastructure equipment industry
is extremely competitive and is characterized by rapid technological change..."

Deferred Taxes

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

Warranties

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

Results of Operations

     The following table summarizes our results of operations as a percentage of
net sales for the three months ended March 31, 2002 and April 1, 2001.

<TABLE>
<CAPTION>
                                                          As a Percentage of Net Sales
                                                       --------------------------------
                                                             Three Months Ended
                                                       --------------------------------
                                                          March 31,       April 1,
                                                             2002           2001
                                                       --------------------------------
<S>                                                       <C>             <C>
Net sales ............................................        100.0%          100.0%
Cost of sales ........................................         82.0            93.7
                                                              -----          ------
Gross profit .........................................         18.0             6.3
Operating expenses:
     Sales and marketing .............................          3.4             6.8
     Research and development ........................          8.0            14.9
     General and administrative ......................          3.5             8.5
                                                              -----          ------
Total operating expenses .............................         14.9            30.2
                                                              -----          ------
Operating income (loss) ..............................          3.1           (23.9)
Other income, net ....................................          0.6             3.5
                                                              -----          ------
Income (loss) before income taxes ....................          3.7           (20.4)

Provision (benefit) for income taxes .................          1.1            (7.3)
                                                              -----          ------
Net income (loss) ....................................          2.6%          (13.1)%
                                                              =====          ======
</TABLE>

                                       12

<PAGE>


Three months ended March 31, 2002 and April 1, 2001

Net Sales

     Our net sales are derived primarily from the sale of RF power amplifiers
for use in wireless communications networks. Sales increased by 43% to $104.1
million for the quarter ended March 31, 2002, from $73.0 million for the quarter
ended April 1, 2001. The increase in revenue was attributed to increased demand
for wireless infrastructure products. For the quarter ended March 31, 2002,
total sales of products for networks in the 800-1000 MHz range accounted for
approximately 63% of sales or $65.5 million, compared to approximately 64% of
sales or $46.4 million for the quarter ended April 1, 2001. Sales of products
for networks in the 1800-2000 MHz range accounted for approximately 20% of sales
or $20.4 million for the first quarter of 2002, compared to approximately 16% or
$11.9 million for the first quarter of 2001. For the quarter ended March 31,
2002, sales of products for use in networks over 2000 MHz, which largely consist
of 3G products, accounted for approximately 18% of sales or $18.2 million, as
compared to 20% of sales or $14.7 million for the quarter ended April 1, 2001.

     We track the geographic location of our sales based upon the location of
our customers. Since many of our customers purchase products from us at central
locations and then reship the product with other base station equipment to
locations throughout the world, we are not able to identify the final
installation location of our products. Sales to customers in North America
accounted for the majority of our sales, comprising approximately 77% of revenue
or $79.8 million for the quarter ended March 31, 2002, compared to approximately
56% of revenue or $40.8 million for the quarter ended April 1, 2001. Total
international sales (excluding North American sales) accounted for approximately
23% of revenues or $24.3 million for the quarter ended March 31, 2002, compared
to approximately 44% or $32.2 million for the quarter ended April 1, 2001. Total
Asian sales decreased to approximately 1% of revenues or $1.6 million for the
quarter ended March 31, 2002 from approximately 20% of revenues or $14.4 million
for the quarter ended April 1, 2001. Total sales to Europe and other
international locations increased to $22.7 million or 22% of revenues for the
quarter ended March 31, 2002, as compared to $17.8 million or 24% for the
quarter ended April 1, 2001. See "Additional Factors That May Affect Future
Results--We rely upon a few customers for a significant amount of our
revenues...; --Our success is tied to the growth of the wireless services
market; and --There are many risks associated with international operations...."

     For the first quarter ended March 31, 2002, total sales to Nortel Networks
Corporation and related entities ("Nortel") accounted for approximately 36% of
revenues and sales to Cingular Wireless, Lucent Technologies, Inc. ("Lucent")
and Nokia Networks ("Nokia") each accounted for 10% or more of revenues for the
quarter. Total sales to Nortel accounted for approximately 37% of revenues for
the quarter ended April 1, 2001 and sales to Cingular Wireless, Samsung
Electronics Co. Ltd. ("Samsung") and Verizon Wireless each accounted for 10% or
more of revenues. 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 LM Ericsson Telephone Company ("Ericsson"), Lucent, Motorola,
Inc. ("Motorola"), Nokia and Nortel, is dependent upon the deployment schedules
of wireless network operators who are purchasing wireless infrastructure
equipment from such OEMs and on such OEMs' strategy concerning the outsourcing
of RF power amplifiers. During the first quarter of 2002, several major OEMs
made announcements that they were lowering their expectations for wireless
infrastructure demand for the remainder of 2002. If OEMs significantly reduce
their demand for our products, our business, financial condition and results of
operations would be negatively impacted.

     A number of factors have caused delays and may cause future delays in new
wireless infrastructure and upgrade deployment schedules for both North American
and international deployments, including deployments in Europe, Asia, South
America and other areas. Such factors include economic slowdowns in the wireless
operator's operating region, the inability of wireless network operators to fund
infrastructure deployment plans, delays in government approvals required for
system deployment, reduced subscriber demand for wireless services, high prices
for new spectrum licenses, increased competition and bidding between OEMs for
infrastructure contracts, and delays in the development and delivery of
telephone handsets and base station equipment that are compatible with new
wireless protocols. In addition, a number of factors may cause OEMs to alter
their outsourcing strategy concerning RF power amplifiers, which could cause
such OEMs to reduce or eliminate their demand for external supplies of RF power
amplifiers or shift their demand to alternative suppliers. Such factors include
lower perceived internal manufacturing costs and competitive reasons to remain
vertically integrated. Some OEMs, such as Ericsson, have acquired our
competitors to strengthen their vertical integration. Due to the possible
uncertainties associated with wireless

                                       13

<PAGE>

infrastructure deployments and OEM demand, we have experienced and expect to
continue to experience significant fluctuations in demand from our OEM and
network operator customers. Such fluctuations have caused and may continue to
cause significant reductions in our revenues and/or operating income, which has
harmed and may continue to harm our business, financial condition and results of
operations. See "Additional Factors That May Affect Future Results --We rely
upon a few customers for a significant amount of our revenues...; --There are
many risks associated with international operations...; and --We have
experienced, and will continue to experience, significant fluctuations in sales
and operating results from quarter to quarter...."

Gross Profit

     Cost of sales consists primarily of raw materials, assembly and test labor,
overhead and warranty costs. Gross profit margins for the first quarter of
fiscal 2002 and 2001 were 18.0% and 6.3%, respectively. The increase in our
gross profit margins during the first quarter of 2002 as compared to the first
quarter of 2001 is due to several factors, the most significant being the large
increase in revenues, higher absorption of manufacturing overhead expenses and
improved manufacturing efficiencies associated with the increased production
rates realized in the first quarter of fiscal 2002. The first quarter of fiscal
2001 was negatively impacted by an unanticipated reduction in revenues during
that quarter that resulted in lower absorption of manufacturing overhead expense
and increased labor costs, when viewed as a percentage of revenue. Additionally,
during the first quarter of 2001, we incurred additional costs to ramp up
several new production lines as well as approximately $1.4 million in one-time
expenses directly associated with the move to and consolidation of our
manufacturing operations in our new Santa Ana facility. Our first quarter 2001
gross profit margin was also negatively impacted by a $5.5 million provision for
excess and obsolete inventories that resulted from significant order quantity
reductions, delivery cancellations and push outs of demand during that quarter.

     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 and these
lower sales prices have impacted the average sales prices of our products.
Future pricing actions by our competitors and us may also adversely impact our
gross profit margins and profitability, which could also result in decreased
liquidity and adversely affect our business, financial condition and results of
operations. See "Additional Factors That May Affect Future Results--The wireless
communications infrastructure equipment industry is extremely competitive..."

     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 further reduce our costs through our
manufacturing and/or engineering efforts, our gross margins and profitability
may be adversely affected. For a discussion of effects of declining average
sales prices on our business, see "Additional Factors That May Affect Future
Results--Our average sales prices have declined...."

Operating Expenses

     Sales and marketing expenses consist primarily of sales commissions,
salaries, other expenses for sales and marketing personnel, travel expenses,
charges for customer demonstration units, provisions for credit losses, and
trade show expenses. Sales and marketing expenses decreased by 29% to $3.5
million for the quarter ended March 31, 2002, from $5.0 million for the quarter
ended April 1, 2001. As a percentage of sales, sales and marketing expenses were
3.4% and 6.8% for the quarters ended March 31, 2002 and April 1, 2001,
respectively. The decrease in sales and marketing expenses was primarily
attributable to cost reduction efforts and reduced personnel costs. For the
quarter ended March 31, 2002, approximately $0.03 million in sales and marketing
expenses represents the amortization of a non-compete agreement acquired as part
of our acquisition of Hewlett-Packard Company's RF power amplifier business in
October 1998 (the "HP Acquisition"). This compares to approximately $0.2 million
of sales and marketing expenses related to the amortization of a customer list
and non-compete agreement from the HP Acquisition for the quarter ended April 1,
2001.

     Research and development expenses include ongoing RF power amplifier design
and development expenses, as well as design expenses associated with reducing
the cost and improving the manufacturability of existing RF power

                                       14

<PAGE>

amplifiers. Current programs include cellular, PCS, and next generation "2.5G"
and "3G" products. Research and development expenses decreased by 23% to $8.4
million for the quarter ended March 31, 2002 from $10.9 million for the quarter
ended April 1, 2001. Research and development expenses as a percentage of sales
for the quarters ended March 31, 2002 and April 1, 2001 were 8.0% and 14.9%,
respectively. The decrease in research and development expenses was primarily
due to reductions in material and engineering expenditures as several of our
design projects entered the production stage during the latter half of fiscal
2001.

     General and administrative expenses consist primarily of salaries and other
expenses for management, finance, information systems, facilities maintenance
and human resources. General and administrative expenses decreased by 41% to
$3.6 million for the quarter ended March 31, 2002, from $6.2 million for the
quarter ended April 1, 2001. General and administrative expenses as a percentage
of sales for the quarters ended March 31, 2002 and April 1, 2001 were 3.5% and
8.5%, respectively. The decrease in general and administrative expenses was
primarily attributable to cost reduction efforts, reduced personnel costs, the
non-recurrence of approximately $2.2 million of one-time expenses related to the
move to our new Santa Ana headquarters during the first quarter of 2001, and the
discontinuance of the amortization of goodwill pursuant to SFAS 142, which
approximated $0.1 million during the quarter ended April 1, 2001.

Other Income (Expense)

     We earned other income, net, of $0.7 million during the first quarter of
2002, compared to $2.5 million for the first quarter of 2001. Other income
consists primarily of interest income, net of any interest expense. The decrease
in other income is primarily due to the decline in short-term interest rates on
our cash investments and the recognition of a one-time gain of approximately
$0.6 million from the sale of available-for-sale securities during the quarter
ended April 1, 2001.

Provision (Benefit) for Income Taxes

     During the quarter ended March 31, 2002, we recorded a tax provision at a
rate of 30.0% as compared to a tax benefit at a rate or 36.0% during the quarter
ended April 1, 2001. The decrease in our effective tax rate is primarily due to
the availability of various federal and state 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 March 31, 2002, we had working capital of $205.7
million, including $138.8 million in cash and cash equivalents as compared with
working capital of $186.3 million at December 30, 2001, which included $123.2
million in cash and cash equivalents. We currently invest our excess cash in
short-term, investment-grade, money market instruments with maturities of three
months or less. We typically hold such investments until maturity and then
reinvest the proceeds in similar money market instruments. We believe that all
of our cash investments would be readily available to us should the need arise.

     Net cash provided by operations was approximately $14.6 million during the
quarter ended March 31, 2002, compared with cash used in operations of $6.1
million during the quarter ended April 1, 2001. The increase in cash flow from
operating activities during the first quarter of 2002 as compared to the first
quarter of 2001 is due to several factors, including our increased sales,
improved inventory management and enhanced profitability. Our net accounts
receivable increased to $67.3 million at March 31, 2002 from $59.7 million at
December 30, 2001, consistent with the increase in our sales volume during the
first quarter of 2002. Net inventories increased to $37.2 million at March 31,
2002, from $33.5 million at December 30, 2001 consistent with our increased
production volume. Also consistent with our increased production volume, net
accounts payable increased to $39.1 million at March 31, 2002 from $22.7 million
at December 30, 2001.

     Total capital expenditures during the first quarter of 2002 and 2001 were
approximately $1.0 million and $16.7 million, respectively. The majority of the
capital spending during the first quarter of 2002 was for computer hardware and
electronic test equipment utilized in our manufacturing and research and
development areas. The majority of the capital spending during the first quarter
of 2001 was for capital improvements to our new Santa Ana

                                       15

<PAGE>

manufacturing and headquarters facility and the purchase of electronic test
equipment to expand our manufacturing capacity.

     Net cash provided by financing activities was $2.0 million for the quarter
ended March 31, 2002, compared to $3.5 million for the quarter ended April 1,
2001. Net cash provided by financing activities primarily represents proceeds
from our employee's stock option exercises as well as proceeds from the issuance
of common stock under our Employee Stock Purchase Plan. The amount of cash
provided by employee option exercises is subject to various factors beyond our
control, including the market price of our Common Stock and an individual's
timing decisions regarding the exercise of such options. Therefore, we cannot be
assured that this will continue to be a source of cash for Powerwave on an
on-going basis.

     We currently have a $20 million revolving credit agreement with Comerica
Bank-California. The credit facility provides for an unsecured revolving line of
credit up to a maximum principal amount outstanding at any one time of $20
million (the "Revolving Commitment Amount"). We are required to pay a commitment
fee of 0.25% per annum on the unused portion of the Revolving Commitment Amount.
The commitment fee is payable quarterly in arrears. The revolving credit
facility allows for borrowings based either upon the bank's prime rate (4.75% at
March 31, 2002) or the bank's LIBOR rate plus an applicable LIBOR Margin of
1.25% or 1.50%, based upon our debt leverage ratio. The revolving credit
facility terminates on May 31, 2002 and is in the process of being renewed. The
revolving credit facility contains certain standard affirmative and negative
covenants, including limitations on future indebtedness, restricted payments,
transactions with affiliates, liens, dividends, mergers, transfers of assets and
leverage ratios. At March 31, 2002, we were in compliance with all covenants
contained in the revolving credit facility. There were no amounts outstanding
and the full $20 million of the Revolving Commitment Amount was available to us
at March 31, 2002.

     We incur various obligations pursuant to capital and operating leases in
our normal course of business. As of March 31, 2002, we had total short-term and
long-term obligations under capital leases and operating leases of approximately
$0.1 million and $6.8 million, respectively. We also incur various future
purchase obligations with our vendors and suppliers for the purchase of
inventory, as well as other goods and services, in the normal course of
business. These obligations are generally evidenced by purchase orders and, in
certain cases, supply agreements that contain the terms and conditions
associated with these purchase arrangements. We estimate that the total value of
our purchase obligations was approximately $31.0 million at March 31, 2002. We
also issue standby letters of credit as security for liabilities related to our
workers compensation insurance policies. As of March 31, 2002, our total
commitments secured by standby letters of credit were approximately $0.1
million. We believe that our existing cash balances and funds expected to be
generated from future operations will be sufficient to satisfy these contractual
obligations and that the ultimate payments associated with these commitments
will not have a material adverse impact on our liquidity position.

     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 and fulfill our contractual commitments for at least the next 12
months. For the remainder of fiscal 2002, we currently anticipate capital
spending on property and equipment to be in the range of approximately $10
million, and we plan to fund these expenditures from our existing cash balances.
Our principal sources of liquidity consist of existing cash balances and funds
expected to be generated from future operations. We had cash and cash
equivalents of $138.8 million at March 31, 2002, compared with $123.2 million at
December 30, 2001, and we regularly review our cash funding requirements and
attempt to meet those requirements through a combination of cash on hand and
cash provided by operations. Our ability to increase revenues and generate
profits is subject to numerous risks and uncertainties and any significant
decrease in our revenues or profitability could reduce our operating cash flows
and erode our existing cash balances. Therefore, no assurances can be given that
we will continue to be able to generate positive operating cash flows or
maintain/grow our existing cash balances. See "Additional Factors That May
Affect Future Results --We rely upon a few customers for a significant amount of
our revenues...; --The wireless communications infrastructure equipment industry
is extremely competitive; --Our average sales prices have declined; --Our
success is tied to the growth of the wireless services market; and --We have
experienced, and will continue to experience, significant fluctuations in sales
and operating results from quarter to quarter...."

     In the past, we have occasionally utilized both operating and capital lease
financing for certain equipment purchases used in our manufacturing and research
and development operations and may continue to do so selectively in the future.
We may also require additional funds in the future to support our working
capital requirements or for


                                       16

<PAGE>

other purposes, and we may seek to raise such additional funds through the sale
of public or private equity and/or debt financings, as well as from other
sources. Although we presently have an unsecured line of credit in the amount of
$20 million, no assurances can be given that we will be able to renew this line
of credit under its current terms or obtain additional financing, if required in
the future, on terms favorable to us and our shareholders. Our ability to
maintain existing financing arrangements and to secure additional financing or
sources of funding is dependant on our credit rating and the market price for
our common stock, which are both directly impacted by our ability to grow
revenues and generate profits. See "Additional Factors That May Affect Future
Results --We rely upon a few customers for a significant amount of our
revenues...; --The wireless communications infrastructure equipment industry is
extremely competitive; --Our average sales prices have declined; --Our success
is tied to the growth of the wireless services market; and --We have
experienced, and will continue to experience, significant fluctuations in sales
and operating results from quarter to quarter...."

Disclosure About Foreign Currency Risk

     We have operations in France, the United Kingdom and South Korea that incur
expenses in foreign currencies. These expenses expose us to foreign currency
transactions and result in gains and losses from such transactions. In addition,
a significant portion of our revenues are derived from international sources,
with our international customers accounting for approximately 23% of our first
quarter fiscal 2002 net sales, 41% of fiscal 2001 net sales, and 21% of fiscal
2000 net sales. We regularly pursue new customers in various domestic and
international locations where new deployments or upgrades to existing wireless
communication networks are planned. Such international locations include Europe
and South America, where there has been instability in several of the region's
currencies, including the Brazilian Real and Argentine Peso. Although we
currently invoice most 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 their current financial performance and overall economic conditions. In
the future, we may be required or decide to offer certain international
customers extended payment terms and/or sell additional products or services in
the local currency of such customers. If we sell additional products or services
in a foreign currency, we may be required to convert the payments received into
U.S. dollars or utilize such foreign currencies as payments for expenses of our
business. Given the uncertainty as to when and what specific foreign currencies
we may be required or decide to accept as payment from our international
customers, we cannot predict the ultimate impact that such a decision would have
on our business, gross margins and results of operations.

     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 generally pay for our products
with U.S. Dollars. The past strengthening of the U.S. Dollar as compared to the
Brazilian Real or the South Korean Won, effectively increased the cost of our
products by as much as 100% or more for our Brazilian and South Korean
customers. Such a significant increase in the local currency based cost of such
products makes them less attractive to such customers. Accordingly, changes in
exchange rates, and in particular a strengthening of the U.S. Dollar, may
negatively impact our future sales and gross margins. For further discussion of
the risks associated with our international sales, see "Additional Factors That
May Affect Future Results--There are many risks associated with international
operations..."

Disclosure About Terrorist Risk

     We did not experience any direct impact from the September 11, 2001
terrorist attacks on the United States other than minor delays in certain
material shipments due to disruptions in the air transportation system. These
delays did not have a material impact on us. We are not able to estimate or
predict what long-term impact these events will have on us, our customers, our
suppliers and market demand for our products. Since all of our

                                       17

<PAGE>

manufacturing capability is located in the State of California, we may be
exposed to risks that could include production delays or shutdowns due to
terrorist attacks. Any reduction in demand or loss of customers could have a
negative impact on our results of operations and future sales.

European Monetary Union

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

     On January 1, 1999, the participating countries adopted the euro as their
local currency, initially available for currency trading on currency exchanges
and non-cash transactions such as banking. The existing local currencies, or
legacy currencies, remained legal tender through December 31, 2001. Beginning on
January 1, 2002, euro-denominated bills and coins are now issued for cash
transactions. For a period of up to six months from this date, both legacy
currencies and the euro will be legal tender. On or before July 1, 2002, the
participating countries will withdraw all legacy currencies and exclusively use
the euro.

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

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

New Accounting Pronouncements

     In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets ("SFAS 142"). SFAS 142 addresses the financial accounting and
reporting for acquired goodwill and other intangible assets. Under SFAS 142, the
Company is no longer required to amortize goodwill and other intangible assets
with indefinite lives but will be required to subject these assets to periodic
testing for impairment. SFAS 142 supersedes APB Opinion No. 17, Intangible
Assets, effective for fiscal years beginning after December 15, 2001. We adopted
SFAS 142 effective December 31, 2001 and such adoption did not have a material
impact on our consolidated financial statements.

     Statement of Financial Accounting Standards No. 143, Accounting for
Obligations Associated with the Retirement of Long-Lived Assets ("SFAS 143") was
issued by the FASB in August 2001. SFAS 143 establishes accounting standards for
the recognition and measurement of an asset retirement obligation and its
associated asset retirement cost. It also provides accounting guidance for legal
obligations associated with the retirement of tangible long-lived assets. SFAS
143 is effective for fiscal years beginning after June 15, 2002, with early
adoption permitted. We adopted SFAS 143 effective December 31, 2001 and such
adoption did not have a material impact on our consolidated financial
statements.

     The FASB issued Statement of Financial Accounting standards No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS 144") in
October 2001. SFAS 144 establishes a single accounting model for the impairment
or disposal of long-lived assets and new standards for reporting discontinued
operations. SFAS 144 superseded Statement of Financial Accounting Standards No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of and APB Opinion No. 30, Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions. The
provisions of SFAS 144 are effective in fiscal years beginning after December
15, 2001 and, in general, are to be applied prospectively. We adopted SFAS 144
effective December 31, 2001 and such adoption did not have a material impact on
our consolidated financial statements.


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<PAGE>

Additional Factors That May Affect Our Future Results

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

     .    the ability to add new customers to reduce our dependence on any one
          customer;
     .    the ability to maintain our existing customers;
     .    the ability to timely develop and produce commercially viable products
          at competitive prices;
     .    industry specific factors, including a slowdown in the demand for
          wireless communications and RF power amplifiers;
     .    the impact of any reduction in demand for our products;
     .    the ability to manage expense levels given reductions in demand;
     .    the ability to increase demand for our products from major wireless
          infrastructure original equipment manufacturers, or OEMs;
     .    the ability to produce both new and existing products which meet the
          quality standards of both our existing and potential new customers;
     .    the ability to ramp-up production of new products in both a timely and
          cost effective manner;
     .    the ability to manage rapid change in demand for our products;
     .    the availability and cost of components;
     .    the ability to finance our activities and maintain our financial
          liquidity;
     .    the ability of our products to operate and be compatible with various
          OEMs' base station equipment;
     .    worldwide and regional economic downturns and unfavorable political
          conditions;
     .    the ability to maintain a stable and reliable source of electricity to
          support our operations at a reasonable cost;
     .    the ability to manage future product repairs; and
     .    the ability to accurately anticipate customer demand.

     We rely upon a few customers for a significant amount of our revenues and
     the loss of any one of these customers, or a significant loss, reduction or
     rescheduling of orders from any of our customers, would have a material
     adverse effect on our business, results of operations and financial
     condition.

     We sell most of our products to a small number of customers, and we expect
that this will continue. We believe that our future success depends upon our
ability to broaden our customer base and maintain relationships with major
wireless OEMs, such as Ericsson, LG, Lucent, Motorola, Nokia, Nortel and
Samsung, as well as major operators of wireless networks, such as ALLTEL
Corporation, AT&T Wireless, Cingular Wireless and Verizon Wireless.

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

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

     For the quarter ended March 31, 2002, our largest customer, Nortel,
accounted for approximately 36% of our net sales or $37.5 million. For fiscal
2001, Nortel accounted for approximately 44% of our net sales. For the first
quarter of 2002, our next three largest customers (in alphabetical order)
Cingular Wireless, Lucent and Nokia, each accounted for 10% or more of our net
sales. During the first quarter of fiscal 2002, a number of major OEMs made
announcements lowering their expectations for total wireless infrastructure
demand for the remainder of 2002. If these forecasted reductions in overall
market demand result in significant reductions in demand by our OEM customers,
such reductions will have an adverse effect on our business, results of
operations and financial condition. In addition, several of our customers
continue to experience poor financial performance that has resulted in
downgrades of their credit worthiness by outside credit rating agencies. While
we perform ongoing credit evaluations and have not experienced any significant
payment delays from these customers, further reductions in

                                       19

<PAGE>

their financial liquidity could result in future payment delays and/or the
non-payment of their accounts receivable, which in turn, could have an adverse
effect on our business, results of operations and financial condition.

     There are several examples of the risks related to our customer and
industry concentration. During 2001, we experienced an overall reduction in
revenue of $147 million from our 2000 revenue levels, $80 million of which
related to a single customer, Nortel. During 1998, we had a significant
geographic customer concentration in South Korea, which experienced an economic
and financial crisis. As a result, our fiscal 1998 sales to South Korean
customers decreased by approximately 60% to $30.2 million, or approximately 30%
of total net sales, as compared to $99.3 million or approximately 83% of our
total net sales for fiscal 1997.

     We believe that continued purchases of our products by OEMs is dependent
upon many factors, including the OEMs' view of utilizing third party suppliers
of RF power amplifiers. During the third quarter of 2001, Lucent announced that
it had split off its internal power amplifier group to a new private entity
called Celiant Corporation. During the first quarter of 2002, Andrew
Corporation, a competitor, announced that it had entered into an agreement to
acquire Celiant Corporation and expects to complete such acquisition by the end
of the second quarter of 2002. During fiscal 2000, Ericsson purchased Microwave
Power Devices, Inc., one of our competitors. Any shift in demand by an OEM away
from utilizing third party suppliers of RF amplifiers could have a negative
impact on our business, results of operations and financial condition.
Additionally, OEM purchasers are impacted by their current view of wireless
infrastructure deployments and orders for our products could be significantly
reduced due to any delays of such deployments. A number of factors may cause
delays in wireless infrastructure deployments, including the following factors:

     .    economic or political problems in the wireless operator's operating
          region;
     .    delays in government approvals required for system deployment;
     .    higher than anticipated network infrastructure costs;
     .    technical delays in the development of new wireless protocols, such as
          3G; and
     .    reduced subscriber demand for wireless services.

     In addition, from time to time, OEMs may purchase products from us in large
quantities over a short period of time, which may cause demand for our products
to change rapidly. Due to these and other uncertainties associated with wireless
infrastructure deployments and OEMs' purchasing strategies, we may experience
significant fluctuations in demand from our OEM customers. Such fluctuations
could cause a significant increase in demand that could exceed our production
capacity and could negatively impact our ability to meet customers' demands as
well as potentially impact product quality. Alternatively, such fluctuations
could cause a significant reduction in revenues, which could have a material
adverse effect on our business, results of operations and financial condition.
We cannot guarantee that a major customer will not reduce, delay or eliminate
purchases from us, which could have a material adverse effect on our business,
results of operations and financial condition.


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

     .    variations in the timing, cancellation, or rescheduling of customer
          orders and shipments;
     .    variations in manufacturing costs, capacities and efficiencies;
     .    capacity and production constraints, including constraints associated
          with single-source component suppliers;
     .    delays in qualification of new products or redesigns by our customers;
     .    product failures and associated in-field service support costs;
     .    competitive factors, including pricing, availability and demand for
          competing amplification products;
     .    cancellations or reductions of customer orders and shipments due to
          economic slowdowns in the customers' operating regions;
     .    cancellations or rescheduling of customer orders and shipments due to
          excess inventory levels caused by changes in demand or deployment
          schedules at the customer;
     .    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;


                                       20

<PAGE>

     .    long sales cycles associated with our products;
     .    variations in product development and other operating expenses;
     .    discounts given to certain customers for large volume purchases;
     .    interruptions in the supply of electricity and significant increases
          in the cost of electricity; and
     .    high fixed expenses that increase operating expenses, especially
          during a quarter with a sales shortfall.

     Our sales to customers are usually made under purchase orders with short
delivery requirements. While we receive periodic order forecasts from our major
customers, such customers generally have no obligation to purchase the
forecasted amounts and may cancel orders, change delivery schedules or change
the mix of products ordered with minimal notice. Order deferrals and
cancellations by our customers, declining average sales prices, changes in the
mix of products sold, delays in the introduction of new products and longer than
anticipated sales cycles for our products have in the past adversely affected
our quarterly results of operations. We cannot guarantee that our quarterly
results of operations will not be similarly adversely affected in the future. In
spite of these limitations, we maintain significant work-in-progress and raw
materials inventory as well as increased levels of technical production staff to
meet estimated order forecasts. If customers purchase less than the forecasted
amounts or cancel or delay existing purchase orders, we will have higher levels
of inventory that face a greater risk of obsolescence and excess production
staff. If our customers desire to purchase products in excess of the forecasted
amounts or in a different product mix, we may lack the inventory or
manufacturing capacity to fill their orders. Either situation could have a
material adverse effect upon our business, financial condition and results of
operations and future business with such customers.

     Due to these and other factors, our past results are not reliable
indicators of our future performance. Future revenues and operating results may
not meet the expectations of public market analysts and investors. In either
case, the price of our Common Stock could be materially adversely affected. See
"Our stock price has been and may continue to be volatile and you may not be
able to resell shares of our stock at or above the price you paid for such
shares."

     Our average sales prices have declined, and we anticipate that the average
     sales prices for our products will continue to decline and negatively
     impact our gross profit margins.

     Wireless service providers are placing increasing price pressure on
wireless infrastructure manufacturers, which in turn has resulted in downward
pricing pressure on our products. Competition among third-party suppliers has
also increased the downward price pressure on our products. Since wireless
infrastructure manufacturers frequently negotiate supply arrangements far in
advance of delivery dates, we must often commit to price reductions for our
products before we know how, or if, we can obtain such cost reductions. In
addition, average sales prices are affected by price discounts negotiated for
large volume purchases by certain customers. To offset declining average 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.

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

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

     The expansion of wireless communications services depends on developed
countries, such as the United States, continuing to allow deployment of new
networks and upgrades to existing networks, and on less developed countries
deploying wireless communications networks. Our performance could be adversely
affected by any of the following risks:


                                       21

<PAGE>

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

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

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

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

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

     Our products compete on the basis of the following key characteristics:

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

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

     Our current competitors include Allen Telecom, Inc., Andrew Corporation,
Celiant Corporation, Fujitsu Limited, Hitachi Kokusai Electric Inc., Japan Radio
Co., Ltd., Mitsubishi Electric Corporation and Spectrian

                                       22

<PAGE>

Corporation, in addition to a number of privately held companies throughout the
world, subsidiaries of certain multinational corporations and the RF power
amplifier manufacturing operations of the leading wireless infrastructure
manufacturers such as Ericsson, Motorola, Nokia and Samsung. Some competitors
have significantly greater financial, technical, manufacturing, sales, marketing
and other resources than we do and have achieved greater name recognition for
their products and technologies than we have. We may not be able to successfully
increase our market penetration or our overall share of the RF power amplifier
market. Our results of operations could be adversely impacted if we are unable
to effectively increase our share of the RF power amplifier market.

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

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

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

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

     We also continue efforts to improve our existing cellular, PCS and 3G lines
of RF power amplifier products. Any delays in the shipment of these products may
cause customer dissatisfaction and delay or loss of product revenues. In
addition, it is possible that a significant number of development projects will
not result in manufacturable new products or product improvements.

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

     We may fail to develop products that are sufficiently manufacturable or of
     adequate quality and reliability, which would adversely impact our ability
     to sell our products.

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

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

                                       23

<PAGE>

product quality and meet the quality standards of our customers, which could
cause us to lose such customers. Design problems could damage relationships with
existing and prospective customers and could limit our ability to market our
products to large wireless infrastructure manufacturers, many of which build
their own, high quality RF power amplifiers and have stringent quality control
standards. See "Many wireless infrastructure manufactures have internal RF power
amplifier production capabilities and if these manufacturers begin offering
their own RF power amplifiers, demand for our products would be reduced, and our
business, financial condition and results of operations would be materially
adversely affected."

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

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

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

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

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

     For the first quarter of fiscal 2002, fiscal years 2001, 2000, and 1999,
international revenues (excluding North American sales) accounted for
approximately 23%, 41%, 21%, and 33%, respectively, of our net sales. We
currently expect that international revenues will continue to account for a
significant percentage of our revenues for the foreseeable future.

     We have traditionally invoiced most of our international sales in U.S.
dollars. Accordingly, we do not currently engage in foreign currency hedging
transactions. However, as we continue to expand our international operations, we
may be paid in foreign currencies and, therefore, would become exposed to
possible losses in foreign currency transactions. In addition, in December 2001,
we acquired Toracomm Limited, a company located in Bristol, United Kingdom. Due
to this acquisition, we will incur foreign currency expenses that will expose us
to additional foreign currency transactions, and the resulting gains and losses
from such transactions will be included in our operating results.

                                       24

<PAGE>

     Since we sell our products in many countries, the price of our products in
those countries rises and our sales into those countries may fall when the U.S.
dollar strengthens and becomes more expensive relative to the local currency of
our foreign customers. This happened to us in South Korea during 1998. In
addition, as we sell our products into foreign countries, our products can
become subject to tariffs and import duties which raise the overall price of our
products to such a level that our products are no longer competitive in price to
locally based suppliers. If any of the above risks actually occurs, there may be
a material adverse effect on our business, financial condition and results of
operations.

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

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

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



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

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

     Many wireless infrastructure manufacturers have internal RF power amplifier
     production capabilities and if these manufacturers begin offering their own
     RF power amplifiers, demand for our products would be reduced and our
     business, financial condition and results of operations would be materially
     adversely affected.

     Many of the leading wireless infrastructure equipment manufacturers
internally manufacture their own RF power amplifiers. We believe that our
existing customers continuously evaluate whether to manufacture their own RF
power amplifiers. Certain of our customers regularly produce RF power amplifiers
in an attempt to replace products manufactured by us. We believe that this
practice will continue. During 2000, Ericsson, one of our OEM customers,
purchased Microwave Power Devices, Inc., one of our competitors. In the event
that our customers manufacture their own RF power amplifiers, such customers
could reduce or eliminate their purchases of our products. We cannot guarantee
that our current customers will continue to rely or expand their reliance on us
as an external source of supply for their RF power amplifiers.

     Wireless infrastructure equipment manufacturers with internal manufacturing
capabilities could also sell RF power amplifiers externally to other
manufacturers, thereby competing directly with us. During 2001, Lucent announced
the spinout of its internal amplifier group creating Celiant Corporation, and in
early 2002, one of our competitors, Andrew Corporation, announced its planned
acquisition of Celiant Corporation. Even if we are successful in selling our
products to OEM customers, we believe that such customers will demand price and
other concessions based on their ability to manufacture RF power amplifiers
internally. If, for any reason, our major customers decide to produce their RF
power amplifiers internally or through joint ventures with other competitors, or
require us to participate in joint venture manufacturing with them, our
business, results of operations and financial condition could be materially
adversely affected.

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<PAGE>

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

     We rely upon trade secrets and patents to protect our intellectual
property. We execute confidentiality and non-disclosure agreements with our
employees and suppliers and limit access to and distribution of our proprietary
information. We have an on-going program to identify and file applications for
both U.S. and international patents for various aspects of our technology. We
have been granted a total of 16 U.S. patents, and we currently have 26 separate
U.S. patent applications filed. All of these efforts, along with the knowledge
and experience of our management and technical personnel, strengthen our ability
to market our existing products and to develop new products. The departure of
any of our management and technical personnel, the breach of their
confidentiality and non-disclosure obligations to us, or the failure to achieve
our intellectual property objectives may have a material adverse effect on our
business, financial condition and results of operations.

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

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

     As the number of patents, copyrights and other intellectual property rights
in our industry increases, and as the coverage of these rights and the
functionality of the products in the market further overlap, we believe that we,
along with other companies in our industry, may face more frequent infringement
claims. Such claims, whether or not valid, could result in substantial costs and
diversion of our resources. See "We are at risk of litigation which could result
in substantial costs to us and adversely impact our operations."

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

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

     Actual or alleged defects in our products may create liability to those
     claiming injury.

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

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

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<PAGE>

     Our facilities are located in the State of California, which has
     experienced an electricity shortage, and we are not able to guarantee that
     we, or any of our suppliers located in California, will not experience any
     significant interruptions in electrical service to our or their facilities
     in the future.

     The two largest investor owned electric utility companies in California,
Pacific Gas & Electric and Southern California Edison, have experienced
electricity generation shortages due to the collapse of California's
deregulation strategy. Pacific Gas & Electric has declared voluntary bankruptcy
in order to restructure its outstanding obligations, and Southern California
Edison continues to operate with the potential risk of a future bankruptcy
filing. The previous inability of these companies to purchase electricity
resulted in rolling blackouts in certain parts of the state. Our Southern
California operation is wholly dependent on Southern California Edison and our
Northern California engineering center is wholly dependent upon Pacific Gas and
Electric. As of April 23, 2002, we have not experienced any significant
interruptions in electrical service to our facilities. We currently do not have
backup power generators or alternate sources of power to support our needs in
the event of a blackout and our current insurance does not provide coverage for
any damages that our customers or we may suffer as a result of interruptions of
power supply. The loss of electrical service would cause a temporary shutdown of
our operations resulting in lost production and may require us to recalibrate
our production equipment, resulting in potentially significant unanticipated
costs. In addition, many of our suppliers are located in California and could be
similarly affected. Frequent and continuing shutdowns of our operations and
those of our suppliers could cause us to be unable to manufacture the products
required by our customers in a timely manner. Shipments to our customers could
be delayed, resulting in the delay or loss of product revenues. Such delay or
loss of product revenues could have a material adverse effect on our business,
financial condition and results of operations.

     Furthermore, the deregulation of the energy industry instituted in 1996 by
the California government has caused power prices to increase. Under
deregulation, utilities were encouraged to sell their plants, which
traditionally had produced most of California's power, to independent energy
companies that were expected to compete aggressively on price. Instead, due in
part to a shortage of supply, wholesale prices skyrocketed over the past year.
As a result, we have incurred significant increases in our electricity costs
that are negatively impacting our results of operations. If wholesale prices
continue to increase and these increases are passed on to end users, the
operating expenses associated with our facilities will increase, which could
further harm our results of operations.

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

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

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

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

     The price of shares of our Common Stock has exhibited high levels of
volatility with significant volume and price fluctuations, which makes our
Common Stock unsuitable for many investors. In addition, the stock market has
from time to time experienced significant price and volume fluctuations. The
fluctuations in the stock market are often unrelated to the operating
performance of particular companies, and the market prices for securities of

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<PAGE>

technology companies have been especially volatile. These broad market
fluctuations may adversely affect the market price of shares of our Common
Stock. Our stock price may be affected by the factors discussed above as well
as:

     .    fluctuations in our results of operations or the operations of our
          competitors or customers;
     .    failure of such results of operations to meet the expectations of
          stock market analysts and investors;
     .    reductions in demand or expectations of future demand by our
          customers;
     .    delays or postponement of wireless infrastructure deployments,
          including new 3G deployments;
     .    changes in the political or economic outlook of the markets into which
          we sell our products;
     .    changes in stock market analyst recommendations regarding us, our
          competitors or our customers;
     .    the timing and announcements of technological innovations or new
          products by us or our competitors;
     .    changes in the wireless communications industry; and
     .    general market conditions.


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

    We are not currently party to any legal proceedings or threatened
 proceedings, the adverse outcome of which, individually or in the aggregate, we
 believe would have a material adverse effect on our business, financial
 condition and results of operations. Any potential litigation, regardless of
 its merits, could result in substantial costs to us and divert our attention
 from our operations. Such diversion could have an adverse impact on our
 business, results of operations and financial condition.

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<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     Our financial instruments include cash and cash equivalents and long-term
debt. At March 31, 2002, the carrying values of our financial instruments
approximated their fair values based on current market prices and rates.

     Currently, we do not enter into derivative financial instruments and we do
not currently have any significant direct foreign currency exposure. Aside from
the net operating costs of our foreign operations in South Korea, France and the
United Kingdom, we do not transact business in foreign currencies. As a result,
we do not have any significant direct foreign currency exposure at March 31,
2002.

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

     We currently do not have any material debt outstanding, so we do not have
significant interest rate risk from a liability perspective. We do have a
significant amount of cash and short-term investments with maturities less than
three months. This cash portfolio exposes us to interest rate risk as short-term
investment rates fell significantly during 2001 and have remained low during the
first quarter of 2002. Given the short-term maturities and high-grade investment
quality of our investment portfolio, we believe that we are not subject to
principal fluctuations and the effective interest rate of our portfolio tracks
closely to various short-term money market interest rate benchmarks. During
fiscal 2001, we saw significant interest rate reductions as the U.S. Federal
Reserve has aggressively lowered short-term interest rates. This has contributed
to a significant reduction in interest income from our cash investments.

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

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<PAGE>

                           PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

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

None

        (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:     April 23, 2002                   By: /s/  Kevin T. Michaels
          --------------                   -------------------------------------
                                                    Kevin T. Michaels
                                             Senior Vice President, Finance and
                                               Chief Financial Officer
                                               (Principal Accounting Officer)

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