POWERWAVE TECHNOLOGIES INC, S-1/A, 1996-12-03

POWERWAVE TECHNOLOGIES INC
S-1/A, 1996-12-03
RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 3, 1996
REGISTRATION NO. 333-13679

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AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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POWERWAVE TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 3663 11-2723423
(STATE OR OTHER JURISDICTION
OF
INCORPORATION OR (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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2026 MCGAW AVENUE, IRVINE, CALIFORNIA 92614
(714) 757-0530
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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BRUCE C. EDWARDS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWERWAVE TECHNOLOGIES, INC.
2026 MCGAW AVENUE
IRVINE, CALIFORNIA 92614
(714) 757-0530
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

COPIES TO:
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NICK E. YOCCA, ESQ. ROBERT M. MATTSON, JR., ESQ.
K.C. SCHAAF, ESQ. TAMARA POWELL TATE, ESQ.
MICHAEL H. MULROY, ESQ. KRISTINA M. JODIS, ESQ.
STRADLING, YOCCA, CARLSON & RAUTH MORRISON & FOERSTER LLP
A PROFESSIONAL CORPORATION 19900 MACARTHUR BOULEVARD, 12TH FLOOR
660 NEWPORT CENTER DRIVE, SUITE 1600 IRVINE, CALIFORNIA 92612
NEWPORT BEACH, CALIFORNIA 92660 (714) 251-7500
(714) 725-4000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION

DECEMBER 3, 1996

2,400,000 Shares

LOGO

Common Stock

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Of the 2,400,000 shares of Common Stock offered hereby, 1,800,000 shares are
being sold by Powerwave Technologies, Inc., a Delaware corporation ("Powerwave"
or the "Company") and 600,000 shares are being sold by the Selling
Shareholders. The Company will not receive any of the proceeds from the sale of
shares by the Selling Shareholders. See "Principal and Selling Shareholders."
Prior to the Offering, there has been no public market for the Common Stock of
the Company. It is currently estimated that the initial public offering price
of the Common Stock will be between $11.00 and $13.00 per share. See
"Underwriting" for the factors to be considered in determining the initial
public offering price. The Company's Common Stock has been approved for
quotation on the Nasdaq National Market under the symbol "PWAV."

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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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PRICE UNDERWRITING PROCEEDS PROCEEDS
TO DISCOUNTS AND TO TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS
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<S> <C> <C> <C> <C>
Per Share........................ $ $ $ $
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Total (3)........................ $ $ $ $
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(1) See "Underwriting" for information relating to indemnification of the
Underwriters.
(2) Before deducting offering expenses estimated at $950,000 payable by the
Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
360,000 additional shares of Common Stock solely to cover over-allotments,
if any. To the extent that the option is exercised, the Underwriters will
offer the additional shares at the Price to Public shown above. If the
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ respectively. See "Underwriting."

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The shares of Common Stock are offered by the several Underwriters subject to
prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the
offices of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about
, 1996.
Alex. Brown & Sons
INCORPORATED
UBS Securities
Wessels, Arnold & Henderson

THE DATE OF THIS PROSPECTUS IS , 1996
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Powerwave designs, manufacturers and markets both single channel and multi-
channel amplifiers, with a primary focus on multi-channel products. Multi-
channel amplifiers integrate the functions of several power amplifiers and
cavity filters within a single unit, thereby reducing service providers'
equipment and maintenance costs and space requirements while providing
increased call capacity. The Company's products are currently being utilized
in cellular base stations in both digital and analog-based networks and the
Company has recently delivered initial prototype units for PCS networks.

[Graphic displaying difference between single channel RF power amplifier
using separate cavity filters and Company's multi-channel RF power
amplifier, and a picture of one of the Company's products.]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus.

THE COMPANY

Powerwave designs, manufactures and markets ultra-linear radio frequency
("RF") power amplifiers for use in the wireless communications market. The
Company's amplifiers, which are key components in wireless communications
networks, increase the signal strength of wireless transmissions while reducing
interference, or "noise." The reduction of noise enables wireless service
providers to offer improved service to subscribers by offering clearer call
connections with less interference. Increasing the signal strength of wireless
transmissions also improves service by reducing the number of interrupted or
dropped calls. Powerwave's RF power amplifiers achieve ultra-linearity at
increased levels of amplification through the application of "feedforward"
technology, which enables the Company's multi-channel power amplifiers to
significantly reduce RF interference thereby increasing the efficiency of the
wireless service provider's network.

Powerwave manufactures both single channel and multi-channel amplifiers, with
a primary focus on multi-channel products. Multi-channel amplifiers integrate
the functions of several power amplifiers and cavity filters within a single
unit, thereby reducing service providers' equipment and maintenance costs and
space requirements while providing increased call capacity. The Company's
products are currently being utilized in cellular base stations in both digital
and analog-based networks and the Company has recently delivered initial
prototype units for personal communications services ("PCS") networks. The
Company's products support a wide range of digital and analog transmission
protocols including CDMA, TDMA, GSM, FHMA, AMPS and TACS. The Company also
produces power amplifiers for the specialized mobile radio ("SMR") market,
which is characterized as a two-way radio market with devices commonly utilized
by police and emergency personnel and the business dispatch marketplace. The
Company also manufactures air-to-ground amplifiers used both in ground stations
and in commercial aircraft to amplify telephone transmissions between airline
passengers and ground-based networks.

The Company began selling RF power amplifiers for use in analog wireless
networks in 1985. In 1995, the Company began selling multi-channel ultra-linear
amplifiers for installation in digital cellular base stations in South Korea,
and the Company believes that it is the leading supplier of amplifiers to the
South Korean market. South Korea is experiencing rapid economic development and
is one of the first countries to begin the process of installing a nationwide
digital cellular network. The Company's customers in the South Korean market
include Hyundai Electronics Industries Co. ("Hyundai"), LG Information &
Communications, Ltd. ("LGIC") and Samsung Electronics Co. Ltd. ("Samsung"). The
Company also sells amplifiers domestically to numerous wireless equipment
suppliers, including ADC Kentrox Industries, Inc., AirNet Communications Corp.,
In-Flight Phone Corp., Metawave Communications Corporation and Phoenix Wireless
Group, Inc.

The worldwide wireless communications market, which consists of cellular,
PCS, SMR, paging, air-to-ground and other applications, has experienced
significant growth in recent years. The growth in wireless communications is
largely attributable to increased affordability in consumer equipment, such as
cellular phones and pagers, more comprehensive service coverage at lower prices
and technological advancements which have resulted in improved transmission
quality and reliability. International growth has also been driven by the
build-out of cellular networks, including those designed to serve as primary
telephone systems in part due to inadequacies in existing wireline
infrastructures. As demand continues to grow for wireless communications, many
service providers either are switching from analog networks

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to digital networks, which provide for a greater number of transmissions and
increased call quality over the same range of existing frequencies, or are
further upgrading the capacity of their existing analog networks.

Consumer demand for additional services, combined with capacity constraints
and other limitations of cellular networks, has also led to the development of
PCS, another form of wireless communications which utilizes a higher frequency
range and lower power than traditional cellular networks. The continued growth
of wireless communications networks throughout the world along with continued
upgrading of existing analog systems is expected to result in increased demand
for wireless network infrastructure equipment, such as the ultra-linear
RF power amplifiers manufactured by the Company.

The Company's strategic objective is to be the leading third-party supplier
of high performance RF power amplifiers for use in both digital and analog
wireless networks worldwide. The Company's strategy includes the following key
elements: (i) provide leading technology to the RF amplifier industry;
(ii) leverage its position as a leading multi-channel amplifier supplier; (iii)
expand relationships with leading original equipment manufacturers ("OEMs");
(iv) develop and market amplifier products for PCS networks; (v) maintain its
commitment to quality, reliability and manufacturability; and (vi) increase
Powerwave's involvement in its customers' product development process. The
Company intends to pursue each of these elements of its strategy by focusing
its core strengths on the global wireless communications market.

The Company was incorporated in Delaware in January 1985 under the name
Milcom International, Inc. and changed its name to Powerwave Technologies, Inc.
in June 1996. The Company's headquarters and principal place of business is
located at 2026 McGaw Avenue, Irvine, California 92614, and its telephone
number is (714) 757-0530.

4
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THE OFFERING

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Common Stock offered by the Company.......... 1,800,000 shares
Common Stock offered by the Selling
Shareholders................................ 600,000 shares
Common Stock to be outstanding after the
Offering.................................... 15,862,500 shares(1)(2)
Use of proceeds.............................. The net proceeds of the Offering will be
used for capital expenditures, working
capital, new product development and other
general corporate purposes. See "Use of
Proceeds."
Nasdaq National Market symbol................ PWAV
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SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
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<CAPTION>
NINE MONTHS ENDED
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YEAR ENDED DECEMBER 31, SEPTEMBER 30, SEPTEMBER 29,
--------------------------- ------------- -------------
1993 1994 1995 1995 1996
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<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales.............. $ 8,717 $ 22,861 $ 36,044 $22,384 $43,594
Cost of sales.......... 6,567 14,466 22,713 14,554 25,371
Gross profit........... 2,150 8,395 13,331 7,830 18,223
Operating expenses:
Sales and marketing.... 387 570 1,557 1,013 3,315
Research and
development........... 581 1,433 2,252 1,401 4,033
General and
administrative........ 559 1,518 1,958 1,288 2,004
Total operating
expenses.............. 1,527 3,521 5,767 3,702 9,352
Operating income....... 623 4,874 7,564 4,128 8,871
Other income (expense). (5) (20) 32 -- 333
Income before income
taxes................. 618 4,854 7,596 4,128 9,204
Provision for income
taxes................. 267 1,908 3,116 1,694 3,774
Net income............. $ 351 $ 2,946 $ 4,480 $ 2,434 $ 5,430
Pro forma net income
per share(2).......... $ .30 $ .37
Pro forma weighted
average common
shares(2)............. 14,774 14,774
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<CAPTION>
SEPTEMBER 29, 1996
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ACTUAL PRO FORMA(2) AS ADJUSTED(2)(3)
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BALANCE SHEET DATA:
Working capital.......................... $11,197 $12,547 $31,685
Total assets............................. 25,060 25,060 44,198
Long-term debt........................... 41 41 41
Total shareholders' equity............... 503 16,351 35,489
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(1) Excludes 1,823,179 shares of Common Stock issuable upon exercise of
outstanding stock options as of September 29, 1996 at a weighted average
exercise price of $3.31 per share. Under an agreement with the Company,
certain shareholders have agreed that, once the Company has issued an
initial 1,095,000 shares of Common Stock under the 1995 Stock Option Plan,
any additional shares issued under that Plan upon an option exercise will
be coupled with a pro rata redemption from those shareholders of an equal
number of shares at a redemption price equaling the option exercise price.
See "Capitalization" and "Management--1995 Stock Option Plan."
(2) Gives effect to the conversion of 3,375,900 shares of Series A Convertible
Preferred Stock into 5,063,850 shares of Common Stock upon the closing of
the Offering and the reversal of accrued dividends payable thereon. See
Note 2 of notes to the consolidated financial statements, "Capitalization,"
"Description of Capital Stock" and "Management--1995 Stock Option Plan."
(3) Adjusted to reflect the sale by the Company of 1,800,000 shares of Common
Stock at an assumed initial public offering price of $12.00 per share and
the application of the estimated net proceeds therefrom. See "Use of
Proceeds," "Capitalization" and "Selected Consolidated Financial Data."

Except as otherwise specified, all information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option. See "Underwriting." Except
for the consolidated financial statements and as otherwise noted, all
information in this Prospectus has been adjusted to give effect to (i) the
conversion of all outstanding shares of Series A Convertible Preferred Stock
("Series A Preferred Stock") into Common Stock and the reversal of accrued
dividends payable thereon and (ii) a three-for-two stock split of the
outstanding shares of Common Stock, each of which will occur prior to or upon
completion of the Offering. See "Capitalization" and "Description of Capital
Stock."

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RISK FACTORS

In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing the shares of Common Stock offered hereby. This
Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere in this Prospectus.

CUSTOMER CONCENTRATION

A small number of customers account for a substantial majority of the
Company's net sales. Although the Company is attempting to expand its customer
base, the Company expects that a limited number of customers will continue to
represent a substantial portion of the Company's net sales for the foreseeable
future. The Company believes that its future success depends upon its ability
to broaden its customer base. The Company's four largest customers include, in
alphabetical order, Hyundai, In-Flight Phone Corp. ("In-Flight"), LGIC and
Samsung. For the nine months ended September 29, 1996, these customers, each
of which accounted for more than 10% of the Company's net sales, accounted for
approximately 81% of the Company's net sales in the aggregate. Hyundai, LGIC
and Samsung currently purchase products for implementation in the South Korean
digital cellular telephone network. The Company expects that sales to these
customers of products for use in the South Korean cellular network will
decline as that network nears completion, which is expected to occur in the
next one to two years. See "--Reliance upon South Korean Market and Growth of
Wireless Services Market." In-Flight purchases the Company's products for
implementation in an air-to-ground wireless network. As this network has been
substantially completed, the Company expects sales to In-Flight to decrease
significantly in future periods. Sales of power amplifiers to wireless
infrastructure equipment suppliers are expected to continue to account for a
substantial majority of the Company's product sales. A limited number of large
OEMs account for a majority of RF power amplifier purchases in the wireless
infrastructure market, and the Company's success will be dependent upon its
ability to establish and maintain relationships with these types of customers.
There can be no assurance that a major customer will not reduce, delay or
eliminate its purchases from the Company, which could have a material adverse
effect on the Company's business, results of operations and financial
condition. In addition, major customers also have significant leverage and may
attempt to change the terms, including pricing, upon which the Company and
such customers do business, thereby adversely affecting the Company's
business, results of operations and financial condition. Further, one or more
of these customers may determine to manufacture amplifiers internally thus
reducing or eliminating its purchases from the Company and possibly becoming a
direct competitor of the Company. See "--Internal Amplifier Production
Capabilities of OEMs." As a result, the Company's success will depend on its
ability to expand its customer base and, in particular, to successfully market
its products to OEMs for wireless networks.

The Company currently sells to its major customers under purchase orders
which are usually placed with short delivery requirements, although the
Company is attempting to negotiate long-term supply agreements with these
customers. As such, while the Company receives periodic order forecasts from
its major customers, such customers have no obligation to purchase the
forecasted amounts. Nonetheless, the Company maintains significant work-in-
progress and raw materials inventory as well as maintaining increased levels
of technical production staff to meet order forecasts. To the extent its major
customers purchase less than the forecasted amounts, the Company will have
higher levels of inventory than otherwise needed, increasing the risk of
obsolescence, and the Company will have increased levels of production staff
to support such forecasted orders. Such higher levels of inventory and
increased employee levels would reduce the Company's liquidity and could have
a material adverse effect on the Company's results of operations and financial
condition. In addition, in the event the Company's major customers desire to
purchase products in excess of the forecasted amounts, the Company may not
have

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sufficient inventory or manufacturing capacity to fill such increased orders,
which could have a material adverse effect on the Company's relationships and
future business with its customers.

RELIANCE UPON SOUTH KOREAN MARKET AND GROWTH OF WIRELESS SERVICES MARKET

Three of the Company's customers, Hyundai, LGIC and Samsung, collectively
accounted for approximately 69% of the Company's net sales for the first nine
months of 1996 and are expected to account for a higher percentage of sales
during the remainder of 1996. These customers supply equipment for
implementation in the South Korean digital cellular telephone network. The
delay or termination of the implementation of the South Korean digital
cellular telephone network could have a material adverse effect on the
Company's business, results of operations and financial condition. In
addition, the Company believes that the South Korean digital cellular network
is more than 50% completed and the buildout phase of this network will be
completed over the next two years. Accordingly, the Company's sales related to
that network are anticipated to decrease significantly over the same time
period.

During fiscal 1995 and the first nine months of 1996, Hyundai, LGIC and
Samsung purchased multi-channel linear RF power amplifiers for installation in
the buildout of the South Korean digital cellular network. These customers
also have begun marketing wireless infrastructure equipment for installation
in networks outside of the South Korean market. There can be no assurance that
such customers will be successful in obtaining new business outside of South
Korea or that, if successful, they will continue to purchase amplifiers from
the Company. Any significant decrease in the Company's sales of amplifiers to
these customers, without an offsetting increase in sales to other customers,
would have a material adverse effect on the Company's business, results of
operations and financial condition.

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

FLUCTUATIONS IN QUARTERLY RESULTS

The Company experiences, and expects to continue to experience, significant
fluctuations in sales and operating results from quarter to quarter. Quarterly
results fluctuate due to a number of factors, any of which could have a
material adverse effect on the Company's business, results of operations and
financial condition. In particular, the Company's quarterly results of
operations can vary due to the timing, cancellation, or rescheduling of
customer orders and shipments; variations in manufacturing capacities,
efficiencies and costs; the availability and cost of components; the timing,
availability and sale of new

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products by the Company; changes in the mix of products having differing gross
margins; warranty expenses; changes in average sales prices; long sales cycles
associated with the Company's products; and variations in product development
and other operating expenses. The Company's quarterly revenues are also
affected by volume discounts given to certain customers for large volume
purchases over a given period of time. In addition, the Company's quarterly
results of operations are influenced by competitive factors, including
pricing, availability and demand for the Company's and competing amplification
products. A large portion of the Company's expenses are fixed and difficult to
reduce in a short period of time. If net sales do not meet the Company's
expectations, the Company's fixed expenses would exacerbate the effect of such
net sales shortfall. Furthermore, announcements by the Company or its
competitors regarding new products and technologies could cause customers to
defer purchases of the Company's products. In addition, while the Company
receives periodic order forecasts from its major customers, such customers
have no binding obligation to purchase the forecasted amounts. See "--Customer
Concentration." Order deferrals and cancellations by the Company's customers,
declining average sales prices, delays in the Company's introduction of new
products and longer than anticipated sales cycles for the Company's products
have in the past adversely affected the Company's quarterly results of
operations. There can be no assurance that the Company's quarterly results of
operations will not be similarly adversely affected in the future.

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

COMPETITION

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

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

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of the Company, continuously evaluate whether to manufacture their own RF
power amplifiers rather than purchase them from third-party vendors such as
the Company. These and other large manufacturers of wireless infrastructure
equipment could also determine to offer and sell their power amplifiers to
other OEMs or customers of the Company and compete directly with the Company.
In addition, these or other OEMs may enter into joint ventures or strategic
relationships with the Company's competitors, in which event the Company's
ability to sell products to such OEMs could be reduced or eliminated. See "--
Internal Amplifier Production Capabilities of OEMs."

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

RAPID TECHNOLOGICAL CHANGE; DEPENDENCE ON NEW PRODUCTS

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

The Company introduced a second-generation multi-channel linear RF power
amplifier for cellular base stations in August 1996 and intends to introduce a
new amplifier for PCS networks in the fourth quarter of 1996. Delays in
commencement of commercial shipments of these products may result in customer
dissatisfaction and delay or loss of product revenues, which could have a
material adverse effect on the Company's business, results of operations and
financial condition. No assurance can be given that the Company's product
development efforts will be successful, that its new products will achieve
customer acceptance or that its customers' products and services will achieve
market acceptance. If a significant number of development projects do not
result in manufacturable new products or product enhancements within
anticipated time-frames, the Company's business, results of operations and
financial condition could be materially adversely affected. Any failure by the
Company to anticipate or respond adequately to technological developments and
customer requirements, or any significant delays in product development,
introduction or deliveries, could result in a loss of competitiveness and
reduced net sales. While the Company maintains an active development program
to attempt to improve its product offerings, there can be no assurance that
such efforts will be successful or that other companies or institutions will
not develop and commercialize products based on new technologies that are
superior in performance or cost-effectiveness to the Company's products. There
also can be no assurance that the Company's products will not be rendered
obsolete by the introduction and acceptance of new communications protocols.
See "Business--Product Development."

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PROPRIETARY TECHNOLOGY; RISK OF THIRD-PARTY CLAIMS OF INFRINGEMENT

The Company relies primarily upon trade secrets to protect its intellectual
property. The Company generally enters into confidentiality and non-disclosure
agreements with its employees and limits access to and distribution of its
proprietary information. In addition, the Company has applied for a U.S.
patent for its proprietary implementation of feedforward technology and
regularly examines various aspects of its technology for possible patent
applications. The Company believes that its success depends upon the knowledge
and experience of its management and technical personnel and its ability to
market its existing products and to develop new products.

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

RISKS OF DOING BUSINESS IN INTERNATIONAL MARKETS

For the fiscal years 1993, 1994 and 1995 and the nine months ended September
29, 1996, international revenues accounted for approximately 8%, 9%, 67% and
73%, respectively, of the Company's net sales. The Company expects that
international revenues will continue to account for a significant percentage
of the Company's net sales for the foreseeable future. As a result, the
Company is subject to various risks, including a greater difficulty of
administering business globally, compliance with multiple and potentially
conflicting regulatory requirements such as export requirements, tariffs and
other barriers, differences in intellectual property protections, health and
safety requirements, difficulties in staffing and managing foreign operations,
longer accounts receivable cycles, currency fluctuations, restrictions against
the repatriation of earnings, export control restrictions, overlapping or
differing tax structures, political and economic instability and general trade
restrictions. If any of these risks materializes, it could have a material
adverse effect on the Company's business, results of operations and financial
condition. In particular, a large portion of the Company's existing customers
and potential new customers are servicing new markets in developing countries
that may deploy wireless communication networks as an alternative to the
construction of a wireline infrastructure. Such countries may decline to
construct wireless

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communication systems, or construction of such systems may be delayed for a
variety of reasons, including business and economic conditions and changes in
economic stability due to factors such as increased inflation and political
turmoil. In recent years, a majority of the Company's net sales resulted from
the sale of products to a small number of companies in South Korea, where
future sales may be dependent upon continuing favorable trade relations with
the United States and a lack of political conflicts with North Korea. Any
significant change in United States trade relations or the economic or
political stability of foreign locations in which the Company sells its
products could have a material adverse effect on the Company's business,
results of operations and financial condition. See "--Reliance upon South
Korean Market and Growth of Wireless Services Market."

The Company's foreign sales are generally invoiced in U.S. dollars and,
accordingly, the Company does not currently engage in foreign currency hedging
transactions. However, as the Company continues to expand its international
operations, the Company may be paid in foreign currencies and exposure to
losses in foreign currency transactions may increase. The Company may choose
to limit such exposure by the purchase of forward foreign exchange contracts
or similar hedging strategies. There can be no assurance that any currency
hedging strategy would be successful in avoiding exchange-related losses. In
addition, if the relative value of the U.S. dollar in comparison to the
currency of the Company's foreign customers should increase, the resulting
effective price increase of the Company's products to such foreign customers
could result in decreased sales which could have a material adverse impact on
the Company's business, results of operations and financial condition. See
"Business--Marketing and Distribution, International Sales."

INTERNAL AMPLIFIER PRODUCTION CAPABILITIES OF OEMS

Many of the leading wireless telecommunications infrastructure equipment
manufacturers internally manufacture their own RF power amplifiers, and the
Company believes that its existing customers continuously evaluate whether to
manufacture their own amplifiers. In the event that such customers decide to
increase or shift completely to the internal manufacture of amplifiers, such
customers could eliminate or reduce their purchases of the Company's products.
There can be no assurance that the Company's current customers will continue
to rely, or expand their reliance, on the Company as an external source of
supply for their RF power amplifiers, or that other wireless
telecommunications OEMs such as Lucent, Ericsson, Motorola, Nokia and Nortel
will become and remain customers of the Company. OEMs with internal
manufacturing capabilities could also sell amplifiers externally to other
OEMs, thereby competing directly with the Company. In addition, even if the
Company were successful in selling its products to these OEMs, it is
anticipated that such OEMs would demand price and other concessions based on
their ability to manufacture amplifiers internally. While the Company attempts
to negotiate long-term supply contracts with its customers, there can be no
assurance that it will be able to enter into such contracts on terms that are
acceptable to the Company, if at all, or that contracts will not be terminated
on short notice. Any significant loss of sales to current customers, not
offset by sales to other customers, would have a material adverse effect on
the Company's business, results of operations and financial condition.

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

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DECLINING AVERAGE SALES PRICES

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

NO ASSURANCE OF PRODUCT MANUFACTURABILITY, QUALITY OR RELIABILITY

Manufacturing the Company's products is an extremely complex process and
requires significant time and expertise to tune the products to meet
customers' specifications. The ability of the Company to cost-effectively
manufacture its RF power amplifier products in volume is substantially
dependent upon the Company's ability to tune these products to meet
specifications in an efficient manner. In this regard, the Company is
dependent upon its staff of trained technicians. If the Company is unable to
design its products to minimize the manual tuning process or if the Company
were unable to attract additional trained technicians or were to lose the
services of a number of its trained technicians, the Company's business,
results of operations and financial condition would be materially adversely
affected. In addition, the Company has in the past and may from time to time
in the future experience quality problems with its products. The Company has
been required to replace certain components in certain of its products in the
past in accordance with warranty provisions under which the products were
sold. If such problems were to reoccur, the Company could experience increased
costs, delays in or cancellations or rescheduling of orders or deliveries and
product returns, any of which could damage relationships with current
customers and have a material adverse effect on the Company's business,
results of operations and financial condition. Such quality problems could
also damage relationships with prospective customers and, in particular, could
limit the Company's ability to market its products to large OEMs, many of
which manufacture power amplifiers internally. See "--Internal Amplifier
Production Capabilities of OEMs."

MANAGEMENT OF GROWTH; DEPENDENCE UPON KEY PERSONNEL

The growth in the Company's business has placed, and is expected to continue
to place, a significant strain on the Company's management and operations. The
Company's ability to compete effectively and to manage future expansion of its
operations, if any, will require the Company to continue to improve its
financial and management controls, reporting systems and procedures on a
timely basis and effectively expand, train and manage its work force. In
particular, the Company must carefully manage production and inventory levels
to meet increasing product demand and new product introductions. Inaccuracies
in demand forecasts in the environment in which the Company operates can
quickly result in either insufficient or excessive inventories and
disproportionate overhead expenses. The Company plans to expand the geographic
scope of its customer base and operations. The Company also is in the process
of implementing a number of new financial and management controls, reporting
systems and procedures. In addition, many members of the Company's senior
management have recently joined the Company. The Company's President and Chief
Executive Officer joined the Company in February 1996, its Executive Vice
President joined the Company in April 1996, its Vice President, Finance and
Chief Financial Officer joined the Company in June 1996, and its Vice
President, Engineering joined the Company in July 1996. In

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<PAGE>

addition to its senior management, the Company has recently hired a
significant number of employees, including engineers, production technicians
and sales and marketing employees, and plans to further increase its total
employee base. In the event that the Company's new personnel are unable to
work effectively as a team or achieve desired levels of production, the
Company's business, results of operations and financial condition could be
materially adversely affected. There can be no assurance that the Company will
be able to continue to attract and retain qualified personnel necessary for
the development of its business. The Company's failure to manage growth
effectively would have a material adverse effect on the Company's business,
operating results and financial condition. See "Management."

Due to the specialized nature of the Company's business, the Company is
highly dependent on the continued services of, and on its ability to attract
and retain, qualified technical, marketing and managerial personnel.
Competition for such personnel is intense, and the loss of any of such
persons, as well as the failure to recruit and train additional technical
personnel in a timely manner, could have a material adverse effect on the
Company's business, results of operation and financial condition. In
particular, the Company's success is dependent upon the services of Alfonso G.
Cordero, a founder of the Company and its Chairman of the Board of Directors,
and Ki Y. Nam, Vice President, New Business Development. The loss of their
services would materially adversely affect the Company.

DEPENDENCE ON SINGLE SOURCES FOR KEY COMPONENTS

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

RISKS ASSOCIATED WITH DEVELOPING TECHNOLOGIES; PRODUCT LIABILITY

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

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ENVIRONMENTAL REGULATIONS

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

GOVERNMENT REGULATION OF COMMUNICATIONS INDUSTRY

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

POSSIBLE VOLATILITY OF STOCK PRICE

The stock market has from time to time experienced significant price and
volume fluctuations that are unrelated to the operating performance of
particular companies, and the market prices for securities of technology
companies have been especially volatile. These broad market fluctuations may
adversely affect the market price of the Company's Common Stock. Factors such
as fluctuations in the Company's

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<PAGE>

results of operations, failure of such results of operations to meet the
expectations of stock market analysts and investors, change in stock market
analyst recommendations regarding the Company, timing and announcements of
technological innovations or new products by the Company or its competitors,
developments with respect to patents and proprietary rights, timing and
announcements of developments related to the Company's customers, results of
operations of certain of the Company's competitors, government regulation,
political instability in countries in which the Company sells its products,
changes in the wireless communications industry generally and general market
conditions may have a significant adverse effect on the market price of the
Common Stock.

FUTURE CAPITAL REQUIREMENTS

The Company's future capital requirements will depend upon many factors,
including the development of new wireless communications networks, the
establishment and maintenance of adequate manufacturing facilities, the
success of the Company's research and development efforts, the expansion of
the Company's sales and marketing efforts and the status of competitive
products. The Company believes that the net proceeds from the Offering,
together with existing cash balances and funds expected to be generated from
operations, financings through equipment lease transactions and available
lines of credit will be adequate to fund its operations for at least the 12
months following the Offering. There can be no assurance, however, that the
Company will not require additional financing during such time. Further, there
can be no assurance that any additional financing will be available to the
Company on acceptable terms, if at all. If additional funds are raised by
issuing equity securities, further dilution to the existing shareholders could
result. If adequate funds are not available, the Company may be required to
delay, scale back or eliminate its research and development or manufacturing
programs or obtain funds through arrangements with partners or others that may
require the Company to relinquish rights to certain of its technologies or
potential products or other assets. Accordingly, the inability to obtain or
difficulty in obtaining such financing could have a material adverse effect on
the Company's business, results of operations and financial condition.

CONTROL BY DIRECTORS, OFFICERS AND AFFILIATED ENTITIES

The Company's directors, officers and entities affiliated with them will, in
the aggregate, beneficially own approximately 76% of the Company's outstanding
Common Stock following the completion of the Offering. These shareholders, if
acting together, would be able to control substantially all matters requiring
approval by the shareholders of the Company, including the election of
directors and the approval of mergers or other business combination
transactions. Such concentration of ownership could discourage or prevent a
change in control of the Company. See "Principal and Selling Shareholders."

NO PRIOR PUBLIC TRADING MARKET

Prior to the Offering there has been no public market for the Common Stock,
and there can be no assurance that an active trading market will develop or,
if one does develop, that it will be maintained. The initial public offering
price, which will be established by negotiations between the Company, the
Selling Shareholders and the Representatives of the Underwriters, may not be
indicative of prices that will prevail in the trading market. See
"Underwriting."

EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS

Certain provisions of the Company's Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws may have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party
from attempting to acquire, control of the Company. Such provisions could
limit the price that certain investors might be willing to pay in the future
for shares of the Company's Common Stock. The Company's Amended and Restated
Certificate of Incorporation allows the Company to issue up to 5,000,000
shares of currently undesignated Preferred Stock, to determine the

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<PAGE>

powers, preferences and rights and the qualifications, limitations or
restrictions granted to or imposed on any unissued series of that Preferred
Stock, and to fix the number of shares constituting any such series and the
designation of such series, without any vote or future action by the
shareholders. The Preferred Stock could be issued with voting, liquidation,
dividend and other rights superior to the rights of the Common Stock. The
Amended and Restated Certificate of Incorporation also eliminates the ability
of shareholders to call special meetings. The Company's Amended and Restated
Bylaws require advance notice to nominate a director or take certain other
actions. Such provisions may make it more difficult for shareholders to take
certain corporate actions and could have the effect of delaying or preventing
a change in control of the Company. In addition, the Company has not elected
to be excluded from the provisions of Section 203 of the Delaware General
Corporation Law, which imposes certain limitations on transactions between a
corporation and "interested" shareholders, as defined in such provisions. See
"Description of Capital Stock."

ADVERSE IMPACT OF SHARES ELIGIBLE FOR FUTURE SALE

Sales of Common Stock (including Common Stock issued upon the exercise of
outstanding options) in the public market after the Offering could materially
adversely affect the market price of the Common Stock. Such sales also might
make it more difficult for the Company to sell equity securities or equity-
related securities in the future at a time and price that the Company deems
acceptable, or at all. Upon the completion of the Offering, the Company will
have 15,862,500 shares of Common Stock outstanding. Of these outstanding
shares of Common Stock, the 2,400,000 shares sold in the Offering will be
freely tradable without restriction under the Securities Act of 1933, as
amended (the "Securities Act"), unless purchased by "affiliates" of the
Company, as that term is defined in Rule 144 under the Securities Act. The
remaining shares of Common Stock held by existing shareholders are "restricted
securities" as that term is defined in Rule 144 under the Securities Act, and
were issued and sold by the Company in reliance on exemptions from the
registration requirements of the Securities Act. These restricted shares may
be sold in the public market only if registered or pursuant to an exemption
from registration, such as Rule 144, 144(k) or 701 under the Securities Act.
All officers, directors and existing shareholders have agreed, pursuant to
certain lock-up agreements, that they will not offer, sell, contract to sell,
grant any option to sell or otherwise dispose of, directly or indirectly, any
shares of Common Stock owned by them for a period of 180 days after the date
of this Prospectus without the prior written consent of Alex. Brown & Sons
Incorporated. Furthermore, all option holders are precluded from selling any
shares issuable to them through the exercise of options for a 180-day lock
period, under the terms of such options. As a result of the lock-up
agreements, no shares of Common Stock will become available for sale in the
public market under either Rule 144 or 144(k). Upon expiration of the lock-up
agreements, approximately 1,422,868 shares of Common Stock held by existing
shareholders will be eligible for sale without restriction pursuant to Rule
144(k), and approximately 7,253,776 shares held by existing shareholders will
be eligible for sale subject to the volume and other restrictions of Rule 144
and Rule 701. The approximately 4,785,856 remaining Restricted Shares will not
be eligible for sale pursuant to Rule 144 until the expiration of their two-
year holding periods. In addition, it is anticipated that approximately
476,761 shares of Common Stock issuable upon exercise of options outstanding
at September 29, 1996 will become eligible for sale in the public market upon
the expiration of the lock-up under the terms of such options, which
expiration shall occur 180 days after the closing of the Offering. The
Securities and Exchange Commission has recently proposed reducing the initial
Rule 144 holding period to one year and the Rule 144(k) holding period to two
years. There can be no assurance as to when or whether such rule changes will
be enacted. If enacted, such modification will have a material effect on the
time when shares of the Company's Common Stock become eligible for resale.
Following completion of the Offering, 13,350,000 shares will be entitled to
certain demand and piggyback registration rights upon termination of lock-up
agreements. Any exercise of these registration rights may cause the Company to
incur substantial expense, could impair the Company's ability to raise capital
through the sale of its equity securities and, if sold, could have an adverse
effect on the market price of the Common Stock. See "Description of Capital
Stock--Registration Rights" and "Shares Eligible for Future Sale."

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<PAGE>

BENEFITS OF OFFERING TO EXISTING SHAREHOLDERS

All of the Company's shareholders, including those selling in the Offering
(the "Selling Shareholders"), will benefit from the creation of a public
market for the Company's Common Stock as a result of the Offering. In
particular, the Selling Shareholders are selling an aggregate of 600,000
shares of Common Stock which, at an assumed initial offering price of $12.00
per share, less underwriting discounts and commissions, would result in
aggregate net proceeds to the Selling Shareholders of approximately $6.7
million. In addition, the Selling Shareholders benefit from the Underwriters'
marketing efforts in connection with the Offering and their firm commitment to
purchase the shares offered hereby. Further, the Selling Shareholders, to the
extent of their sales, will not be subject to the risk of a decline in the
price of the Company's Common Stock in the public market. See "--Possible
Volatility of Stock Price." The Company will not receive any proceeds from the
sale of Common Stock by the Selling Shareholders. See "Principal and Selling
Shareholders."

BROAD DISCRETION OF MANAGEMENT TO ALLOCATE OFFERING PROCEEDS

The Company expects to use substantially all of the net proceeds of the
Offering for capital expenditures, to finance new product development and to
increase the Company's funds available for working capital and general
corporate purposes. The Company may utilize approximately $4 million of the
proceeds for capital expenditures related to the purchase of equipment and
systems. Approximately $3 million of the proceeds may be used toward new
product research and development efforts, including research and development
related to PCS RF power amplifiers and enhancements to the Company's multi-
channel cellular amplifiers. The remainder of the proceeds, approximately
$12.1 million, may be used toward other working capital purposes, such as
increasing the Company's engineering activities and augmenting the Company's
sales, marketing, administrative and technical support organizations. The
Company's management will have broad discretion to allocate the proceeds of
the Offering and the amounts actually expended for each use listed above may
vary significantly depending on a number of factors, including the amount of
future revenues, the amount of cash generated or used by the Company's
operations, the progress of the Company's product development efforts,
technological advances, the status of competitive products and acquisition
opportunities presented to the Company. Pending such uses, the Company intends
to invest the net proceeds of the Offering in short-term, investment-grade
money market instruments. See "Use of Proceeds."

DILUTION

The assumed initial public offering price of $12.00 per share is
substantially higher than the net tangible book value per share of Common
Stock. Investors purchasing shares of Common Stock in the Offering will incur
immediate and substantial net tangible book value dilution of $9.76 per share.
To the extent that options to purchase the Company's Common Stock are
exercised, there will be further dilution. See "Dilution."

ABSENCE OF DIVIDENDS

The Company has never paid cash dividends on its Common Stock and does not
anticipate paying cash dividends in the foreseeable future. The Company's bank
credit agreement currently restricts the Company from paying cash dividends
without the prior written consent of the bank. See "Dividend Policy."

17
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,800,000 shares of
Common Stock offered by the Company hereby at an assumed offering price of
$12.00 per share are estimated to be $19,138,000 ($23,155,600 if the
Underwriters' over-allotment option is exercised in full). The Company will
not receive any proceeds from the sale of Common Stock by the Selling
Shareholders.

The Company expects to use substantially all of the net proceeds of the
Offering for capital expenditures, to finance new product development and to
increase the Company's funds available for working capital and general
corporate purposes. The Company may utilize approximately $4 million of the
proceeds for capital expenditures related to the purchase of equipment and
systems. Approximately $3 million of the proceeds may be used toward new
product research and development efforts, including research and development
related to PCS RF power amplifiers and enhancements to the Company's multi-
channel cellular amplifiers. The remainder of the proceeds, approximately
$12.1 million, may be used toward other working capital purposes, such as
increasing the Company's engineering activities and augmenting the Company's
sales, marketing, administrative and technical support organizations. A
portion of the net proceeds may also be used for strategic acquisitions of
businesses, products or technologies complementary to those of the Company;
however, the Company is not currently a party to any commitments or agreements
and is not currently involved in any negotiations with respect to any
acquisitions. Except as stated above, the Company has not determined the
amounts it plans to expend with respect to each of the listed uses or the
timing of such expenditures, and management will have broad discretion in the
application of the proceeds. The amounts actually expended for each use listed
above may vary significantly depending on a number of factors, including the
amount of future revenues, the amount of cash generated or used by the
Company's operations, the progress of the Company's product development
efforts, technological advances, the status of competitive products and
acquisition opportunities presented to the Company. Pending such uses, the
Company intends to invest the net proceeds of the Offering in short-term,
investment-grade money market instruments.

DIVIDEND POLICY

The Company anticipates that all future earnings will be retained to finance
future growth. The Company has not paid any dividends on its Common Stock and
does not anticipate paying any dividends on the Common Stock in the
foreseeable future. The Company's bank credit agreement currently restricts
the Company from paying cash dividends without the prior written consent of
the bank.

18
<PAGE>

CAPITALIZATION

The following table sets forth as of September 29, 1996 (i) the actual
capitalization of the Company; (ii) the pro forma capitalization of the
Company after giving effect to the conversion of all outstanding shares of
Series A Preferred Stock into shares of Common Stock at or prior to the
closing of the Offering and the reversal of accrued dividends payable thereon;
and (iii) the capitalization of the Company as adjusted to reflect the receipt
of net proceeds from the sale of 1,800,000 shares of Common Stock offered
hereby at an assumed initial public offering price of $12.00 per share and
receipt of the net proceeds therefrom. This table should be read in
conjunction with the consolidated financial statements and notes thereto
included elsewhere in this Prospectus. See "Selected Consolidated Financial
Data."

<TABLE>
<CAPTION>
SEPTEMBER 29, 1996
----------------------------------------
ACTUAL PRO FORMA(1)(2) AS ADJUSTED(3)
-------- --------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt....................... $ 41 $ 41 $ 41
Series A Convertible Preferred Stock,
$.0001 par value; 3,375,900 shares
authorized, 3,375,900 issued and
outstanding, actual; no shares
issued or outstanding, pro forma or
as adjusted......................... 14,498
Shareholders' equity:
Preferred Stock, $.0001 par value;
5,000,000 shares authorized and no
shares outstanding pro forma and as
adjusted............................
Common Stock, $.0001 par value;
20,000,000 shares authorized,
8,998,650 shares issued and
outstanding, actual; 14,062,500
shares issued and outstanding, pro
forma; 40,000,000 shares authorized
and 15,862,500 shares outstanding,
as adjusted(2)...................... 771 15,269 34,407
Retained earnings.................... 11,963 13,313 13,313
Less Treasury Stock at cost.......... (12,231) (12,231) (12,231)
-------- -------- --------
Total shareholders' equity ........ 503 16,351 35,489
-------- -------- --------
Total capitalization............. $ 15,042 $ 16,392 $ 35,530
======== ======== ========
</TABLE>
- --------
(1) Excludes 1,823,179 shares of Common Stock issuable upon exercise of
outstanding stock options as of September 29, 1996 at a weighted average
exercise price of $3.31 per share. Under an agreement with the Company,
certain shareholders have agreed that, once the Company has issued an
initial 1,095,000 shares of Common Stock under the 1995 Stock Option Plan,
any additional shares issued under that Plan upon an option exercise will
be coupled with a pro rata redemption from those shareholders of an equal
number of shares at a redemption price equaling the option exercise price.
See "Management--1995 Stock Option Plan."
(2) Gives effect to the conversion of 3,375,900 shares of Series A Preferred
Stock into 5,063,850 shares of Common Stock upon the closing of the
Offering and the reversal of accrued dividends payable thereon. See Note 2
of notes to the consolidated financial statements, "Description of Capital
Stock" and "Management--1995 Stock Option Plan."
(3) Adjusted to reflect the sale by the Company of 1,800,000 shares of Common
Stock at an assumed initial public offering price of $12.00 per share and
the application of the estimated net proceeds therefrom. See "Use of
Proceeds" and "Selected Consolidated Financial Data."

19
<PAGE>

DILUTION

The pro forma net tangible book value of the Company as of September 29,
1996 was approximately $16,351,000, or approximately $1.16 per share. Pro
forma net tangible book value per share represents the amount of the Company's
shareholders' equity, less intangible assets, divided by 14,062,500 shares of
Common Stock outstanding after giving effect to the conversion of all the
outstanding shares of Series A Preferred Stock into Common Stock.

Pro forma net tangible book value dilution per share represents the
difference between the amount per share paid by purchasers of shares of Common
Stock in the Offering and the pro forma net tangible book value per share of
Common Stock immediately after completion of the Offering. After giving effect
to the sale of the 1,800,000 shares of Common Stock offered by the Company
hereby at an assumed initial public offering price of $12.00 per share, and
deducting underwriting discounts and commissions and estimated offering
expenses payable by the Company, the Company's pro forma net tangible book
value at September 29, 1996, would have been $35,489,000, or $2.24 per share.
This represents an immediate increase in pro forma net tangible book value of
$1.08 per share to existing shareholders and an immediate dilution in pro
forma net tangible book value of $9.76 per share to new investors purchasing
Common Stock in the Offering, as illustrated in the following table:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $12.00
Pro forma net tangible book value per share as of
September 29, 1996.......................................... $1.16
Increase per share attributable to new investors............. 1.08
-----
Pro forma net tangible book value per share after the Offering. 2.24
------
Pro forma net tangible book value dilution per share to new
investors..................................................... $ 9.76
======
</TABLE>

The following table sets forth, on a pro forma basis as of September 29,
1996, the difference between the existing shareholders and the purchasers of
shares in the Offering (at an assumed price of $12.00 per share) with respect
to the number of shares purchased from the Company, the total consideration
paid and the average price per share paid.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing
Shareholders(1)(2)........ 14,062,500 88.7% $15,269,000 41.4% $ 1.09
New Investors............. 1,800,000 11.3 21,600,000 58.6 $12.00
---------- ----- ----------- -----
Total................... 15,862,500 100.0% $36,869,000 100.0%
========== ===== =========== =====
</TABLE>
- --------
(1) Sales by the Selling Shareholders in the Offering will cause the number of
shares held by existing shareholders to be reduced to 13,462,500 shares,
or 84.9% of the total number of shares to be outstanding after the
Offering (83.0% if the Underwriters' over-allotment option is exercised in
full), and will increase the number of shares held by new investors to
2,400,000, or 15.1% of the total shares of Common Stock outstanding after
the Offering (2,760,000 shares, or 17.0%, if the Underwriters' over-
allotment option is exercised in full). See "Principal and Selling
Shareholders."
(2) Excludes amounts attributable to Treasury Stock.

20
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated statements of operations data set forth below for
each of the years ended December 31, 1993, 1994 and 1995 and the nine months
ended September 29, 1996 and the balance sheet data as of December 31, 1994,
1995 and September 29, 1996 are derived from the financial statements of the
Company audited by Deloitte & Touche LLP, independent auditors, which are
included elsewhere in this Prospectus. The selected balance sheet data as of
December 31, 1993 are derived from the Company's audited balance sheet which
is not included herein. The selected financial data with respect to the
Company's consolidated statements of operations for the years ended December
31, 1991 and 1992 and the consolidated balance sheets as of December 31, 1991
and 1992 are derived from the Company's unaudited consolidated financial
statements, which are not included herein. The selected consolidated financial
data with respect to the Company's consolidated statements of operations for
the nine months ended September 30, 1995 and the consolidated balance sheet as
of September 30, 1995, are derived from the Company's unaudited consolidated
financial statements. The consolidated unaudited financial statements have
been prepared by the Company on a basis consistent with the audited
consolidated financial statements and include all normal recurring adjustments
necessary for a fair presentation of the information. The results of
operations for the fiscal nine months ended September 29, 1996 are not
necessarily indicative of the results to be expected for any subsequent
period. The data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and related notes
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30, SEPTEMBER 29,
--------------------------------------- ------------- -------------
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------- ------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $2,802 $4,083 $8,717 $22,861 $36,044 $22,384 $43,594
Cost of sales........... 1,912 2,928 6,567 14,466 22,713 14,554 25,371
------ ------ ------ ------- ------- ------- -------
Gross profit............ 890 1,155 2,150 8,395 13,331 7,830 18,223
Operating expenses:
Sales and marketing.... 199 200 387 570 1,557 1,013 3,315
Research and
development........... 125 380 581 1,433 2,252 1,401 4,033
General and
administrative........ 382 384 559 1,518 1,958 1,288 2,004
------ ------ ------ ------- ------- ------- -------
Total operating
expenses............... 706 964 1,527 3,521 5,767 3,702 9,352
------ ------ ------ ------- ------- ------- -------
Operating income........ 184 191 623 4,874 7,564 4,128 8,871
Other income (expense).. (24) 6 (5) (20) 32 -- 333
------ ------ ------ ------- ------- ------- -------
Income before income
taxes.................. 160 197 618 4,854 7,596 4,128 9,204
Provision for income
taxes.................. 51 35 267 1,908 3,116 1,694 3,774
------ ------ ------ ------- ------- ------- -------
Net income.............. $ 109 $ 162 $ 351 $ 2,946 $ 4,480 $ 2,434 $ 5,430
====== ====== ====== ======= ======= ======= =======
Pro forma net income per
share.................. $ .30 $ .36
======= =======
Pro forma weighted
average common shares.. 14,774 14,774
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30, SEPTEMBER 29,
----------------------------------- ------------- -------------
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------ ------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............ $ 633 $ 396 $ 359 $3,030 $ 5,861 $ 615 $10,389
Working capital......... 559 592 679 3,486 9,640 5,756 11,197
Total assets............ 1,417 1,631 4,446 9,551 16,463 12,900 25,060
Long-term debt.......... 39 63 56 176 138 160 41
Total shareholders'
equity(1).............. 683 845 1,196 4,142 10,620 6,577 15,001
</TABLE>
- --------
(1) Includes amounts attributable to Preferred Stock.

21
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Powerwave designs, manufactures and markets ultra-linear RF power amplifiers
for use in the wireless communications market. The Company's amplifiers, which
are key components in wireless communications networks, increase the signal
strength of wireless transmissions while reducing interference. The Company's
amplifiers are currently being utilized in cellular base stations and support
a broad range of analog and digital transmission protocols, including CDMA,
TDMA, GSM, FHMA, AMPS and TACS. The Company also produces power amplifiers for
the SMR market and air-to-ground amplifiers used in both ground stations and
commercial aircraft. The Company's customer base consists primarily of OEMs of
wireless infrastructure equipment as well as specialized equipment
manufacturers and designers in various wireless communications markets.

Powerwave was formed in 1985 to develop a line of high-power RF amplifiers
suitable for use with VHF/UHF, AM/FM transceivers. The Company also offered
products for use in the SMR industry. For the next several years, the Company
continued product development in the land mobile radio industry, broadening
its product offerings and selling to a diversified customer base.

In late 1994, Powerwave developed a multi-channel linear RF amplifier which
could be utilized in the transmission of radio signals for cellular base
stations. In 1995, the Company began supplying multi-channel RF linear
amplifiers for use in the deployment of a digital cellular network utilizing
CDMA technology in South Korea. In 1996, the Company commenced development of
amplifier products for PCS networks.

A small number of customers account for a substantial majority of the
Company's net sales. Although the Company is attempting to expand its customer
base, the Company expects that a limited number of customers will continue to
represent a substantial portion of the Company's net sales for the foreseeable
future. The Company believes that its future success depends upon its ability
to broaden its customer base. The Company's four largest customers include, in
alphabetical order, Hyundai, In-Flight, LGIC and Samsung. For the nine months
ended September 29, 1996, these customers, each of which accounted for more
than 10% of the Company's net sales, accounted for approximately 81% of the
Company's net sales in the aggregate. In-Flight purchases the Company's
products for implementation in an air-to-ground wireless network. As this
network has been substantially completed, the Company expects sales to In-
Flight to decrease significantly in future periods. Sales of power amplifiers
to wireless infrastructure equipment suppliers are expected to continue to
account for a substantial majority of the Company's product sales. Hyundai,
LGIC and Samsung currently purchase products for implementation in the South
Korean digital cellular telephone network. The Company expects that sales to
these customers of products for use in the South Korean cellular network will
decline as that network nears completion, which is expected to occur in the
next one to two years. See "Risk Factors--Reliance upon South Korean Market
and Growth of Wireless Services Market." A limited number of large OEMs
account for a majority of RF power amplifier purchases in this market, and the
Company's success will be dependent upon its ability to establish and maintain
relationships with these types of customers. There can be no assurance that a
major customer will not reduce, delay or eliminate its purchases from the
Company, which could have a material adverse effect on the Company's business,
results of operations and financial condition.

In recent periods, Powerwave's revenues have continued to increase
significantly, primarily as a result of increasing sales to a limited number
of customers supplying the South Korean marketplace. The Company is attempting
to expand its customer base as it pursues additional opportunities within the
wireless infrastructure equipment market. The Company has experienced, and
expects to continue to experience, declining average sales prices for its
multi-channel amplifier products. Wireless infrastructure equipment
manufacturers have come under increasing price pressure from cellular service
providers, which in turn has resulted in downward pricing pressure on the
Company's products. Consequently, the

22
<PAGE>

Company believes that in order to maintain or improve existing gross margins
in the near term, it must achieve manufacturing cost reductions, and in the
long term it must develop new products that incorporate advanced features and
that command higher gross margins. The Company has initiated actions that it
believes will reduce its materials and manufacturing costs and intends to
continue to invest significant internal resources in the development of its
amplification products. See "Risk Factors--Declining Average Sales Prices."

RESULTS OF OPERATIONS

The following table summarizes the Company's results of operations as a
percentage of net sales for the fiscal years ended December 31, 1993, 1994 and
1995 and the nine-month periods ended September 30, 1995 and September 29,
1996.

<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
------------------------------------------------------
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30, SEPTEMBER 29,
------------------------- ------------- -------------
1993 1994 1995 1995 1996
------- ------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........... 75.3 63.3 63.0 65.0 58.2
------- ------- ------- ----- -----
Gross profit............ 24.7 36.7 37.0 35.0 41.8
Operating expenses:
Sales and marketing... 4.4 2.5 4.3 4.5 7.6
Research and
development.......... 6.7 6.3 6.3 6.3 9.3
General and
administrative....... 6.4 6.6 5.4 5.7 4.6
------- ------- ------- ----- -----
Total operating
expenses............... 17.5 15.4 16.0 16.5 21.5
Operating income........ 7.2 21.3 21.0 18.5 20.3
Other income (expense).. (0.1) (0.1) 0.1 -- 0.8
------- ------- ------- ----- -----
Income before income
taxes................... 7.1 21.2 21.1 18.5 21.1
Provision for income
taxes................... 3.1 8.3 8.7 7.6 8.7
------- ------- ------- ----- -----
Net income.............. 4.0% 12.9% 12.4% 10.9% 12.4%
======= ======= ======= ===== =====
</TABLE>

YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

Net Sales

The Company's net sales are derived primarily from the sale of RF power
amplifiers for use in wireless communications networks. The Company's revenues
increased 162.3% from $8.7 million in 1993 to $22.9 million in 1994 and
increased 57.7% to $36.0 million in 1995. The increase from 1993 to 1994 was
principally attributable to increased sales of a new generation SMR amplifier
product to a single customer. In 1994, three customers accounted for
approximately 65% of total revenues. For 1994, SMR and paging systems
accounted for approximately 56% of revenues, while air-to-ground amplifier
sales accounted for approximately 30% of revenues. The increase in revenues
from 1994 to 1995 was principally attributable to the introduction of several
new cellular multi-channel linear RF power amplifier products. For 1995,
multi-channel linear RF amplifiers accounted for approximately 54% of
revenues, while SMR and paging accounted for approximately 29% of revenues. In
1995, four customers accounted for approximately 81% of total revenues.
Revenues attributable to air-to-ground amplifiers were reduced to 15% of
revenues for the year. The increase in multi-channel amplifier sales was
largely attributable to supplying the Company's South Korean customers for the
implementation of the digital cellular network in South Korea. During 1995,
four customers accounted for approximately 29%, 15%, 13% and 11%,
respectively, of revenues. Increases in revenue from 1993 to 1994 and from
1994 to 1995 were attributable primarily to increases in sales volume,
partially offset by declining average sales prices in the respective periods.
See "Risk Factors--Declining Average Sales Prices."

For the fiscal years 1993, 1994 and 1995 international revenues accounted
for 8.0%, 8.7% and 67.1%, respectively, of the Company's net sales. The
Company expects that international revenues will continue to account for a
significant percentage of the Company's net sales for the foreseeable future.
As a result,

23
<PAGE>

the Company is subject to various risks, including a greater difficulty of
administering business globally, compliance with multiple and potentially
conflicting regulatory requirements such as export requirements, tariffs and
other barriers, differences in intellectual property protections, health and
safety requirements, difficulties in staffing and managing foreign operations,
longer accounts receivable cycles, restrictions against the repatriation of
earnings, export control restrictions, overlapping or differing tax
structures, political and economic instability, general trade restrictions and
currency fluctuations. The Company's international sales are generally
invoiced in U.S. dollars and, as such, foreign currency fluctuations have not
had a significant effect on the financial results of the Company in the past.
See "Risk Factors--Risks of Doing Business in International Markets."

Gross Profit

Cost of sales consists primarily of raw materials, assembly and test labor,
overhead, warranty costs and royalties. Gross profit margins were 24.7%, 36.7%
and 37.0% in 1993, 1994 and 1995, respectively. The gross profit margins
between 1993 and 1994 increased as manufacturing overhead was further absorbed
with increased sales of the same product line. The gross margins between 1994
and 1995 remained relatively constant primarily due to a decrease in average
sales prices on existing SMR products which were offset by a change in the
sales mix to new cellular multi-channel RF amplifier products, which have
higher gross margins. For a discussion of the effects of declining average
sales prices on the Company's business, see "Risk Factors--Declining Average
Sales Prices." The wireless communications infrastructure equipment industry
is extremely competitive and is characterized by rapid technological change,
new product development and product obsolescence, evolving industry standards
and significant price erosion over the life of a product. Due to these
competitive pressures, the Company expects that the average sales prices of
its products will continue to decrease. Future pricing actions by the Company
and its competitors may adversely impact the Company's gross margins and
profitability, which could also result in decreased liquidity and adversely
affect the Company's business, results of operations and financial condition.

Operating Expenses

Sales and marketing expenses consist primarily of sales commissions,
salaries and other expenses for sales and marketing personnel, travel expenses
and trade shows. Sales and marketing expenses increased by 47.4% from $0.4
million in 1993 to $0.6 million in 1994 and increased by 173.1% to $1.6
million in 1995. Sales and marketing expenses as a percentage of revenues were
4.4%, 2.5% and 4.3% in 1993, 1994 and 1995, respectively. The decrease in
sales and marketing expenses as a percentage of sales between 1993 and 1994
resulted from the Company's decision to hold sales and marketing expenses
relatively constant while revenues were growing. The increase in sales and
marketing expenses between 1994 and 1995 was primarily attributable to
increases in sales personnel and sales commissions related to increased
product sales.

Research and development expenses include ongoing amplifier design and
development expenses, as well as those design expenses associated with
reducing the cost and improving the manufacturability of existing amplifiers.
Research and development expenses increased by 146.6% from $0.6 million in
1993 to $1.4 million in 1994 and increased by 57.2% to $2.3 million in 1995.
The increase in research and development expenses has been due to the
Company's continued commitment to new product development, which includes
development during 1994 and 1995 of multi-channel linear RF amplifiers for the
cellular marketplace. Research and development expenses as a percentage of
revenues were 6.7%, 6.3% and 6.3% in 1993, 1994 and 1995, respectively. The
increase in expenses between 1993 and 1994 and 1994 and 1995 was primarily due
to increased personnel costs, materials costs related to design and
development of product prototypes, consulting costs and related overhead
expenses.

General and administrative expenses consist primarily of salaries and other
expenses for management, finance, accounting and human resources. General and
administrative expenses increased by 171.4% from $0.6 million in 1993 to $1.5
million in 1994 and increased by 29.0% to $2.0 million in 1995. General and
administrative expenses as a percentage of revenues were 6.4%, 6.6% and 5.4%
in 1993, 1994 and 1995,

24
<PAGE>

respectively. The increase in general and administrative expenses between 1993
and 1994 was primarily due to higher incentive payments in 1994 as opposed to
1993. General and administrative expenses increased from 1994 to 1995 due to
increases in personnel and related labor costs.

Other Income (Expense)

The Company incurred net interest expense in 1993 and 1994 from the use of
capital lease financing to fund the Company's capital equipment expenditures
and working capital requirements. The Company generated net interest income in
1995 as a result of excess working capital which was invested in short-term
money market instruments.

Provision for Income Taxes

The Company's effective tax rates were 43.1%, 39.3% and 41.0% for the years
ended December 31, 1993, 1994 and 1995, respectively.

NINE MONTHS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 29, 1996

Net Sales

Sales increased by 94.8% from $22.4 million for the nine months ended
September 30, 1995 to $43.6 million in the nine months ended September 29,
1996. The growth in revenue was primarily attributable to increased demand by
the Company's South Korean customers for multi-channel linear amplifiers,
partially offset by a decrease in sales volumes of SMR and paging amplifiers
and by a decline in average sales prices of multi-channel linear amplifiers.
For the first nine months of 1996, multi-channel linear amplifiers accounted
for approximately 76% of revenues, compared to approximately 43% for the first
nine months of 1995. SMR and paging amplifiers accounted for approximately 11%
of revenues for the first nine months of 1996, compared to approximately 35%
of revenues for the comparable period in 1995. Air-to-ground amplifiers
accounted for approximately 12% of revenues in the first nine months of 1996,
compared to approximately 18% in 1995. International sales accounted for 62.1%
of revenues for the first nine months of 1995, compared with 72.5% for the
first nine months of 1996.

Gross Profit

The gross margin for the nine months ended September 30, 1995 and September
29, 1996 as a percentage of sales was 35.0% and 41.8%, respectively. The
increase in gross margins during the first nine months of 1996 was primarily
attributable to reductions in manufacturing costs and a shift in sales mix to
multi-channel linear RF amplifiers which have higher gross margins.

Operating Expenses

Sales and marketing expenses increased by 227.3% from $1.0 million for the
nine months ended September 30, 1995 to $3.3 million for the nine months ended
September 29, 1996. Sales and marketing expenses as a percentage of sales for
the nine months ended September 30, 1995 and September 29, 1996 were 4.5% and
7.6%, respectively. The increase in sales and marketing expenses was primarily
attributable to increases in the sales and marketing staff and sales
commissions related to increased product sales. The Company intends to
increase its investment in sales and marketing in future periods.

Research and development expenses increased by 187.9% from $1.4 million for
the nine months ended September 30, 1995 to $4.0 million for the nine months
ended September 29, 1996. Research and development expenses as a percentage of
sales were 6.3% and 9.3%, respectively. The increase in research and
development expenses during the first nine months of 1996 was primarily
attributable to increased

25
<PAGE>

staffing and associated engineering costs related to continued new product
development, including the Company's second generation multi-channel linear
amplifier for cellular networks, and ongoing product enhancements. During the
second quarter of 1996, the Company also began development work on amplifier
products for PCS networks. The Company intends to increase its investment in
research and development in future periods.

General and administrative expenses increased by 55.6% from $1.3 million for
the nine months ended September 30, 1995 to $2.0 million for the nine months
ended September 29, 1996. General and administrative expenses as a percentage
of sales were 5.7% and 4.6%, respectively. The increase in general and
administrative expenses during the first nine months of 1996 was primarily
attributable to increased staffing costs associated with supporting the
Company's increased revenues.

Provision for Income Taxes

The Company's effective tax rate was 41.0% for both the nine month periods
ended September 30, 1995 and September 29, 1996.

26
<PAGE>

Quarterly Results of Operations

The following tables present unaudited quarterly financial information for
each quarter of fiscal 1994, 1995 and the first nine months of 1996. The
information has been prepared by the Company on a basis consistent with the
Company's audited consolidated financial statements appearing elsewhere in
this Prospectus and includes all necessary adjustments, consisting only of
normal recurring adjustments, that management considers necessary for a fair
presentation of the unaudited quarterly results when read in conjunction with
the audited consolidated financial statements of the Company and the notes
thereto appearing elsewhere in this Prospectus. These operating results are
not necessarily indicative of results that may be expected for any subsequent
periods.

<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 29,
1994 1994 1994 1994 1995 1995 1995 1995 1996 1996 1996
-------- -------- --------- -------- -------- -------- --------- -------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net sales........ $4,791 $6,469 $7,394 $4,207 $4,593 $6,980 $10,811 $13,660 $13,807 $15,301 $14,486
Cost of sales.... 3,095 4,101 4,510 2,760 3,337 4,616 6,601 8,159 8,229 9,000 8,142
------ ------ ------ ------ ------ ------ ------- ------- ------- ------- -------
Gross profit..... 1,696 2,368 2,884 1,447 1,256 2,364 4,210 5,501 5,578 6,301 6,344
Operating
expenses:
Sales and
marketing...... 119 159 150 142 227 338 448 544 1,056 1,103 1,156
Research and
development.... 268 347 389 429 298 461 642 851 1,075 1,375 1,583
General and
administrative. 298 320 412 488 397 441 450 670 612 671 721
------ ------ ------ ------ ------ ------ ------- ------- ------- ------- -------
Total operating
expenses........ 685 826 951 1,059 922 1,240 1,540 2,065 2,743 3,149 3,460
------ ------ ------ ------ ------ ------ ------- ------- ------- ------- -------
Operating income. 1,011 1,542 1,933 388 334 1,124 2,670 3,436 2,835 3,152 2,884
Other income
(expense)....... (9) (29) (6) 24 18 (11) (7) 32 59 120 154
------ ------ ------ ------ ------ ------ ------- ------- ------- ------- -------
Income before
income taxes.... 1,002 1,513 1,927 412 352 1,113 2,663 3,468 2,894 3,272 3,038
Provision for
income taxes.... 394 595 758 161 144 457 1,093 1,422 1,186 1,342 1,246
------ ------ ------ ------ ------ ------ ------- ------- ------- ------- -------
Net income....... $ 608 $ 918 $1,169 $ 251 $ 208 $ 656 $ 1,570 $ 2,046 $ 1,708 $ 1,930 $ 1,792
====== ====== ====== ====== ====== ====== ======= ======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 29,
1994 1994 1994 1994 1995 1995 1995 1995 1996 1996 1996
-------- -------- --------- -------- -------- -------- --------- -------- -------- -------- ---------
(AS A PERCENTAGE OF NET SALES)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net sales........ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.... 64.6 63.4 61.0 65.6 72.7 66.1 61.1 59.7 59.6 58.8 56.2
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Gross profit..... 35.4 36.6 39.0 34.4 27.3 33.9 38.9 40.3 40.4 41.2 43.8
Operating
expenses:
Sales and
marketing...... 2.5 2.5 2.0 3.4 5.0 4.8 4.1 4.0 7.6 7.2 8.0
Research and 10.9
development.... 5.6 5.4 5.3 10.2 6.5 6.6 5.9 6.2 7.8 9.0
General and 5.0
administrative. 6.2 4.9 5.6 11.6 8.6 6.3 4.2 4.9 4.4 4.4
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total operating
expenses........ 14.3 12.8 12.9 25.2 20.1 17.7 14.2 15.1 19.8 20.6 23.9
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Operating income. 21.1 23.8 26.1 9.2 7.2 16.2 24.7 25.2 20.6 20.6 19.9
Other income
(expense)....... (0.2) (0.4) (0.1) 0.6 0.5 (0.3) (0.1) 0.2 0.4 0.8 1.1
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income before
income taxes.... 20.9 23.4 26.0 9.8 7.7 15.9 24.6 25.4 21.0 21.4 21.0
Provision for
income taxes.... 8.2 9.2 10.3 3.8 3.2 6.5 10.1 10.4 8.6 8.8 8.6
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net income....... 12.7% 14.2% 15.7% 6.0% 4.5% 9.4% 14.5% 15.0% 12.4% 12.6% 12.4%
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>

27
<PAGE>

components; the timing, availability and sale of new products by the Company;
changes in the mix of products having differing gross margins; warranty
expenses; changes in average sales prices; long sales cycles associated with
the Company's products; and variations in product development and other
operating expenses. The Company's quarterly revenues are also affected by
volume discounts given to certain customers for large volume purchases over a
given period of time. In addition, the Company's quarterly results of
operations are influenced by competitive factors, including pricing,
availability and demand for the Company's and competing amplification
products. A large portion of the Company's expenses are fixed and difficult to
reduce in a short period of time. If net sales do not meet the Company's
expectations, the Company's fixed expenses would exacerbate the effect of such
net sales shortfall. Furthermore, announcements by the Company or its
competitors regarding new products and technologies could cause customers to
defer purchases of the Company's products. In addition, while the Company
receives periodic order forecasts from its major customers, such customers
have no binding obligation to purchase the forecasted amounts. See "Risk
Factors--Customer Concentration." Order deferrals and cancellations by the
Company's customers, declining average sales prices, delays in the Company's
introduction of new products and longer than anticipated sales cycles for the
Company's products have in the past adversely affected the Company's quarterly
results of operations. There can be no assurance that the Company's quarterly
results of operations will not be similarly adversely affected in the future.
See "Risk Factors--Fluctuations in Quarterly Results."

Net Sales

Sales grew substantially over the eleven-quarter period, with significant
quarter to quarter fluctuations. Fluctuations in revenues over the four
quarters of fiscal 1994 and the first two quarters of fiscal 1995 resulted
primarily from fluctuations in demand for SMR and air-to-ground amplifier
products. The increase in revenues in the final two quarters of fiscal 1995
and the first two quarters of fiscal 1996 resulted primarily from increasing
demand for cellular multi-channel linear RF amplifier products. The increase
in revenues in the first two quarters of fiscal 1996 was partially offset by a
reduction in the average sales price of the Company's multi-channel linear RF
amplifier products. The Company relocated its manufacturing and headquarters
facility during July 1996, and the transition resulted in a reduction in
revenue during the third quarter of fiscal 1996.

Gross Profit

Gross profit margins ranged from 27.3% to 43.8% over the eleven-quarter
period, with significant quarter to quarter fluctuations. Gross profit margins
decreased in the fourth quarter of fiscal 1994 and in the first two quarters
of fiscal 1995 primarily as a result of a decrease in revenue, as well as
manufacturing inefficiencies experienced in the introduction of a new
amplifier. The increases in gross margins from the second quarter of fiscal
1995 to the third quarter of fiscal 1996 were primarily attributable to a
shift in the sales mix to multi-channel linear RF amplifiers, improved
manufacturing efficiencies and lower materials costs.

Operating Expenses

Sales and marketing expenses grew over the eleven-quarter period, generally,
with consistent increases quarter to quarter. The increases in sales and
marketing expenses were primarily a result of increased headcount and higher
sales commissions associated with the overall growth in revenue.

Research and development expenses grew substantially over the eleven-quarter
period. The increases in research and development expenses were primarily a
result of increased headcount and associated development costs as the Company
staffed several cellular power amplifier development projects.

28
<PAGE>

Research and development expenses decreased between the fourth quarter of
fiscal 1994 and the first quarter of fiscal 1995 primarily as a result of a
temporary reduction in headcount due to a reduction in business activity and
to lower incentive compensation payments paid in fiscal 1995 as opposed to
fiscal 1994. The increase in research and development expenses during the
first three quarters of 1996 was primarily due to increased staffing and
associated engineering costs related to new product development, including the
Company's second generation multi-channel linear amplifier for cellular
networks. During the second quarter of 1996, the Company also initiated
development work on amplifiers for PCS networks, which work is expected to
continue through fiscal 1997.

General and administrative expenses generally grew consistently over the
eleven-quarter period in support of increasing revenues. The increases in
general and administrative expenses were primarily a result of increased
headcount and associated labor costs. General and administrative expenses
decreased between the fourth quarter of fiscal 1994 and the first quarter of
fiscal 1995 as a result of a temporary reduction in headcount due to a
reduction in business activity and to lower incentive compensation payments
paid in fiscal 1995 as opposed to fiscal 1994. The increase in expenses during
the first three quarters of fiscal 1996 was primarily attributable to
increased staffing cost associated with supporting the Company's revenue
growth.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically financed its operations primarily through a
combination of cash on hand, cash provided from operations, equipment lease
financings, available borrowings under its bank line of credit and a private
equity offering. As of September 29, 1996, the Company had working capital of
$11.2 million, including $10.4 million in cash and cash equivalents.

Cash provided by operations was approximately $.1 million, $3.7 million, $.9
million and $7.2 million in 1993, 1994, 1995, and in the nine months ended
September 29, 1996, respectively. Cash generated from operations in 1994 was
primarily due to improved profitability and reductions in accounts receivable.
Cash generated from operations in the nine months ended September 29, 1996 was
primarily as a result of increased profitability, improved inventory and
working capital management.

On October 10, 1995, the Company and certain shareholders entered into a
Stock Purchase Agreement with two venture capital fund investors in which the
Company sold a total of 3,375,900 shares of Series A Preferred Stock at an
aggregate price of $15.0 million. As part of these transactions, the Company
subsequently purchased 5,063,850 shares of its Common Stock from certain
shareholders for an aggregate price of $12.5 million. The Company received net
proceeds from this transaction of $2.0 million. The Series A Preferred Stock
has a dividend rate of twelve percent (12%) per annum, commencing January 1,
1996, and payable upon the redemption or repurchase of such Series A Preferred
Stock or the conversion of such Series A Preferred Stock into Common Stock of
the Company after December 31, 1996. If the Company completes an underwritten
public offering pursuant to an effective registration statement under the
Securities Act on or before December 31, 1996, covering the offer and sale of
Common Stock for the account of the Company from which the aggregate net
proceeds to the Company exceed $15.0 million and in which the price per share
is at least $5.924346 per share, the dividend on the Series A Preferred Stock
will not be payable. The Series A Preferred Stock is convertible into shares
of Common Stock of the Company at a rate of one and one-half (1.5) shares of
Common Stock for each share of Series A Preferred Stock, adjusted for any
accrued and unpaid dividends.

Capital expenditures were approximately $.4 million, $.2 million, $.5
million and $2.9 million in 1993, 1994, 1995 and in the nine months ended
September 29, 1996, respectively, of which approximately $77,000, $.2 million,
$0 and $0, respectively, were financed through capital leases. The Company
relocated its headquarters and manufacturing operations to a new leased
facility in July 1996. Leasehold improvements and capital expenditures
associated with this facility totalled approximately $2.0 million and were
substantially completed during the third quarter of 1996.

29
<PAGE>

On May 30, 1996, the Company entered into a $5.0 million unsecured committed
revolving credit agreement with a maturity date of May 31, 1997. The agreement
allows the Company to borrow at the bank's reference rate. The Company is
required to pay a commitment fee equal to .125% per annum based on the average
daily unused portion of the facility. The fee is payable quarterly in arrears.
Under the terms of this credit facility, the Company is required to maintain
certain minimum working capital, net worth and financial ratios. As of
September 29, 1996, the full amount of the facility was available to the
Company and the Company has not utilized this facility.

The Company had cash and cash equivalents of $10.4 million at September 29,
1996, compared with $5.9 million at December 31, 1995. The Company regularly
reviews its cash funding requirements and attempts to meet those requirements
through a combination of cash on hand, cash provided by operations, available
borrowings under any credit facilities, financing through equipment lease
transactions, and possible future public or private debt and/or equity
offerings. The Company invests its excess cash in investment grade short-term
money market instruments.

The Company believes that the net proceeds from the Offering, together with
existing cash balances, funds expected to be generated from operations and
borrowings under its bank line of credit will provide the Company with
sufficient funds to finance its operations for at least the next 12 months.
The Company has utilized lease financing for the equipment used in its
manufacturing operations and expects to continue to do so in the future. The
Company currently anticipates spending approximately $1 million of existing
working capital over the next six months in order to increase production
capacity and support additional research and development activities. The
Company may require additional funds to support its working capital
requirements or for other purposes and may seek to raise such additional funds
through public or private equity and/or debt financings or from other sources.
No assurance can be given that additional financing will be available or that,
if available, such financing will be obtainable on terms favorable to the
Company or its shareholders. See "Risk Factors--Future Capital Requirements."

30
<PAGE>

BUSINESS

Powerwave designs, manufactures and markets ultra-linear RF power amplifiers
for use in the wireless communications market. The Company's amplifiers, which
are key components in wireless communications networks, increase the signal
strength of wireless transmissions while reducing interference, or "noise."
The reduction of noise enables wireless service providers to offer improved
service to subscribers by offering clearer call connections with less
interference. Increasing the signal strength of wireless transmissions also
improves service by reducing the number of interrupted or dropped calls.
Powerwave's RF power amplifiers achieve ultra-linearity at increased levels of
amplification through the application of "feedforward" technology which
enables the Company's multi-channel power amplifiers to significantly reduce
RF interference thereby increasing the efficiency of the wireless service
provider's network.

Powerwave manufactures both single channel and multi-channel amplifiers,
with a focus on multi-channel products. Multi-channel amplifiers integrate the
functions of several power amplifiers and cavity filters within a single unit,
thereby reducing service providers' equipment and maintenance costs and space
requirements while providing increased call capacity. The Company's products
are currently being utilized in cellular base stations in both digital and
analog-based networks and the Company has recently delivered initial prototype
units for PCS networks. The Company's products support a wide range of digital
and analog transmission protocols including CDMA, TDMA, GSM, FHMA, AMPS and
TACS. See "--Markets; Cellular and PCS." The Company also produces power
amplifiers for the SMR market, which is characterized as a two-way radio
market with devices commonly utilized by police and emergency personnel and
the business dispatch marketplace. The Company also manufactures air-to-ground
amplifiers used both in ground stations and in commercial aircraft to amplify
telephone transmissions between airline passengers and ground based networks.

The Company began selling RF power amplifiers for use in analog wireless
networks in 1985. In 1995, the Company began selling multi-channel ultra-
linear amplifiers for installation in digital cellular base stations in South
Korea, and the Company believes that it is the leading supplier of amplifiers
to the South Korean market. South Korea is experiencing rapid economic
development and is one of the first countries worldwide to begin the process
of installing a nationwide digital cellular network. The Company's customers
in the South Korean market include Hyundai, LGIC and Samsung. The Company also
sells amplifiers domestically to numerous wireless equipment suppliers,
including ADC Kentrox Industries, Inc., AirNet Communications Corp., In-Flight
Phone Corp., Metawave Communications Corporation and Phoenix Wireless Group,
Inc.

INDUSTRY BACKGROUND

The worldwide wireless communications market, which consists of cellular,
PCS, SMR, paging, air to ground and other applications, has experienced
significant growth in recent years. According to the Cellular Telephone
Industry Association, the total number of worldwide subscribers for cellular
services, the leading sector of the wireless market, increased 59% from 54.5
million in 1994 to 86.8 million in 1995. The growth in wireless communications
is largely attributable to increased affordability in consumer equipment, such
as cellular phones and pagers, more comprehensive service coverage at lower
prices and technological advancements which have resulted in improved
transmission quality and reliability. International growth has also been
driven by the build-out of cellular networks, including those designed to
serve as primary telephone systems in part due to inadequacies in existing
wireline infrastructures.

The continuing growth of the wireless communications market, and of the
cellular communications segment in particular, has resulted in the crowding of
transmissions within the available spectrum of radio frequencies. In the
United States, only 3% of the usable 4000 megahertz (MHz) of RF spectrum have
been allocated for cellular transmissions. As a result of the limited
allocation of frequencies and the related overcrowding of available
bandwidths, service providers are increasingly deploying digital networks

31
<PAGE>

which, by comparison to analog networks, allow a greater number of
transmissions over the same range of frequencies. Digital networks, by
converting voice transmissions into bits of electronic information, are able
to utilize the existing radio spectrum allocated to cellular transmissions
more efficiently and thereby increase the call capacity of a given network.
The implementation of digital networks, in conjunction with continued growth
and upgrading of analog networks, has resulted in an increased demand for
network infrastructure equipment.

Consumer demand for additional services, combined with capacity constraints
and other limitations of cellular networks, has also led to the development of
PCS, another form of wireless communications which utilizes a higher frequency
range. It is anticipated that PCS applications will include voice
communication, personal messaging, mobile facsimile transmission and wireless
computer networking. The Personal Communications Industry Association
estimates that by the end of the decade there will be approximately 100,000
PCS cell sites in the United States servicing more than 15 million PCS users.

In 1995 and 1996, the United States government auctioned PCS frequency
licenses covering markets throughout the U.S. and its territories for an
aggregate purchase price of approximately $17.4 billion. This indicates the
scale of investment being made in the PCS market. The successful bidders
included AT&T Wireless PCS, Inc., PCS Primeco L.P., a consortium of Bell
Atlantic Corp., Nynex Corporation, Airtouch Communications, Inc. and US West,
Inc.; and Wireless Co., a consortium of Sprint Corp., TCI International, Inc.,
Comcast Corp., Cox Enterprises, Inc. and GTE Corporation.

CELLULAR AND PCS NETWORKS

Cellular networks use a number of base stations with high power antennas to
serve a geographical region. Each region is broken down into a number of
smaller geographical areas, or "cells." Each cell has its own base station
which uses wireless technology to receive subscribers calls and transmit those
calls to the wireline public switched telephone network ("PSTN"). Cellular
networks operate within the 800 and 900 MHz bandwidths of the radio spectrum.
PCS networks operate in a substantially similar manner as cellular networks,
except that PCS networks operate at a higher range in the available RF
spectrum, within the 1800 and 1900 MHz bandwidths. Transmissions at the higher
frequencies utilized by PCS networks have shorter transmission waves as
compared to cellular frequency transmissions, which limit the distances PCS
transmissions can travel without significant degradation. Signals travel
farther at lower frequencies and also penetrate into buildings and other
obstacles better at the lower frequencies. Therefore, PCS networks operating
at the higher frequency ranges will require smaller operating cells and more
base stations than existing cellular networks to cover the same total
geographic region. Additionally, due to the smaller geographical cell size
utilized in PCS networks, PCS base stations and telephones will operate at
lower power levels as compared to existing cellular networks.

Base stations contain a variety of sophisticated electronic equipment,
including RF power amplifiers, transceivers and oscillators. RF power
amplifiers, which are typically the most expensive base station components,
increase the signal strength of the incoming and outgoing transmissions which,
like all radio waves, weaken as transmission distances increase.
Traditionally, base station amplifiers were one of the primary sources of
background noise, as they amplified not only the main signal but the noise
inherent in the signal as well. Background noise, which is measured in
decibels (dBc), distorts the transmission signal and may cause the signal to
transmit outside of its designated frequency, thereby possibly interfering
with other transmissions and resulting in interrupted and dropped calls.
Current amplifier technology reduces the background noise in the transmitted
signal through the use of linearization technology.

Linearity is the degree to which amplified signals remain within their
prescribed band of radio frequency with low distortion or interference with
adjacent channels. An amplifier's capacity to limit or reduce background noise
is dependent on its ability to amplify signals with high linearity. Ultra-
linear power amplifiers amplify a signal while significantly reducing the
related background noise, thus enabling cellular and PCS service providers to
place more signals within a given bandwidth and thereby

32
<PAGE>

accommodate a larger number of subscribers on a network. Utilizing power
amplifiers with high linearity is therefore critical to service providers'
ability to improve the efficiency and increase the capacity of their systems.

In analog cellular networks, each base station is allocated a certain number
of frequency channels, each of which can carry only one call at a time. As
such, a base station utilizing traditional amplification technology can not
transmit or receive more calls than it has available channels at any given
time. Originally, cellular base stations in analog networks used single
channel power amplifiers for each frequency channel allocated to the cell.
Many analog cellular networks now utilize a process known as adaptive channel
allocation in order to increase network capacity. In adaptive channel
allocation, which requires multi-channel amplifiers, unused channels in cells
are temporarily reallocated to augment more heavily utilized adjacent cells.
The signals are amplified simultaneously through a multi-channel power
amplifier which allows for the simultaneous amplification of all channels
within a base station. Multi-channel amplifiers require significantly higher
linearity than do single channel designs, but do not require separate, high-
maintenance, tunable cavity filters. By eliminating the need for separate
cavity filters for each channel, multi-channel amplifiers reduce overall
deployment and maintenance costs associated with base stations. While adaptive
channel allocation using multi-channel linear amplifiers has increased the
capacity of analog networks, many service providers still require additional
capacity to serve the increased flow of transmissions through their networks.
This has led many service providers to begin to move from analog networks to
digital networks.

In digital networks, calls are segmented and transmitted across the entire
bandwidth of allocated spectrum, rather than in single channels of that
spectrum. The calls are reassembled when received at the base station or
cellular phone. While using the entire bandwidth of allocated spectrum results
in greater system capacity, there is a greater likelihood that even minimal
background noise will result in interrupted or dropped calls. Accordingly,
ultra-linear amplification is even more critical in digital networks than in
their analog counterparts.

While the core technologies related to linear amplification of wireless
transmissions are fairly well established, manufacturing reliable ultra-linear
RF power amplifiers in a repeatable, cost-effective manner remains a difficult
process. Due to the nature of RF signals, amplification can cause frequency
and phase variations in the transmission signal for a variety of reasons,
including the electromagnetic make-up of the amplifier's own components. As
such, the manufacturing process involves highly precise fine-tuning of the
amplifier's electronic components by skilled technicians.

The Company believes that the growth in demand for cellular services and the
deployment of PCS will result in increased demand for network infrastructure
equipment meeting more exacting specifications. This has created a significant
market opportunity for third-party RF power amplifier manufacturers capable of
producing highly reliable ultra-linear multi-channel RF power amplifiers in a
repeatable, cost-effective manner.

THE POWERWAVE SOLUTION

Powerwave's focus on multi-channel power amplifiers and the experience it
has gained through the implementation of its products in digital cellular
networks have enabled the Company to develop substantial expertise in ultra-
linear multi-channel power amplifier technology. The Company has developed the
ability to manufacture ultra-linear multi-channel RF power amplifiers in a
standard, repeatable manner, thus allowing for increased production and
reliability. In addition, by obtaining components from numerous leading
technology companies, Powerwave believes it is able to respond quickly and
cost-effectively to new transmission protocols and design specifications. The
manufacturability of the Company's existing multi-channel RF power amplifier
design has allowed it to increase its manufacturing productivity while
reducing its product costs. The Company believes that its ability to cost-
effectively manufacture commercial quantities of multi-channel RF power
amplifiers represents a competitive advantage over other third-party
manufacturers of RF power amplifiers.

33
<PAGE>

Powerwave's ultra-linear multi-channel RF power amplifiers utilize the
Company's implementation of feedforward technology to increase power and
linearity for cellular and PCS service providers. The ultra-linear, multi-
channel approach utilized by the Company in its amplifiers provides increased
transmission capacity as well as quality, thereby providing a highly reliable,
low maintenance product that reduces the providers' future operating costs.
The Company's products support multiple transmission protocols, including
existing analog protocols such as AMPS and TACS, as well as current digital
protocols including CDMA, TDMA, FHMA and GSM. The Company is committed to
supporting all widely accepted existing and future communication protocols.

STRATEGY

Powerwave's strategic objective is to be the leading third-party supplier of
high performance RF power amplifiers used in digital and analog wireless
networks worldwide. The Company's strategy includes the following key
elements:

PROVIDE LEADING TECHNOLOGY TO THE RF AMPLIFIER INDUSTRY. Powerwave intends
to continue to dedicate significant resources to the research and development
of new methods to improve amplifier performance, including methods to reduce
noise and increase power in the RF amplification process. The Company believes
that further reductions in noise may be attained through digital processing,
regulating amplifiers with software and other techniques, as well as through
continued improvements in traditional feedforward technology. The Company also
intends to focus its research and development resources on further increasing
amplifier reliability. The Company is currently investigating several
technologies, including "smart" amplifier technologies which may improve
amplifier performance.

LEVERAGE POSITION AS LEADING MULTI-CHANNEL AMPLIFIER SUPPLIER. Powerwave
intends to continue to leverage its experience in supplying ultra-linear
multi-channel RF power amplifiers, especially for the South Korean
marketplace, and to penetrate other existing and emerging wireless markets.
The Company currently supplies its products to Hyundai, LGIC and Samsung and
believes that it is the leading supplier of multi-channel RF power amplifiers
being installed in the South Korean nationwide digital cellular network. The
Company is incorporating its technological expertise, manufacturing capability
and product implementation experience into its marketing and sales strategy
which focuses on establishing relationships with new domestic and
international customers through a network of sales representatives selected on
the basis of their contacts with the Company's potential customers and
knowledge of the wireless infrastructure market. In addition, the Company
intends to leverage its existing relationships with its South Korean customers
as they attempt to market their infrastructure equipment throughout the world.

EXPAND RELATIONSHIPS WITH LEADING OEMS. Powerwave intends to continue to
develop new, and strengthen existing, relationships with the leading OEMs of
wireless base stations. Many leading OEMs, including Ericsson, Lucent and
Motorola, manufacture their own power amplifiers as opposed to purchasing such
equipment from third-party vendors such as the Company. Powerwave believes
that increased traffic flow on wireless networks and capacity limitations have
resulted in service providers making greater demands on OEMs' resources. As a
result, the Company believes that OEMs may increasingly consider purchasing
power amplifiers from third-party suppliers rather than devoting resources to
internal development and manufacturing of such components. The Company seeks
to provide cost effective amplifier solutions which will allow OEMs to more
efficiently utilize their research and development resources in other areas.

DEVELOP AND MARKET AMPLIFIER PRODUCTS FOR PCS NETWORKS. Powerwave intends to
develop PCS single and multi-channel RF power amplifier products and utilize
its network of sales representatives to market its PCS amplifiers to customers
domestically and worldwide. The successful bidders for PCS frequency licenses
are in the process of implementing PCS networks and are required to have such
networks operational within designated time frames in order to avoid losing
their frequency licenses. A

34
<PAGE>

limited number of test markets are currently operational in the United States
and network operators in Asia and Europe are also moving forward with PCS
technology. In the U.S., the Company believes that PCS network operators and
infrastructure manufacturers are currently conducting product trials in order
to validate technology and formulate future purchase decisions.

MAINTAIN COMMITMENT TO QUALITY, RELIABILITY AND MANUFACTURABILITY. Powerwave
designs its amplifiers to be manufactured in commercial quantities in a cost-
effective manner while being built for high reliability and effectiveness. The
Company believes that its ability to design products for volume manufacturing
has been a competitive advantage in securing orders from its customers and
positions the Company to attract new customers. Historically, power amplifiers
have been difficult to manufacture in high volumes due to the complexities of
RF power technology. Powerwave believes that the manufacturability of its
products is enhanced by its strategy of purchasing standardized components for
integration into its power amplifiers from numerous suppliers. By purchasing
key components rather than internally manufacturing component parts, the
Company believes it can more readily respond to new transmission protocols and
customer specification demands. In addition, the Company believes that its
third-party sourcing strategy enables it to minimize its capital investment in
manufacturing facilities and focus its resources on developing new products
and improvements to existing products utilizing the best suppliers available.
The Company believes that its third-party sourcing strategy allows it to bring
the latest improvements in technology to market ahead of its non-OEM
competitors.

INCREASE INVOLVEMENT IN CUSTOMER PRODUCT DEVELOPMENT PROCESS. Powerwave
intends to utilize technically-oriented marketing personnel to gain early
access to the product development processes of existing and potential
customers. By participating in a customer's product development, the Company
seeks to have its standard product specifications designed into the customer's
system, thereby ensuring sales to such customer and minimizing manufacturing
costs associated with product customization. Powerwave also intends to utilize
its marketing personnel to help direct its own product development. By
interfacing with infrastructure manufacturers and service providers, the
Company's marketing personnel gain substantial insight into user needs, cost
sensitivity and quality requirements. By introducing these concepts early in
the product development cycle, the Company believes it will be able to better
serve customer demand with quality products offered at competitive prices.

MARKETS

Powerwave sells its RF power amplifier products primarily into the following
segments of the wireless communications market:

CELLULAR AND PCS. The traditional cellular communications market is
experiencing substantial growth. As a result of the limited allocation of
frequencies and the related overcrowding of available bandwidths, service
providers are increasingly deploying digital networks which, by comparison to
analog networks, allow a greater number of transmissions over the same range
of frequencies. Digital networks, by converting voice transmissions into bits
of electronic information, are able to utilize the existing radio spectrum
allocated to cellular transmissions more efficiently and thereby increase the
call capacity of a network. The implementation of digital networks, in
conjunction with continued growth and upgrading of analog networks, has
resulted in increased demand for network infrastructure equipment. In
addition, as a result of the recent FCC auction of radio spectrum allocated to
PCS, leading telecommunications companies such as AT&T, Bell Atlantic and
Sprint and cable systems operators such as Cox Enterprises and TCI
International are beginning to install PCS networks, which the Company
anticipates will substantially increase demand for ultra-linear RF power
amplifiers. The Company's primary focus is on the cellular and PCS markets and
the Company currently derives a substantial portion of its revenues from the
cellular market.

35
<PAGE>

The table below describes the various cellular and PCS transmission
protocols in use today.

MAJOR CELLULAR AND PCS TRANSMISSION PROTOCOLS

<TABLE>
<CAPTION>
DESCRIPTION REGION AND FREQUENCY

<S> <C> <C>
ANALOG AMPS = Advanced Mobile Phone Services North America & Asia--800MHz
CELLULAR TACS = Total Access Communication System Europe & Asia--900MHz
NMT = Nordic Mobile Telephone Europe & Asia--900MHz
- --------------------------------------------------------------------------------------------
DIGITAL CDMA = Code Division Multiple Access North America & Asia--800/900MHz
CELLULAR TDMA = Time Division Multiple Access North America & Asia--800/450MHz
GSM = Global System for Mobile Communications Europe & Asia--900MHz
FHMA = Frequency Hopping Multiple Access North America & Europe--900MHz
PDC = Pacific Digital Cellular Japan--800/1400MHz
- --------------------------------------------------------------------------------------------
PCS CDMA = Code Division Multiple Access North America & Asia--1800/1900MHz
DCS-1800 = Digital Communications System Europe & Asia--1800MHz
GSM = Global System for Mobile Communications North America & Asia--1900MHz
PHS = Personal Handyphone System Japan--1900MHz
</TABLE>

SPECIALIZED MOBILE RADIO. Powerwave has been manufacturing power amplifiers
for the SMR market since 1985. SMR is commonly associated with two-way
communications devices used by police and emergency personnel and the business
dispatch marketplace. While the domestic market has remained relatively static
in the past few years, the Company believes there are opportunities in certain
parts of the international market, where the installation of more expensive
cellular systems is not cost-justified. In addition, Motorola recently
introduced a two-way radio designed to compete with cellular phones. However,
there can be no assurance that Motorola's system will achieve commercial
success or, even if Motorola is successful, whether the Company will be able
to sell amplifiers into this market. The Company has also manufactured
complete paging systems, including transmitters. The paging market is
dominated by a few large suppliers, and the Company is no longer actively
pursuing this market.

AIR-TO-GROUND COMMUNICATIONS. Powerwave also provides amplifiers that are
used to amplify telephone transmissions between commercial aircraft passengers
and the PSTN. While the Company continues to service this market, sales
opportunities within this market are limited.

PRODUCTS

Powerwave designs and manufactures both single channel and multi-channel
ultra-linear power amplifiers which are sold into the cellular and air-to-
ground markets. The single channel products sold into these markets include
the LP product series and the multi-channel products include the MCA product
series. The Company also designs and manufactures single channel power
amplifiers which are sold into the SMR and paging markets. The products sold
into these markets include the RF, LP, KW and LDA product series.

Powerwave's ultra-linear multi-channel amplifiers utilize a single feed
forward loop, which allows greater operating efficiency and requires
approximately 25% less electrical current than competing multi-loop designs.
The Company's amplifiers employ a microprocessor based feed-forward loop
design which results in better tracking between the pilot tone and the actual
signal and reduces interference. Powerwave's multi-channel design also
utilizes an actively switched output combiner, which allows any number of
amplifiers to be "hot-swapped" without a significant loss of power. This
design allows for true cold standby switching of a standby amplifier, thereby
providing network operators with a backup redundancy solution for even greater
reliability. The Company is also in the process of designing and testing both
single channel and multi-channel ultra-linear power amplifiers for the
emerging PCS marketplace.

36
<PAGE>

MCA SERIES. The MCA Series offers ultra-linear multi-channel power amplifier
technology for CDMA, TDMA and GSM digital cellular systems positioned between
800-960 MHz, as well as analog systems utilizing AMPS, TACS, ETACS and SETACS
protocols. The amplifiers are designed to be installed in racks of three or
four amplifiers. Smart combiner paralleling units allow both higher power as
well as system redundancy, which is the ability of the system to remain in
operation in the event of the failure of one or more of the paralleled
amplifiers. When combined, the units have "hot swap" capabilities whereby one
unit can be removed from the rack while all others remain in operation. All
MCA series multi-channel amplifiers provide remote status/fault monitoring
capabilities.

The MCA8000-250, which the Company believes is the leading amplifier in
South Korea's nationwide digital cellular system, produces 25 Watts (W)
average, 250W peak, power per channel with maximum distortion of -60dBc. Up to
4 units can be combined in parallel utilizing the Company's fully redundant
smart combiner racks for effective average power ratings of 20W, 45W, 70W, and
90W.

In August 1996, the Company introduced its second generation multi-channel
amplifier, the MCA9000-400 which produces 40W average, 400W peak, power per
channel with maximum distortion of -65dBc, while retaining its predecessor's
hot swap, paralleling, and redundancy capabilities. Generally, as compared to
the MCA 8000-250, one less amplifier can be used to achieve a similar power
rating, thus decreasing the effective cost per watt to the service operator.
Combining up to 3 units in a rack yields effective power ratings of 32W, 70W
and 100W.

Powerwave also offers within the MCA Series other standard linear products
including 40W Class A and 250W Class AB amplifiers which are used in
applications requiring reduced linearity or power.

PCS SERIES. The PCS Series will offer both single and multi-channel
amplifiers for use in PCS networks that operate in the international DCS-1800
frequency of 1.8 gigahertz (GHz) and the new United States PCS band at 1.9GHz.
Typical system applications include CDMA, TDMA, and GSM protocols with output
power ranging from 5W to 36W. The PCS Series of multi-channel amplifiers will
offer similar power combining, system redundancy, and remote status/fault
monitoring capabilities as the Company's MCA Series with output power ranging
from 10W to 100W and distortion of -60dBc.

RF SERIES. The RF Series is the Company's standard single channel analog
amplification product for SMR, paging, repeater and trunking applications.
These amplifiers operate in discreet bands within the 30 MHz to 960 MHz
frequency range with input powers ranging from 10mW to 70W and produce output
powers ranging from 50W to 160W. These amplifiers have been designed for
simple installation and maintenance and are fully modular for quick and easy
field service.

LP SERIES. The LP Series is a single channel analog amplifier similar to the
Company's RF Series amplifiers, but in a smaller 5" format. The LP Series is
used in SMR, paging, repeater and trunking applications. These amplifiers also
operate in the 35 MHz to 960 MHz frequency range with input powers ranging
from 200mW to 20W and produce output power ranging from 30W to 60W.

KW SERIES. The KW Series provides single channel amplification for analog
and digital paging systems, SMR, repeaters and trunking. Amplifiers in the KW
Series operate in the frequency range of 35 to 960 MHz and are compatible with
most transmitters. These amplifiers operate with input powers ranging from
150mW to 40W and produce 250W, 320W or 450W of power output. Front panel
metering allows users to easily monitor forward and reflected RF power output
and many other critical functions. These units have hot swap capabilities and
can be combined to produce 750W, 1000W and 1500W of output.

LDA SERIES. The LDA Series provides broadband digital or analog
amplification as a "building block" in larger amplification systems or as a
stand-alone amplifier. The LDA Series products are used as a building block
for applications involving electronic counter measures ("ECM") and radar
systems. The products are also used as stand alone amplifiers for applications
in laboratory testing, medical research and multi-

37
<PAGE>

band transceivers and are designed to operate in wide frequency ranges between
20MHz to 1GHz with output powers ranging from 5W to 150W.

The Company's multi-channel power amplifiers range in price from $5,000 to
$15,000 per amplifier, based upon the specification requirements. The
Company's single channel amplifiers range in price from $1,000 to over $5,000
per amplifier depending upon product type and specifications. The Company also
sells racks to install and combine multiple amplifiers, ranging in price from
$1,000 to $3,000, depending upon specifications.

The Company's primary products are summarized below:

PowerWave MULTI-CHANNEL Amplifier Configurations

- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Product Avg. Power
Series Protocol Frequency (MHz) (Watts) Linearity (dBc)
- -------------------------------------------------------------------------------
Cellular:
MCA CDMA 851-960 25-100 -65
MCA TDMA 851-960 25-100 -65
MCA GSM 851-960 30-90 -70
- -------------------------------------------------------------------------------
PCS:***
PCS CDMA 1805-1880 10-100 -60
PCS DCS-1800 TDMA 1805-1880 10-100 -60
PCS CDMA 1930-1990 10-100 -60
PCS TDMA 1930-1990 10-100 -60
</TABLE>

Powerwave SINGLE CHANNEL Amplifier Configurations

- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Product
Series Protocol Frequency (MHz) Avg. Power (Watts)
- -------------------------------------------------------------------------------
Cellular:
LP CDMA 851-960 10-120
LP TDMA 851-960 10-120
LP GSM 851-960 10-120
- -------------------------------------------------------------------------------
PCS:***
PCS CDMA 1805-1880 5-36
PCS TDMA 1805-1880
PCS CDMA 1930-1990 5-36
PCS TDMA 1930-1990
PCS GSM 1930-1990 25
- -------------------------------------------------------------------------------
SMR/PAGING:
RF 30-960 50-160
LP 30-960 30-60
KW 30-960 250-450
LDA 20-1000 5-150
</TABLE>

*** Products in development or prototype stage.

CUSTOMERS

The Company sells its products to a wide variety of customers worldwide.
During the nine months ended September 29, 1996, sales to Hyundai, LGIC and
Samsung accounted for 69% of total sales and are

38
<PAGE>

expected to account for a higher percentage of sales during the remainder of
1996. Each of these customers accounted for more than 10% of the Company's net
sales in the period. The loss of any of these customers, or a significant
loss, reduction or rescheduling of orders from any of these customers, could
have a material adverse effect on the Company's business, results of
operations and financial condition. Sales to In-Flight also accounted for more
than 10% of total sales for the nine months ended September 29, 1996. See
"Risk Factors--Customer Concentration"; and "--Reliance upon South Korean
Market and Growth of Wireless Services Market."

The Company also sells to a wide variety of wireless equipment suppliers,
including ADC Kentrox Industries, Inc., AirNet Communications Corp., In-Flight
Phone Corp., GTE Airfone Corp., Metawave Communications Corporation, Motorola
Corporation, Phoenix Wireless Group, Inc. and Uniden Corporation.

MARKETING AND DISTRIBUTION, INTERNATIONAL SALES

Powerwave sells its products through a highly-technical direct sales force
and through independent sales representatives. Direct sales personnel are
assigned to geographic territories and, in addition to sales responsibilities,
manage networks of independent sales representatives within the United States.
The Company recently implemented a network of independent sales
representatives selected for their familiarity with potential customers of the
Company and knowledge of the wireless infrastructure market. Both the direct
sales personnel and independent sales representatives generate product sales,
provide product and customer service, and provide customer feed back for
product development. In addition, the sales personnel and independent sales
representatives receive support from the Company's marketing, product support
and customer service departments. As the Company's potential customer base
expands, the Company intends to further expand its network of independent
sales representatives.

The Company's marketing efforts are focused on establishing and developing
long-term relationships with potential customers. Sales cycles for certain of
the Company's products, particularly its base station power amplifiers are
lengthy, typically ranging from 6 to 18 months. As is customary in the
industry, sales are made through standard purchase orders which can be subject
to cancellation, postponement or other types of delays. While certain
customers provide the Company with forecasted needs, they are not bound by
such forecasts and the Company does not recognize orders until actual purchase
orders are received from the customer.

International sales of the Company's products amounted to 8.0%, 8.7%, 67.1%
and 72.5% of net sales for the years ended December 31, 1993, 1994 and 1995
and for the nine-month period ended September 29, 1996, respectively. Foreign
sales of some of the Company's products are subject to national security and
export regulations and may require the Company to obtain a permit or license.
In recent years, the Company has not experienced any material difficulty in
obtaining required permits or licenses. Foreign sales also subject the Company
to risks related to political upheaval and economic downturns in foreign
nations. In addition, the Company's foreign customers typically pay for the
Company's products with U.S. dollars. As such, a strengthening of the U.S.
dollar as compared to a foreign customer's local currency would effectively
increase the price of the Company's products for that customer, thereby making
the Company's products less attractive to such customers. See "Risk Factors--
Risks of Doing Business in International Markets."

The Company's warranties vary by product type and range from one to three
years. Warranty obligations and other maintenance services for the Company's
products are performed by the Company in California and Seoul, South Korea.
While the Company currently has one service employee located in South Korea,
it is in the process of increasing its South Korean based service capabilities
and will be utilizing its South Korean location to provide service support for
the Asian region.

39
<PAGE>

PRODUCT DEVELOPMENT

Powerwave intends to continue to dedicate significant resources to the
research and development of new methods to improve amplifier performance,
including reduced noise and increased power in the RF amplification process.
The Company's development efforts also seek to reduce the cost and increase
the manufacturing efficiency of existing products. The Company's research and
development staff consisted of 43 people as of September 29, 1996.
Expenditures for product development amounted to approximately $.6 million in
1993, $1.4 million in 1994, $2.3 million in 1995, and $4.0 million for the
nine months ended September 29, 1996.

The Company believes that further reductions in noise may be attained
through digital processing, regulating amplifiers with software and other
techniques, as well as through continued improvements in traditional
feedforward technology. The Company intends to continue to dedicate
significant resources to research and develop new methods to improve the
performance of its existing amplifiers for use in cellular networks and to
develop a full line of amplifiers for PCS networks.

COMPETITION

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

40
<PAGE>

existing products at prices necessary to gain or retain market share. Certain
of the Company's competitors have substantial financial resources, which may
enable them to withstand sustained price competition or a downturn in the
market better than the Company. There can be no assurance that the Company
will be able to compete successfully in the pricing of its products, or
otherwise, in the future. See "Risk Factors--Competition."

BACKLOG

The Company's backlog of orders was approximately $18.8 million on September
29, 1996 compared to approximately $18.1 million on December 31, 1995. A
substantial portion of the backlog at September 29, 1996 is due to orders from
customers for the South Korean market. The Company includes in its backlog all
accepted product purchase orders with respect to which a delivery schedule has
been specified for product shipment within six months. Product orders in the
Company's backlog are subject to changes in delivery schedules or to
cancellation at the option of the purchaser without significant penalty. The
Company regularly reviews its backlog of orders to ensure that it adequately
reflects product orders expected to be shipped within a six month period. The
Company makes adjustments as customer delivery schedules change as well as in
response to changes in the Company's production schedule. Accordingly,
although useful for scheduling production, backlog as of any particular date
may not be a reliable indicator of sales for any future period.

MANUFACTURING AND SUPPLIERS

In July 1996, the Company relocated to an expanded headquarters and
manufacturing facility in Irvine, California. The Company's manufacturing
process involves the assembly of numerous individual components, and precise
fine-tuning by technically oriented production personnel. The parts and
materials used by the Company consist primarily of printed circuit boards,
specialized subassemblies, fabricated housings, relays, and small electric
circuit components, such as integrated circuits, semiconductors, resistors and
capacitors. The Company manufactures products to fill firm orders and to meet
forecasts received from its major customers.

The Company continually attempts to reduce manufacturing costs while
retaining product quality. The Company purchases a significant quantity of its
materials and components from several suppliers through blanket purchase
orders. The Company acquires certain key components from single sources, but
believes alternative sources could be arranged if the Company were unable to
continue to procure such components from its current sources. If the Company
were unable to replace the supplier of these components in a timely fashion,
its operating results and financial condition could be materially adversely
affected. In recent years, the Company has experienced no significant
difficulty in obtaining necessary supplies.

The Company is currently in the process of attempting to qualify for ISO
9001 certification, a uniform worldwide quality-control standard. Numerous
customers and potential customers throughout the world, particularly in
Europe, require that their suppliers be ISO certified. In addition, many such
customers require that their suppliers purchase components only from
subcontractors that are ISO certified. If the Company is unable to obtain its
ISO certification, it may have difficulty selling to customers who require an
ISO certification. The inability to sell to such customers could have an
adverse effect upon the Company's business, results of operations and
financial condition.

INTELLECTUAL PROPERTY

41
<PAGE>

knowledge and experience of its management and technical personnel and its
ability to market its existing products and to develop new products.

PROPERTIES

The Company's Irvine, California, headquarters and manufacturing facility
occupy an aggregate of approximately 78,000 square feet under a lease expiring
in 2006. The Company believes that its current facilities provide adequate
expansion capabilities for its operations. The Company is currently subletting
to an unrelated party approximately 27,000 square feet of additional expansion
space connected to its new facility. This space can be made available to the
Company when the existing sub-lease expires in April 1997.

EMPLOYEES

As of September 29, 1996, the Company had 265 full and part-time employees,
including 43 in research and development, 11 in sales and marketing and 32 in
corporate and administration. None of the Company's employees are represented
by a union. The Company believes that its relations with its employees are
good.

42
<PAGE>

MANAGEMENT

DIRECTORS AND OFFICERS

The following table sets forth certain information regarding the Company's
directors and officers:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Alfonso G. Cordero (2).. 56 Chairman of the Board
Bruce C. Edwards........ 43 President, Chief Executive Officer and Director
Peter L. Manno.......... 54 Executive Vice President
Mercy B. Cordero........ 48 Vice President, Administration
Kevin T. Michaels....... 38 Vice President, Finance, Chief Financial Officer
and Secretary
Ki Y. Nam............... 36 Vice President, New Business Development
Richard D. Posner....... 53 Vice President, Engineering
Eric A. Tanner.......... 37 Vice President, Operations
Mark D. Winters......... 36 Vice President, Quality
Gregory M. Avis (1)..... 38 Director
David L. George (1)..... 43 Director
Eugene L. Goda (2)...... 60 Director
Rich Shapero (2)........ 48 Director
Sam Yau (1)............. 47 Director
</TABLE>
- --------
<TABLE>
<S> <C>
</TABLE>
(1) Member of Audit Committee of the Board of Directors.
(2) Member of Compensation Committee of the Board of Directors.

ALFONSO G. CORDERO, one of the founders of the Company, has served as a
director since the Company's inception. From June 1985 to January 1996, Mr.
Cordero served as Chief Executive Officer of the Company and currently serves
as Chairman of the Company. Mr. Cordero is married to Mercy B. Cordero, Vice
President, Administration.

BRUCE C. EDWARDS joined the Company in February 1996 as President and Chief
Executive Officer and Director. Mr. Edwards was Executive Vice President,
Chief Financial Officer and Director of AST Research, Inc., a personal
computer company, from July 1994 to December 1995 and Senior Vice President,
Finance and Chief Financial Officer of AST Research, Inc. from March 1988 to
July 1994. Mr. Edwards currently serves on the Board of Directors of Diamond
Multimedia Systems, Inc. and HMT Technology, Inc.

PETER L. MANNO joined the Company in April 1996 as Executive Vice President.
Prior to joining the Company, Mr. Manno served as Corporate Vice President,
Sales and Marketing of M/A-Com Corporation, a wireless network amplifier
company, from February 1992 to April 1996. From August 1984 to December 1991,
Mr. Manno was Vice President of Sales and marketing for Avantek, Inc., a
wireless network amplifier company.

MERCY B. CORDERO has served as Vice President, Administration of the Company
since June 1985. From January 1985 to June 1985, Mrs. Cordero served as
President of the Company. Mrs. Cordero is married to Alfonso G. Cordero,
Chairman of the Company.

43
<PAGE>

KEVIN T. MICHAELS joined the Company in June 1996 as Vice President, Finance
and Chief Financial Officer and was appointed Secretary in June 1996. Prior to
joining the Company, Mr. Michaels worked for AST Research, Inc. for eight
years, most recently as Vice President, Treasurer from October 1995. From July
1991 to October 1995 Mr. Michaels was Treasurer of AST Research, Inc. and from
June 1988 to June 1991, he was Assistant Treasurer.

KI Y. NAM has served as Vice President, New Business Development of the
Company since November 1995. Mr. Nam has held various positions with the
Company, including Senior Engineer and Vice President, Engineering, since
joining the Company in April 1989.

RICHARD D. POSNER joined the Company in July 1996 as Vice President,
Engineering. Prior to joining the Company, Dr. Posner served as Vice
President, Engineering at Whittaker Electronic Systems, Inc., a
telecommunications and electronic equipment company, from February 1990 to
June 1996. Prior to joining Whittaker, Dr. Posner co-founded 3DBM Systems,
Inc., where he served as Vice President of Engineering.

ERIC A. TANNER has served as Vice President, Operations since June 1995.
Prior to joining the Company, Mr. Tanner was employed, from January 1986 to
May 1995, in various managerial roles at Spectrian Corporation, a wireless
network amplifier company, in Mountain View, California. Mr. Tanner served as
Director of Manufacturing at Spectrian Corporation from January 1992 to May
1995. Prior to his employment at Spectrian, Mr. Tanner was employed at
Motorola Inc.'s RF Power Device Group.

MARK D. WINTERS has served as Vice President, Quality of the Company since
June 1996. From May 1995 to June 1996, Mr. Winters served as Vice President,
Engineering of the Company. From July 1992 to May 1995, Mr. Winters was with
E-Systems, Inc., and served as Division Manager, Electronics Manufacturing.
From December 1989 to July 1992, he was with DSC Communications, Inc., a
telecommunications equipment company, serving as Manager, Manufacturing
Engineering.

GREGORY M. AVIS has been a member of the Company's Board of Directors since
October, 1995. Mr. Avis has been a managing partner of Summit Partners, a
venture capital investment firm, since January 1990. Mr. Avis also serves on
the Board of Directors of CMG Information Services, Inc., Digital Link Corp.
and Splash Technologies Holdings, Inc.

DAVID L. GEORGE has been a member of the Company's Board of Directors since
November 1995. Mr. George has served as Executive Vice President of Unique
Technologies International, L.L.C., an SMR network company, since February
1994. From November 1983 to February 1994, Mr. George served as Vice
President, Director of Operations, Commercial Division of Uniden America.

EUGENE L. GODA has been a member of the Company's Board of Directors since
November 1995. For the past year, Mr. Goda has been a consultant and private
investor. From October 1991 to October 1995, Mr. Goda served as CEO of
Simulation Sciences, Inc., a software company. From July 1989 to September
1991, he served as CEO of Meridian Software Systems.

RICH SHAPERO has been a member of the Company's Board of Directors since
October 1995. Mr. Shapero has been a general partner of Crosspoint Venture
Partners, a venture capital investment firm, since April 1993. From January
1991 to June 1992, he served as Chief Operating Officer of Shiva Corporation,
a computer network company.

SAM YAU has been a member of the Company's Board of Directors since November
1995. Mr. Yau has served as Chief Executive Officer of National Education
Corporation, an education training and supply company, since May 1995. From
May 1993 to November 1994, he served as Chief Operating Officer of Advacare,
Inc. and from May 1987 to May 1993 as Senior Vice President, Finance and
Administration of Archive Corporation (now part of Seagate Technologies,
Inc.). Mr. Yau currently serves on the Board of Directors of National
Education Corporation, Steck-Vaughn Publishing Corporation and Procom
Technology, Inc.

44
<PAGE>

ELECTION OF DIRECTORS AND OFFICERS

Each member of the Company's Board of Directors was elected pursuant to a
Stockholders' Agreement dated October 10, 1995 (the "Stockholders'
Agreement"), by and among the Company and all shareholders of the Company on
such date. The Stockholders' Agreement contains a voting agreement for the
election of directors which expires on the closing of the Offering.

BOARD COMMITTEES AND COMPENSATION

The Audit Committee of the Board of Directors consists of Messrs. Avis,
George and Yau. The Audit Committee recommends to the Board of Directors the
independent public accountants to be selected to audit the Company's annual
financial statements and approves any special assignments given to such
accountants. The Audit Committee also reviews the planned scope of the annual
audit and the independent accountants' letter of comments and management's
response thereto, any major accounting changes made or contemplated and the
effectiveness and efficiency of the Company's internal accounting staff.

The Compensation Committee consists of Messrs. Cordero, Goda and Shapero.
The Compensation Committee establishes renumeration levels for executive
officers of the Company, reviews management organization and development and
reviews executive compensation and significant employee benefit programs.

The Company's outside directors, other than Messrs. Avis and Shapero who
have waived their fees, receive $750 per meeting of the Board of Directors.
Following consummation of the Offering, the Company's directors will receive
$1,500 per meeting of the Board of Directors. In addition, in connection with
their joining the Company's Board of Directors, Messrs. George, Goda and Yau
each were granted options to purchase 30,000 shares of Common Stock at an
exercise price of $2.47 per share under the 1995 Stock Option Plan.

1996 DIRECTOR STOCK OPTION PLAN

On October 7, 1996, the Company adopted the 1996 Stock Option Plan for
Directors (the "Director Plan") to be effective upon the completion of the
Offering. The Director Plan provides for the grant by the Company of options
to purchase up to an aggregate of 200,000 shares of Common Stock of the
Company. The Director Plan provides that each member of the Company's Board of
Directors who is not an employee or paid consultant of the Company
automatically will be eligible to receive options to purchase stock under the
Director Plan. Pursuant to the terms of the Director Plan, each director
elected after the closing of the Offering will be granted an initial option
under the plan covering 30,000 shares of Common Stock, which option shall vest
as to 25% of the shares over four (4) years on the anniversary of the date of
grant. Furthermore, on the closing of the Offering, and on each anniversary
date thereof, each director who has been an eligible participant under the
Director Plan for at least six (6) months will be granted an annual option
under the Director Plan to purchase 5,000 shares of Common Stock, which option
will vest on the fourth anniversary of the date of grant. The primary purposes
of the Director Plan are to enhance the Company's ability to attract and
retain well-qualified persons for service as directors and to provide
incentives to such directors to continue their associations with the Company.
There are no options outstanding under the Director Plan.

In the event of a merger of the Company with or into another corporation, or
a consolidation, acquisition of stock or assets or other change in control
transaction involving the Company, each option becomes exercisable in full,
unless such option is assumed by the successor corporation. In the event the
transaction is not approved by a majority of the "Continuing Directors" (as
defined in the Director Plan), each option becomes fully vested and
exercisable in full immediately prior to the consummation of such transaction,
whether or not assumed by the successor corporation.

45
<PAGE>

EXECUTIVE COMPENSATION

Summary Compensation. The following table sets forth summary information
concerning compensation paid by, or accrued for services rendered to, the
Company in all capacities during the fiscal year ended December 31, 1995 to
the Company's Chairman, and the Company's other executive officer whose salary
and bonus exceeded $100,000 (the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
----------------
ALL OTHER
NAME AND PRINCIPAL POSITION(1) SALARY BONUS COMPENSATION
------------------------------ ------- -------- ------------
<S> <C> <C> <C>
Alfonso G. Cordero................................ $85,000 $268,000 None
Chairman
Ki Y. Nam......................................... $85,000 $125,000 None
Vice President, New Business Development
</TABLE>
- --------
(1) Bruce C. Edwards joined the Company as President and Chief Executive
Officer on February 19, 1996 at an annual base salary of $135,000. Peter
Manno joined the Company as Executive Vice President on April 4, 1996 at
an annual base salary of $125,000 and an annual commission of $75,000.
Although not Named Executive Officers for the fiscal year ending December
31, 1995, the Company anticipates that Mr. Edwards and Mr. Manno will each
so qualify in future years.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the fiscal year ended December 31, 1995, the Company's Board of
Directors, prior to the formation of the Compensation Committee, established
the levels of compensation for the Company's executive officers. The following
executive officers, one of which is also a director of the Company,
participated in the deliberations of the Board regarding executive
compensation that occurred during the fiscal year ended December 31, 1995:
Alfonso G. Cordero, Chairman and Ki Y. Nam, Vice President, New Business
Development.

In October 1995, the Company entered into a Stock Purchase Agreement with
investors affiliated with Summit Partners and Crosspoint Venture Partners,
pursuant to which the Company issued to such investors 3,375,900 shares of
Series A Preferred Stock for an aggregate purchase price of $15 million.
Gregory M. Avis and Rich Shapero, both members of the Board of Directors of
the Company, are affiliated with Summit Partners and Crosspoint Venture
Partners, respectively. As part of these transactions, the Company
subsequently purchased 5,063,850 shares of its Common Stock from certain
shareholders, including Alfonso G. Cordero and Ki Nam, for an aggregate
purchase price of $12.5 million. Alfonso G. Cordero, Ki Y. Nam and the holders
of Common Stock issued upon conversion of Series A Preferred Stock, are
entitled to certain registration rights. See "Description of Capital Stock--
Registration Rights."

Pursuant to the Stockholders' Agreement, the Company and its then existing
shareholders (the "Founders") agreed that the Company would redeem from the
Founders, on a pro rata basis, one share of Common Stock for each share of
Common Stock in excess of 1,095,000 issued by the Company upon the exercise of
a Company stock option granted under the 1995 Plan at the exercise price for
such option. Effective upon the consummation of the Offering, the Stockholders
and the Company agreed that this share redemption agreement applies only to
the exercise of options to purchase a total of 843,615 shares of the Company's
Common Stock. In connection with entering into the Stockholders' Agreement,
the Company amended the 1995 Stock Option Plan to provide that all option
grants in excess of 1,050,000 are subject to the approval of Alfonso G.
Cordero and to give Mr. Cordero the right to terminate the Plan. See "--1995
Stock Option Plan."

46
<PAGE>

In August 1995, the Company entered into a Technology License Agreement with
Unique Wireless Developments, L.L.C., a Delaware limited liability company.
Under the agreement, the Company obtained exclusive rights to use certain
amplifier technology for the SMR market in exchange for certain royalties,
including a non-refundable (with certain exceptions) up front royalty totaling
$300,000 of which $250,000 has been paid. David L. George, a member of the
Board of Directors of the Company, is Executive Vice President of Unique
Technologies International, L.L.C., an affiliate of Unique Wireless
Developments, L.L.C.

From November 1993 to June 1996, the Company leased its operating facility
from 17500 Gillette Avenue Associates, a California general partnership (the
"Partnership") owned by the holders of substantially all of the Company's
Common Stock prior to the Offering (and the conversion of Series A Preferred
Stock), including Alfonso G. Cordero, an officer and director of the Company,
and Ki Y. Nam, an officer of the Company. The Company also guaranteed a loan
to the Partnership, the proceeds of which were used to purchase the real
property and facility. In July 1996, the Company relocated its operating
facility and entered into a lease with CNH, LLC, a California limited
liability company (the "LLC") owned by the holders of a substantial majority
of the Company's Common Stock prior to the Offering (and the conversion of
Series A Preferred Stock), including Messrs. Cordero and Nam. The lease
expires on July 15, 2006. In connection with entering into this lease, the
Company paid the LLC $1,000,000 in exchange for various improvements made to
the new facility. In addition, the Company has incurred approximately
$1,000,000 in leasehold improvements to the new facility.

The Company has entered into indemnification agreements with its directors,
certain officers and certain affiliated entities. Such agreements require the
Company to indemnify such individuals to the fullest extent permitted by
Delaware law. See "--Limitations on Liability and Indemnification."

On December 4, 1995, the Company granted to each of David George, Eugene
Goda and Sam Yau, each a member of the Board of Directors, options to purchase
30,000 shares of Common Stock at $2.47 per share. On January 19, 1996, the
Company granted to Bruce Edwards, a director and an officer of the Company, an
option to purchase 450,000 shares of Common Stock at $2.67 per share. On March
4, 1996, the Company granted to Peter Manno, an officer of the Company, an
option to purchase 300,000 shares of Common Stock at $2.67 per share. On May
30, 1996, the Company granted to Kevin Michaels, an officer of the Company, an
option to purchase 90,000 shares of Common Stock at $4.67 per share. Upon
completion of the Offering, the Company will grant to Peter Manno an option to
purchase 25,000 shares of Common Stock at the initial offering price per
share.

The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could otherwise be obtained
from unaffiliated third parties.

1995 STOCK OPTION PLAN

The Company's 1995 Stock Option Plan (the "1995 Option Plan") was adopted by
the Company's shareholders and Board of Directors effective as of December 4,
1995 and provides for the granting of nonqualified stock options to purchase
up to 1,938,615 shares of the Company's Common Stock. Under the 1995 Option
Plan, shares of the Company's Common Stock may be granted to directors,
officers and employees of the Company. As of September 29, 1996, 112,500
options have been exercised under the plan and there were 1,823,179 options
outstanding under the 1995 Option Plan at a weighted average exercise price of
$3.31.

The 1995 Option Plan provides that the 1995 Option Plan itself and all
outstanding options shall terminate upon the occurrence of a consolidation or
merger in which the Company is not the surviving corporation, the sale of
substantially of all the Company's assets and certain other similar events, in
each case unless the 1995 Plan is assumed by the successor corporation.

47
<PAGE>

Pursuant to the Stockholders' Agreement, certain shareholders of the Company
have agreed to have an equivalent number of their shares redeemed by the
Company if options to purchase in excess of 1,095,000 and up to an aggregate
of 1,938,615 shares of the Company's Common Stock are exercised by any of the
option holders who acquire options under the Company's 1995 Stock Option Plan.
The Stockholders' Agreement provides that the redemption price shall equal the
exercise price for each applicable option. See "Compensation Committee
Interlocks and Insider Participation."

The 1995 Stock Option Plan provides that all option grants under the Plan in
excess of 1,050,000 are subject to the approval of Alfonso G. Cordero. In
addition, the Plan may be terminated at the discretion of Mr. Cordero.

1996 STOCK INCENTIVE PLAN

On October 7, 1996, the Company adopted the 1996 Stock Incentive Plan (the
"1996 Plan"), to be effective upon the completion of the Offering. The 1996
Plan covers an aggregate of 1,500,000 shares of Common Stock plus any shares
which are or become available for grant under the 1995 Plan. The 1996 Plan
provides for the granting of "incentive stock options," within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
nonstatutory options and restricted stock grants to directors, officers,
employees and consultants of the Company, except that incentive stock options
may not be granted to non-employee directors or consultants. The purpose of
the 1996 Plan is to provide participants with incentives which will encourage
them to acquire a proprietary interest in, and continue to provide services
to, the Company. The 1996 Plan is administered by the Board of Directors,
which has sole discretion and authority, consistent with the provisions of the
1996 Plan, to determine which eligible participants will receive options, the
time when options will be granted, the terms of options granted and the number
of shares which will be subject to options granted under the 1996 Plan. There
are no options outstanding under the 1996 Plan.

In the event of a merger of the Company with or into another corporation, or
a consolidation, acquisition of stock or assets or other change in control
transaction involving the Company, each option becomes exercisable in full,
unless such option is assumed by the successor corporation. In the event the
transaction is not approved by a majority of the "Continuing Directors" (as
defined in the 1996 Plan), each option becomes fully vested and exercisable in
full immediately prior to the consummation of such transaction, whether or not
assumed by the successor corporation.

EMPLOYEE STOCK PURCHASE PLAN

On October 7, 1996, the Company adopted the Employee Stock Purchase Plan
(the "Purchase Plan"), to be effective upon the completion of the Offering,
covering an aggregate of 500,000 shares of Common Stock. The Purchase Plan,
which is intended to qualify as an "employee stock purchase plan" under
Section 423 of the Code, will be implemented by six-month offerings with
purchases occurring at six month intervals commencing on the date of this
Prospectus. The Purchase Plan will be administered by the Board of Directors.
Employees will be eligible to participate if they are employed by the Company
for at least 30 hours per week and if they have been employed by the Company
for at least 180 days. The Purchase Plan permits eligible employees to
purchase Common Stock through payroll deductions, which may not exceed 15% of
an employee's compensation. The price of stock purchased under the Purchase
Plan will be 85% of the lower of the fair market value of the Common Stock at
the beginning of each six-month offering period or on the applicable purchase
date. Employees may end their participation in any offering period at any time
during such period, and participation ends automatically on termination of
employment. The Board may at any time amend or terminate the Purchase Plan,
except that no such amendment or termination may adversely affect options
previously granted under the Purchase Plan. There are no rights to purchase
outstanding under the Purchase Plan.

48
<PAGE>

401(K) PLAN

The Company has adopted a Future Income Program Plan and Trust (the "401(k)
Plan") covering the Company's full-time employees located in the United
States. The 401(k) Plan is intended to qualify under Section 401(k) of the
Code, so that contributions to the 401(k) Plan by employees or by the Company,
and the investment earnings thereon, are not taxable to employees until
withdrawn from the 401(k) Plan, and so that contributions by the Company, if
any, will be deductible by the Company when made. Pursuant to the 401(k) Plan,
employees may elect to reduce their current compensation by up to 15% of their
base salary, subject to Internal Revenue Service limitations, and to have the
amount of such reduction contributed to the 401(k) Plan. The 401(k) Plan
permits, but does not require, additional matching contributions to the 401(k)
Plan by the Company on behalf of all participants in the 401(k) Plan. The
Company may match up to 10% of employee contributions. For fiscal 1995, the
Company contributed $15,669 to the plan.

LIMITATIONS ON DIRECTORS' LIABILITY AND INDEMNIFICATION

The Company's Amended and Restated Certificate of Incorporation limits the
liability of directors to the maximum extent permitted by Delaware law and the
Company's Amended and Restated Bylaws provide that the Company must indemnify
its directors and officers and may indemnify its other employees and agents to
the fullest extent permitted by law.

Delaware law provides that a director of a corporation will not be
personally liable for monetary damages for breach of such individual's
fiduciary duties as a director except for liability (i) for any breach of such
director's duty of loyalty to the corporation, (ii) for acts or omissions not
in good faith or that involve intentional misconduct or a knowing violation of
law, (iii) for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which a director derives an improper
personal benefit. The provisions of the Company's Amended and Restated
Certificate of Incorporation and Amended and Restated Bylaws do not affect a
director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws.

The Company has entered into separate indemnification agreements with each
of its directors and executive officers. These agreements require the Company,
among other things, to indemnify such director or officer against expenses
(including attorneys' fees), judgments, fines and settlements paid by such
individual in connection with any action, suit or proceeding arising out of
such individual's status or service as a director or officer of the Company
and to advance expenses incurred by such individual in connection with any
proceeding against such individual with respect to which such individual may
be entitled to indemnification by the Company. The Company believes that these
provisions and agreements are necessary to attract and retain qualified
directors and executive officers.

At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened
litigation or proceeding that might result in a claim for such
indemnification.

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<PAGE>

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of September 29, 1996,
as adjusted to give effect to the sale by the Company and the Selling
Shareholders of the shares of Common Stock offered hereby by (i) each person
(or group of affiliated persons) who is known by the Company to own
beneficially 5% or more of the Company's Common Stock, (ii) the Selling
Shareholders selling an aggregate of 600,000 shares, (iii) each of the
Company's directors, (iv) each of the Named Executive Officers, and (v) all
directors and executive officers of the Company as a group.

<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED SHARES
DIRECTORS, NAMED EXECUTIVE PRIOR TO NUMBER BENEFICIALLY OWNED
OFFICERS OFFERING(1) OF SHARES AFTER OFFERING(1)(2)
AND 5% AND SELLING ------------------ BEING ------------------
SHAREHOLDERS OWNED PERCENT OFFERED NUMBER PERCENT
-------------------------- ---------- ------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
Alfonso G. Cordero (3)...... 5,492,338 39.1% 5,492,338 34.6%
2026 McGaw Avenue
Irvine, California 92614
Summit Partners (4)......... 4,304,272 30.6 315,000 3,989,272 25.1
Gregory M. Avis (5)......... 4,304,272 30.6 315,000 3,989,272 25.1
499 Hamilton Avenue,
Suite 200
Palo Alto, California 94301
Ki Y. Nam (6)............... 1,679,688 11.9 19,500 1,660,188 10.5
2026 McGaw Avenue
Irvine, California 92614
Crosspoint Ventures (7)..... 759,577 5.4 759,577 4.8
Rich Shapero (8)............ 759,577 5.4 759,577 4.8
One First Street
Palo Alto, California 94022
Charles Florman (9)......... 751,440 5.3 225,000 526,440 3.3
414A Main Street
Port Jefferson, New York
11777
Bruce C. Edwards............ 112,500 * 112,500 *
Arthur Cook(10)............. 221,012 1.6 12,500 208,512 l.3
Bill H. Doi (11)............ 265,214 1.9 8,000 257,214 1.6
Thomas Ha (12).............. 176,811 1.3 10,000 166,811 1.1
Sussanne Torretta (13)...... 132,606 * 10,000 122,606 *
David L. George (14)........ 7,500 * 7,500 *
Eugene L. Goda (15)......... 7,500 * 7,500 *
Sam Yau (16)................ 7,500 * 7,500 *
All Executive Officers and
Directors as a Group
(8 persons) (17)........... 12,370,875 87.8 334,500 12,036,375 75.7
</TABLE>
- --------
*Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to options or warrants currently exercisable, or exercisable
within 60 days of September 29, 1996, are deemed outstanding for computing
the percentage of the person holding such options or warrants but are not
deemed outstanding for computing the percentage of any other person.
Except as indicated by footnote and subject to community property laws
where applicable, to the knowledge of the Company the persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them.
(2) Assumes that the Underwriters' over-allotment option is not exercised.

50
<PAGE>

(3) Includes 11,250 shares, consisting of options exercisable within 60 days
of September 29, 1996, owned by Mr. Cordero's spouse, an officer of the
Company. Mr. Cordero disclaims beneficial ownership of such shares. Also
includes 522,618 shares subject to redemption by the Company for shares of
Common Stock issued by the Company in excess of 1,095,000 pursuant to the
exercise of stock options under the 1995 Stock Option Plan. See
"Management--1995 Stock Option Plan."
(4) Includes 2,076,855 shares held by Summit Ventures IV, L.P., 2,076,855
shares held by Summit Ventures III, L.P., and 150,562 shares held by
Summit Investors II, L.P. Voting power with respect to shares held by
Summit Ventures IV, L.P., Summit Ventures III, L.P. and Summit Investors
II, L.P. is held solely by Gregory M. Avis.
(5) Consists of shares held by Summit entities, of which Mr. Avis is a
designated representative and general partner. Mr. Avis disclaims
beneficial ownership of all shares held by Summit entities except to the
extent of his pecuniary interest therein.
(6) Includes 160,156 shares subject to redemption by the Company for shares
of Common Stock issued by the Company in excess of 1,095,000 shares of
Common Stock pursuant to the exercise of stock options under the 1995
Stock Option Plan. See "Management--1995 Stock Option Plan."
(7) Includes 736,606 shares held by Crosspoint Ventures Partners 1993 and
22,971 shares held by Crosspoint Ventures Partners Entrepreneurs 1993.
Voting power with respect to shares held by Crosspoint Venture Partners
1993 and Crosspoint Ventures Partners Entrepreneurs 1993 is held solely
by Rich Shapero.
(8) Consists of shares held by Crosspoint entities, of which Mr. Shapero is a
designated representative. Mr. Shapero disclaims beneficial ownership of
all shares held by Crosspoint entities except to the extent of his
pecuniary interest therein.
(9) Includes 71,649 shares subject to redemption by the Company for shares of
Common Stock issued by the Company in excess of 1,095,000 shares of
Common Stock pursuant to the exercise of stock options under the 1995
Stock Option Plan. See "Management--1995 Stock Option Plan."
(10) Includes 21,073 shares subject to redemption by the Company for shares of
Common Stock issued by the Company in excess of 1,095,000 shares of
Common Stock pursuant to the exercise of stock options under the 1995
Stock Option Plan. See "Management--1995 Stock Option Plan."
(11) Includes 25,287 shares subject to redemption by the Company for shares of
Common Stock issued by the Company in excess of 1,095,000 shares of
Common Stock pursuant to the exercise of stock options under the 1995
Stock Option Plan. See "Management--1995 Stock Option Plan."
(12) Includes 16,860 shares subject to redemption by the Company for shares of
Common Stock issued by the Company in excess of 1,095,000 shares of
Common Stock pursuant to the exercise of stock options under the 1995
Stock Option Plan. See "Management--1995 Stock Option Plan."
(13) Includes 12,643 shares subject to redemption by the Company for shares of
Common Stock issued by the Company in excess of 1,095,000 shares of
Common Stock pursuant to the exercise of stock options under the 1995
Stock Option Plan. See "Management--1995 Stock Option Plan."
(14) Consists of options exercisable for 7,500 shares within 60 days of
September 29, 1996.
(15) Consists of options exercisable for 7,500 shares within 60 days of
September 29, 1996.
(16) Consists of options exercisable for 7,500 shares within 60 days of
September 29, 1996.
(17) Includes 682,774 shares subject to redemption by the Company (see notes
3, and 6) and options exercisable for 33,750 shares within 60 days of
September 29, 1996, of which 11,250 are held by Mr. Cordero's spouse (see
notes 3, 14, 15 and 16).

51
<PAGE>

DESCRIPTION OF CAPITAL STOCK

Upon the completion of the Offering the authorized capital stock of the
Company will consist of 40,000,000 shares of common stock, $.0001 par value
("Common Stock"), and 5,000,000 shares of preferred stock, $.0001 par value
("Preferred Stock").

COMMON STOCK

As of September 29, 1996, there were 8,998,650 shares of Common Stock
outstanding held of record by nine shareholders. There will be 15,862,500
shares of Common Stock outstanding after the sale of the shares of Common
Stock offered by the Company hereby, 600,000 shares of which will be sold in
the Offering by the Selling Shareholders. See "Principal and Selling
Shareholders."

Holders of Common Stock are entitled to one vote per share on all matters to
be voted upon by the shareholders. Subject to preferences that may be
applicable to the holders of outstanding shares of Preferred Stock, if any,
the holders of Common Stock are entitled to receive such lawful dividends as
may be declared by the Board of Directors. In the event of liquidation,
dissolution or winding up of the Company, and subject to the rights of the
holders of outstanding shares of Preferred Stock, if any, the holders of
shares of Common Stock shall be entitled to receive pro rata all of the
remaining assets of the Company available for distribution to its
shareholders. There are no redemption or sinking fund provisions applicable to
the Common Stock. All outstanding shares of Common Stock are fully paid and
nonassessable, and shares of Common Stock to be issued pursuant to the
Offering shall be fully paid and nonassessable.

PREFERRED STOCK

Effective upon the closing of the Offering, each issued and outstanding
share of Series A Preferred Stock will be converted into one and one-half
(1.5) shares of Common Stock. After the Series A Preferred Stock is converted
and retired, no shares of Preferred Stock will be outstanding.

Upon the closing of the Offering, the Board of Directors will have the
authority, without further action by the shareholders, to issue the authorized
shares of Preferred Stock in one or more series and to fix the rights,
preferences and privileges thereof, including voting rights, terms of
redemption, redemption prices, liquidation preferences, number of shares
constituting any series or the designation of such series, without further
vote or action by the shareholders. Although it presently has no intention to
do so, the Board of Directors, without shareholder approval, could issue
Preferred Stock with voting and conversion rights which could adversely affect
the voting power of the holders of Common Stock. This provision may be deemed
to have a potential anti-takeover effect and the issuance of Preferred Stock
in accordance with such provision may delay or prevent a change of control of
the Company. See "Risk Factors--Effect of Certain Charter and Bylaw
Provisions."

REGISTRATION RIGHTS

Under the terms of a Registration Rights Agreement, dated as of October 10,
1995, among the Company and certain holders of its securities, after the
Offering and upon the expiration of the 180-day lock-up agreements with the
Underwriters, the holders of approximately 13,350,000 shares of Common Stock
will be entitled to certain rights with respect to the registration of such
shares under the Securities Act. Under the agreement, certain holders of
specified threshold amounts of "Registrable Securities" may demand that the
Company register their securities for resale under the Securities Act, in
which case all holders of their Registrable Securities may join in such demand
registration. In addition, if the Company proposes to register any of its
securities under the Securities Act, either for its own account or the action
of other shareholders (other than the holders of Registrable Securities), the
holders of Registrable Securities are entitled to notice of such registration
and are entitled to include their Registrable Securities

52
<PAGE>

therein. In either case, among other conditions and limitations, the
underwriters have the right to limit the number of Registrable Securities
included in any such registration. Certain holders of Registrable Securities
also may require the Company to register, at the expense of the Company, all
or a portion of their Registrable Securities on Form S-3 when such form
becomes available to the Company, subject to certain conditions and
limitations.

DELAWARE LAW AND CERTAIN CHARTER PROVISIONS

The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. In general, the statute prohibits a publicly-held
Delaware corporation from engaging in a "business combination" with an
"interested" shareholder for a period of three years after the date of the
transaction in which the person became an interested shareholder, unless
either (i) prior to the date at which the person becomes an interested
shareholder, the board of directors approves such transaction or business
combination, (ii) the shareholder acquires more than 85% of the outstanding
voting stock of the corporation (excluding shares held by directors who are
officers or held in certain employee stock plans) upon consummation of such
transaction, or (iii) the business combination is approved by the board of
directors and by two-thirds of the outstanding voting stock of the corporation
(excluding shares held by the interested shareholder) at a meeting of
shareholders (and not by written consent). A "business combination" includes a
merger, asset sale or other transaction resulting in a financial benefit to
such interested shareholder. For purposes of Section 203, an "interested"
shareholder is a person who, together with affiliates and associates, owns (or
within three years prior, did own) 15% or more of the corporation's voting
stock.

Upon the closing of the Offering, the Company's Amended and Restated
Certificate of Incorporation will include a provision that allows the Board of
Directors to issue Preferred Stock in one or more series with such voting
rights and other provisions as the board of Directors may determine. The
Amended and Restated Certificate of Incorporation also will eliminate the
ability of shareholders to call special meetings and require advance notice to
nominate a director or take certain other actions. These provisions may be
deemed to have a potential anti-takeover effect and may delay or prevent a
change of control of the Company.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is U.S. Stock Transfer
Corporation.

53
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offering, there has been no public market for the Common Stock.
Future sales of substantial amounts of Common Stock in the public market could
adversely affect prevailing market prices and adversely affect the Company's
ability to raise additional capital in the capital markets at a time and price
favorable to the Company. As described below, no shares currently outstanding
will be available for sale immediately after the Offering due to certain legal
restrictions on resale.

Upon completion of the Offering, the Company will have 15,862,500 shares of
Common Stock outstanding. Of these shares, the 2,400,000 shares sold in the
Offering will be freely tradeable without restriction or further registration
under the Securities Act unless they are purchased by "affiliates" of the
Company as that term is used under the Securities Act. The remaining
13,462,500 shares held by existing shareholders will be "restricted
securities" as defined in Rule 144 under the Securities Act ("Restricted
Shares"). Restricted Shares may be sold in the public market only if
registered or if they qualify for an exemption from registration under Rules
144, 144(k) or 701 promulgated under the Securities Act, which are summarized
below. Sales of Restricted Shares in the public market, or the availability of
such shares for sale, could adversely affect the market price of the Common
Stock.

All officers, directors, existing shareholders and certain option holders
have agreed with the Underwriters that they will not sell any of the
13,462,500 shares of Common Stock owned by them for a period of 180 days after
the effective date of the Offering without the prior written consent of Alex.
Brown & Sons Incorporated (the "180-day lock-up"). Furthermore, all option
holders are precluded from selling any shares issuable to them through the
exercise of options for a 180-day lock-up period, under the terms of such
options. As a result of the 180-day lock-up, no shares of Common Stock will
become available for sale in the public market under either Rule 144 or
144(k). Upon the expiration of the 180-day lock-up (or earlier upon the
consent of Alex. Brown & Sons, Incorporated), 1,422,868 Restricted Shares
(plus shares issuable upon exercise of then vested outstanding options) will
be eligible for immediate sale in the public market in reliance on Rule 144(k)
and 7,253,776 Restricted Shares will become eligible for sale subject to the
volume and other restrictions of Rule 144 and, in some cases, Rule 701. The
approximately 4,785,856 remaining Restricted Shares will not be eligible for
sale pursuant to Rule 144 until the expiration of their two-year holding
periods.

In general, under Rule 144 as currently in effect, beginning 90 days after
the effective date of the Offering, any person (or persons whose shares are
aggregated) who has beneficially owned Restricted Shares for at least two
years is entitled to sell, within any three-month period, a number of shares
that does not exceed the greater of 1% of the then outstanding shares of the
Company's Common Stock (approximately 158,625 shares immediately after the
Offering) or the average weekly trading volume during the four calendar weeks
preceding such sale. Sales under Rule 144 are also subject to certain
requirements as to the manner of sale, notice and availability of current
public information about the Company. A person who is not an affiliate, has
not been an affiliate within three months prior to the sale and has
beneficially owned the Restricted Shares for a least three years is entitled
to sell such shares under Rule 144(k) as currently in effect without regard to
any of the limitations described above.

In general, under Rule 701 as currently in effect, beginning 90 days after
the effective date of the Offering, certain shares issued upon exercise of
options granted by the Company prior to the date of this Prospectus will also
be available for sale in the public market, subject to expiration of the 180-
day lock-up period under the terms of such options. Any employee, officer or
director of or consultant to the Company who purchased his or her shares
pursuant to a written compensatory plan or contract may be entitled to rely on
the resale provisions of Rule 701. Rule 701 permits affiliates to sell their
Rule 701 shares under Rule 144 without complying with the holding period
requirements of Rule 144. Rule 701 further provides that non-affiliates may
sell such shares in reliance on Rule 144 without having to comply with the
public information, volume limitation or notice provisions of Rule 144.

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<PAGE>

The Company intends to file a registration statement on Form S-8 under the
Act to register shares of Common Stock reserved for issuance under its stock
option plans, thus permitting the resale of shares issued under the plan by
non-affiliates in the public market without restriction under the Securities
Act. Such registration statement will become effective immediately upon filing
which is expected on or shortly after the closing of the Offering. It is
anticipated that approximately 476,761 shares of Common Stock issuable upon
exercise of options outstanding as of September 29, 1996 will become eligible
for sale in the public market upon the expiration of the lock-up under the
terms of such options, which expiration shall occur 180 days after the closing
of the Offering.

The Securities and Exchange Commission has recently proposed reducing the
Rule 144 holding period to one year and the Rule 144(k) holding period to two
years. There can be no assurance as to when or whether such rule changes will
be enacted. If enacted, such modification will have a material effect on the
time when shares of the Company's Common stock become eligible for resale.

55
<PAGE>

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives,
Alex. Brown & Sons Incorporated, UBS Securities LLC and Wessels, Arnold &
Henderson, L.L.C. have severally agreed to purchase from the Company and the
Selling Shareholders the following respective numbers of shares of Common
Stock at the initial public offering price less the underwriting discounts and
commissions set forth on the cover page of this Prospectus:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Alex. Brown & Sons Incorporated...................................
UBS Securities LLC................................................
Wessels, Arnold & Henderson, L.L.C................................
---------
Total......................................................... 2,400,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all the shares of Common Stock offered hereby if any of such shares
are purchased.

The Company and the Selling Shareholders have been advised by the
Representatives of the Underwriters that the Underwriters propose to offer the
shares of Common Stock to the public at the initial public offering price set
forth on the cover page of this Prospectus and to certain dealers at such
price less a concession not in excess of $ per share. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $ per
share to certain other dealers. After the initial public offering, the
offering price and other selling terms may be changed by the Representatives
of the Underwriters.

The Company has granted to the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to 360,000
additional shares of Common Stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the
same percentage thereof that the number of shares of Common Stock to be
purchased by it in the above table bears to 2,400,000, and the Company will be
obligated, pursuant to the option, to sell such shares to the Underwriters.
The Underwriters may exercise such option only to cover over-allotments made
in connection with the sale of Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 2,400,000 shares are being offered.

The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.

The Selling Shareholders, all of the officers and directors and all other
shareholders of the Company have agreed not to offer, sell, contract to sell,
or otherwise dispose of any Common Stock for a period of 180 days after the
date of this Prospectus without the prior written consent of the
Representatives of the Underwriters. See "Shares Eligible for Future Sale."

56
<PAGE>

The Representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.

Prior to the Offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock will be determined by negotiation between the Company, the Selling
Shareholders and the Representatives of the Underwriters. The factors to be
considered in such negotiations include prevailing market conditions, the
results of operations of the Company in recent periods, the market
capitalizations and stages of development of other companies which the Company
and the Representatives of the Underwriters believe to be comparable to the
Company, estimates of the business potential of the Company, the present state
of the Company's development and other factors deemed relevant.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Shareholders by Stradling, Yocca, Carlson
& Rauth, a Professional Corporation, Newport Beach, California. Certain legal
matters will be passed upon for the Underwriters by Morrison & Foerster LLP,
Irvine, California.

EXPERTS

The consolidated financial statements and schedule of the Company as of
December 31, 1994 and 1995, and September 29, 1996 and for each of the three
years in the period ended December 31, 1995 and the nine months ended
September 29, 1996, included in this Prospectus and elsewhere in the
Registration Statement have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports appearing herein and elsewhere in the
Registration Statement, and are included in reliance upon the reports given
upon their authority as experts in accounting and auditing.

ADDITIONAL INFORMATION

A Registration Statement on Form S-1, including amendments thereto, relating
to the Common Stock offered hereby has been filed by the Company with the
Securities and Exchange Commission. This Prospectus does not contain all of
the information set forth in the Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus as to the contents
of any contract or other document referred to are not necessarily complete and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to such Registration Statement, exhibits and schedules. A
copy of the Registration Statement may be inspected by anyone without charge
at the public reference facilities maintained by the Commission in Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of
the Commission located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of all or any part of the Registration
Statement may be obtained from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549 and its public reference
facilities in New York, New York and Chicago, Illinois, upon the payment of
the fees prescribed by the Commission. The Registration Statement is also
available through the Commission's Website on the World Wide Web at the
following address: http://www.sec.gov.

57
<PAGE>

POWERWAVE TECHNOLOGIES, INC.

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

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.............................................. F-2
Consolidated Balance Sheets as of December 31, 1994, 1995 and September
29, 1996................................................................. F-3
Consolidated Statements of Income for the years ended December 31, 1993,
1994 and 1995 and the Nine Months Ended September 30, 1995 (Unaudited)
and September 29, 1996................................................... F-4
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1993, 1994 and 1995 and the Nine Months Ended September 29,
1996..................................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1993, 1994 and 1995 and the Nine Months Ended September 30, 1995
(Unaudited) and September 29, 1996....................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors of
Powerwave Technologies, Inc.:

We have audited the accompanying consolidated balance sheets of Powerwave
Technologies, Inc. (formerly Milcom International, Inc.) (the "Company") as of
December 31, 1994, 1995 and September 29, 1996, and the related consolidated
statements of income, shareholders' equity and of cash flows for each of the
three years in the period ended December 31, 1995, and the nine months ended
September 29, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December
31, 1994, 1995 and September 29, 1996, and the results of their operations and
their cash flows for each of the three years in the period ended December 31,
1995, and the nine months ended September 29, 1996, in conformity with
generally accepted accounting principles.

Deloitte & Touche LLP

Costa Mesa, California
October 24, 1996

F-2
<PAGE>

POWERWAVE TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 29, 1996
------------------------ --------------------------
1994 1995 ACTUAL PRO FORMA
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash
equivalents............ $3,030,211 $ 5,860,785 $ 10,389,407
Short-term investments.. 494,795
Accounts receivable, net
of allowance for
doubtful accounts of
$10,000, $122,532 and
$402,368 at December
31, 1994, 1995 and
September 29, 1996,
respectively........... 1,428,224 3,103,990 5,168,068
Inventories............. 3,276,026 4,724,261 4,495,220
Income tax refund
receivable............. 609,550 --
Prepaid expenses and
other current assets... 18,732 15,163 129,989
Deferred tax assets..... 421,555 1,031,482 1,031,482
---------- ------------ ------------
Total current assets... 8,669,543 15,345,231 21,214,166
Property and equipment... 1,262,168 1,800,078 4,672,439
Accumulated depreciation
and amortization........ (380,355) (734,285) (980,596)
---------- ------------ ------------
Net property and
equipment.............. 881,813 1,065,793 3,691,843
Other assets............. 52,299 153,518
---------- ------------ ------------
TOTAL ASSETS............. $9,551,356 $ 16,463,323 $ 25,059,527
========== ============ ============
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts payable........ $ 756,671 $ 3,508,098 $ 3,911,018 $ 3,911,018
Accrued expenses and
other liabilities...... 1,937,821 2,080,446 4,382,157 4,382,157
Dividends payable....... 1,350,000 --
Due to shareholders..... 90,000 50,000 -- --
Current portion of long-
term debt.............. 93,765 66,824 108,681 108,681
Income taxes payable.... 2,304,855 265,363 265,363
---------- ------------ ------------ ------------
Total current
liabilities........... 5,183,112 5,705,368 10,017,219 8,667,219
Other non-current
liabilities............ 50,000
Long-term debt.......... 176,044 137,526 41,395 41,395
---------- ------------ ------------ ------------
Total liabilities....... 5,409,156 5,842,894 10,058,614 8,708,614
Commitments and
contingency (Note 11)
Series A Convertible
Preferred Stock (Note
6), $.0001 par value;
3,375,900 and 3,375,900
shares authorized,
issued and outstanding
at December 31, 1995 and
September 29, 1996,
(Note 6) no pro forma
shares at September 29,
1996.................... 14,498,193 14,498,193
Shareholders' Equity
(Deficit) (Notes 2, 6
and 9):
Preferred Stock, $.0001
par value; 5,000,000
shares authorized and no
shares outstanding......
Common Stock, $.0001 par
value; 20,000,000 shares
authorized; 13,950,000,
8,886,150 and 8,998,650
shares issued and
outstanding at December
31, 1994 and 1995 and
September 29, 1996,
40,000,000 shares
authorized and
14,062,500 shares issued
pro forma at September
29, 1996................ 740,000 471,380 771,380 15,269,573
Retained earnings........ 3,402,200 7,882,236 11,962,720 13,312,720
Less treasury stock at
cost.................... (12,231,380) (12,231,380) (12,231,380)
---------- ------------ ------------ ------------
Total shareholders'
equity (deficit)...... 4,142,200 (3,877,764) 502,720 $ 16,350,913
========== ============ ============ ============
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY.... $9,551,356 $ 16,463,323 $ 25,059,527
========== ============ ============
</TABLE>

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

F-3
<PAGE>

POWERWAVE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30, SEPTEMBER 29,
------------------------------------ ------------- -------------
1993 1994 1995 1995 1996
---------- ----------- ----------- ------------- -------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net sales............... $8,717,021 $22,860,634 $36,044,438 $22,384,064 $43,594,547
Cost of sales........... 6,566,681 14,465,477 22,713,227 14,554,172 25,371,134
---------- ----------- ----------- ----------- -----------
Gross profit............ 2,150,340 8,395,157 13,331,211 7,829,892 18,223,413
Operating expenses (Note
10):
Sales and marketing..... 386,981 570,276 1,557,282 1,012,637 3,314,715
Research and
development............ 581,126 1,432,544 2,252,254 1,401,390 4,034,140
General and
administrative......... 559,291 1,517,704 1,958,228 1,287,884 2,003,390
---------- ----------- ----------- ----------- -----------
Total operating
expenses............... 1,527,398 3,520,524 5,767,764 3,701,911 9,352,245
---------- ----------- ----------- ----------- -----------
Operating income........ 622,942 4,874,633 7,563,447 4,127,981 8,871,168
Other income (expense).. (5,298) (19,892) 32,237 236 333,041
---------- ----------- ----------- ----------- -----------
Income before income
taxes.................. 617,644 4,854,741 7,595,684 4,128,217 9,204,209
Provision for income
taxes.................. 266,419 1,908,406 3,115,648 1,693,339 3,773,725
---------- ----------- ----------- ----------- -----------
Net income.............. $ 351,225 $ 2,946,335 $ 4,480,036 $ 2,434,878 $ 5,430,484
========== =========== =========== =========== ===========
Pro forma net income per
share.................. $ .30 $ .37
=========== ===========
Pro forma weighted
average common shares.. 14,774,239 14,774,239
=========== ===========
</TABLE>

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

F-4
<PAGE>

POWERWAVE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
TOTAL
COMMON STOCK TREASURY STOCK SHAREHOLDERS'
--------------------- ---------------------- RETAINED EQUITY
SHARES AMOUNT SHARES AMOUNT EARNINGS (DEFICIT)
---------- --------- --------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1993................... 13,950,000 $ 740,000 $ 104,640 $ 844,640
Net income.............. 351,225 351,225
---------- --------- ----------- ------------
Balance at December 31,
1993................... 13,950,000 740,000 455,865 1,195,865
Net income.............. 2,946,335 2,946,335
---------- --------- ----------- ------------
Balance at December 31,
1994................... 13,950,000 740,000 3,402,200 4,142,200
Repurchase of common
stock (Note 6):........ (5,063,850) (268,620) 5,063,850 $(12,231,380) (12,500,000)
Net income.............. 4,480,036 4,480,036
---------- --------- --------- ------------ ----------- ------------
Balance at December 31,
1995................... 8,886,150 471,380 5,063,850 (12,231,380) 7,882,236 (3,877,764)
Issuance of Common
Stock related to the
exercise of stock
options (Note 9)...... 112,500 300,000 300,000
Preferred Stock
dividends (Notes 2 and
6).................... (1,350,000) (1,350,000)
Net Income............. 5,430,484 5,430,484
---------- --------- --------- ------------ ----------- ------------
Balance at September 29,
1996................... 8,998,650 $ 771,380 5,063,850 $(12,231,380) $11,962,720 $ 502,720
========== ========= ========= ============ =========== ============
</TABLE>

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

F-5
<PAGE>

POWERWAVE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30, SEPTEMBER 29,
------------------------------------- ------------- -------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ------------- -------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING
ACTIVITIES:
Net income............. $ 351,225 $ 2,946,335 $ 4,480,036 $ 2,434,878 $ 5,430,484
Adjustments to
reconcile net income
to net cash provided
by (used in) operating
activities:
Depreciation and
amortization.......... 108,758 166,597 353,929 76,792 246,311
Deferred income taxes.. 7,072 (399,127) (609,927)
Changes in assets and
liabilities:
Accounts receivable... (1,974,571) 1,127,618 (1,675,766) (4,029,587) (2,064,078)
Inventories........... (563,609) (2,350,424) (1,448,235) (2,074,537) 229,041
Income tax refund
receivable........... (609,550) 609,550
Prepaid expenses and
other current assets. (4,786) (5,694) (48,730) (55,254) (114,826)
Accounts payable...... 1,847,761 (1,277,867) 2,066,914 2,711,375 402,920
Accrued expenses and
other liabilities.... 106,237 1,379,052 737,138 57,457 2,301,711
Other assets.......... (101,219)
Income taxes payable.. 232,471 2,072,384 (2,304,855) (1,806,662) 265,363
----------- ----------- ----------- ----------- -----------
Net cash provided by
(used in) operating
activities............ 110,558 3,658,874 940,954 (2,685,538) 7,205,257
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of property
and equipment......... (415,818) (207,502) (537,909) (129,657) (2,872,361)
Sale (purchase) of
short-term
investments........... (494,795) 494,795 448,111
----------- ----------- ----------- ----------- -----------
Net cash provided by
(used in) investing
activities............ (415,818) (702,297) (43,114) 318,454 (2,872,361)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Principal payments on
long-term debt........ (4,272) (10,996) (65,459) (48,467) (54,274)
(Principal payments)
borrowings on debt.... 271,522 (273,884)
Increase (decrease) in
amounts due to
shareholders.......... (50,000)
Issuance of Preferred
Stock................. 14,498,193
Issuance of Common
Stock................. 300,000
Preferred Stock
dividend payable...... 1,350,000
Repurchase of Common
Stock................. (12,500,000)
Preferred Stock
dividends............. (1,350,000)
----------- ----------- ----------- ----------- -----------
Net cash provided by
(used in) financing
activities............ 267,250 (284,880) 1,932,734 (48,467) 195,726
----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS............ (38,010) 2,671,697 2,830,574 (2,415,551) 4,528,622
CASH AND CASH
EQUIVALENTS, beginning. 396,524 358,514 3,030,211 3,030,211 5,860,785
----------- ----------- ----------- ----------- -----------
CASH AND CASH
EQUIVALENTS, end....... $ 358,514 $ 3,030,211 $ 5,860,785 $ 614,660 $10,389,407
----------- ----------- ----------- ----------- -----------
SUPPLEMENTAL CASH FLOW
INFORMATION:
Cash paid for:
Interest............... $ 58,942 $ 56,783 $ 55,620 $ 13,751
Income taxes........... $ 20,314 $ 235,149 $ 6,665,000 $ 3,525,000 $ 2,924,000
=========== =========== =========== =========== ===========
NONCASH ITEMS:
Acquisition of property
through capital lease.. $ 77,318 $ 248,141
=========== ===========
</TABLE>

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

F-6
<PAGE>

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF OPERATIONS

Powerwave Technologies, Inc. (formerly Milcom International, Inc.) (the
"Company") is a Delaware corporation engaged in the design, manufacture and
sale of RF power amplifiers and related electronic equipment for use in the
wireless communications market. The Company manufactures both single
channel and multi-channel amplifiers, with a focus on multi-channel
products. The Company's products are currently being utilized on cellular
base stations in both digital and analog-based networks. The Company's
products support a wide range of digital and analog transmission protocols.
The Company also produces power amplifiers for the SMR market, which is
characterized as a two-way radio market with devices commonly utilized by
police and emergency personnel and the business dispatch marketplace. The
Company also manufactures air-to-ground amplifiers.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include the accounts of the Company
and its foreign sales corporation. All intercompany balances and
transactions have been eliminated in consolidation.

Unaudited Information

The information set forth in these consolidated financial statements for
the nine months ended September 30, 1995 is unaudited. This information
reflects all adjustments, consisting only of normal recurring adjustments,
that, in the opinion of management, are necessary to present fairly the
financial position and results of operations of the Company for these
periods, results of operations for the interim periods are not necessarily
indicative of the results of operations for the full fiscal year.

Fiscal Year

The Company operated on a calendar fiscal year basis through fiscal 1995.
Commencing with fiscal year 1996, the Company has adopted a conventional
52/53 week accounting fiscal year. The Company's fiscal year ends on the
Sunday closest to December 31st. Fiscal year 1996 will end on December 29,
1996.

Cash and Cash Equivalents

Cash and cash equivalents generally consist of cash, time deposits,
commercial paper, money market preferred stocks, money market funds and
other money market instruments. The Company invests its excess cash in only
investment grade money market instruments from a variety of industries and,
therefore, bears minimal risk. These securities all have original maturity
dates of three months or less. Such investments are stated at cost, which
approximates fair value, and are considered cash equivalents for purposes
of reporting cash flows.

Short-Term Investments

Short-term investments are valued at the lower of cost or market and
consist of certificates of deposit and marketable securities. The Company
adopted Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities, as of
January 1, 1994. This statement specifies the accounting treatment of the
Company's investments in equity securities based on the investment
classifications defined in the statement. The Company has

F-7
<PAGE>

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

classified the equity securities as available for sale and, in accordance
with SFAS No. 115, they have been recorded at market value as of December
31, 1994. The market value approximated the carrying amount at December 31,
1994. The Company did not have short-term investments at December 31, 1995
or September 29, 1996.

Accounts Receivable

The Company performs ongoing credit evaluations of its customers and
generally does not require collateral. The Company maintains reserves for
potential credit losses and such losses have been within management's
expectations.

Inventories

Inventories are stated at the lower of cost, determined on a first-in
first-out basis, or market. The Company periodically reviews inventory
quantities on hand and provides reserves for obsolete inventory based
primarily on current production requirements and forecasted product demand.

Property and Equipment

Property and equipment are stated at cost. The Company depreciates these
assets using the straight-line method over the estimated useful lives of
the various classes of assets, as follows:

<TABLE>
<S> <C>
Machinery and equipment 3 to 5 years
Office furniture and equipment 5 years
Leasehold improvements 7 to 10 years
Property under capital leases 3 to 5 years
</TABLE>

Other Assets

Included in other assets is $11,061 of deferred offering costs incurred
since July 1996 in connection with the proposed public offering. Such costs
will be offset against the proceeds from such offering if successful. If
the offering is unsuccessful, such costs will be expensed.

Fair Value of Financial Instruments

SFAS No. 107, Disclosures About Fair Value of Financial Instruments,
requires management to disclose the estimated fair value of certain assets
and liabilities defined by SFAS No. 107 as financial instruments. Financial
instruments are generally defined by SFAS No. 107 as cash or a contractual
obligation that both conveys to one entity a right to receive cash or other
financial instruments from another entity and imposes on the other entity
the obligation to deliver cash or other financial instruments to the first
entity. At December 31, 1995 and September 29, 1996, management believes
that the carrying amounts of cash, receivables and trade payables
approximate fair value because of the short maturity of these financial
instruments.

New Accounting Pronouncement

In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, Accounting for Stock-based Compensation, which requires adoption of
the disclosure provisions no later than years beginning after December 15,
1995 and adoption of the recognition and measurement provisions for
nonemployee transactions no later than after December 15, 1995. The new
standard defines a fair value method of accounting for stock options and
other equity instruments. Under the fair value method, compensation cost is
measured at the grant date based on the fair value of the award and is
recognized over the service period which is usually the vesting period.

F-8
<PAGE>

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Pursuant to the new accounting standard, companies are encouraged, but
are not required, to adopt the fair value method of accounting for employee
stock-based transactions. Companies are also permitted to continue to
account for such transactions under Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees, but would be required to
disclose in a note to the financial statements pro forma net income and, if
presented, earnings per share as if the company had applied the new method
of accounting. The Company has determined that it will not change to the
fair value method and will continue to use Accounting Principle Board
Opinion No. 25 for measurement and recognition of employee stock-based
transactions (Note 9).

Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes, which requires that the Company recognize
deferred tax liabilities and assets based on the differences between the
financial statement carrying amounts and the tax bases of assets and
liabilities, using enacted tax rates in effect in the years the differences
are expected to reverse. Deferred income tax benefits result from the
recognition of temporary differences between financial statement and income
tax reporting of income and expenses.

Revenue Recognition

The Company recognizes revenue from product sales at the time of
shipment. The Company also offers its customers, on a limited basis, a
right of return on sales and records an estimate of such returns at the
time of product delivery based on historical experience.

Stock Split

In October 1995, the Company's shareholders approved a 9,300 for one
stock split of the Company's Common Stock. The Company also changed the
number of common shares authorized from 1,000 shares to 20,000,000 shares
and the par value per share from $1 per share to $.0001 per share. All
Common Stock information included in the accompanying consolidated
financial statements has been restated to reflect such stock split.

In October 1996, the Company's Board of Directors approved a 3-for-2
stock split of the Company's Common Stock effective at or prior to the
closing of the Company's initial public offering ("IPO") and increased the
number of shares authorized Common Stock to 40,000,000. All share and per
share information relating to Common Stock and conversion amounts relating
to Series A Convertible Preferred Stock ("Series A Preferred Stock") and
stock options included in the accompanying consolidated financial
statements and footnotes have been restated to reflect the stock split for
all periods presented.

Pro Forma Net Income Per Share

Pro forma net income per share is computed by dividing net income by the
weighted average number of common and common equivalent shares outstanding.
Weighted average common and common equivalent shares include Common Stock,
stock options using the treasury stock method and the assumed conversion of
all outstanding shares of Series A Preferred Stock into shares of Common
Stock.

Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
Topic 4D, stock options granted during the twelve months prior to the date
of the initial filing of the Company's Form S-1 Registration Statement have
been included in the calculation of common equivalent shares using the
treasury stock method.

F-9
<PAGE>

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Pro Forma Information

The Company is preparing for an IPO of its Common Stock which, upon
completion, will result in the conversion of all outstanding shares of
Series A Preferred Stock into shares of Common Stock (Note 6). The
accompanying pro forma information, which is unaudited, gives effect to the
conversion of all outstanding shares of Series A Preferred Stock into
Common Stock upon the closing of the IPO and the reversal of accrued
dividends payable of $1,350,000 at September 29, 1996 (Note 6).

Use of Estimates

The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles necessarily 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 years. Actual results
could differ from those estimates.

Customer Concentrations and International Sales

The Company's product sales have historically been concentrated in a
small number of customers. During the years ended December 31, 1993, 1994
and 1995 and the nine months ended September 30, 1995 and September 29,
1996, sales to three customers (four customers for nine months ended
September 29, 1996) totaled $4,675,900, $14,861,190, $20,741,536,
$10,780,340 and $35,477,332 or 54%, 65%, 58%, 48% and 81% of net sales,
respectively. The loss of, or reduction in, sales to any such customers
would have a material adverse effect on the Company's business, operating
results and financial condition.

During the years ended December 31, 1993, 1994 and 1995 and the nine
months ended September 30, 1995 and September 29, 1996, international
sales, primarily to the Asian market, were $696,400, $1,981,203,
$24,202,748, $13,910,321 and $31,614,742, respectively.

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 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, operating results and financial
condition until alternative sources could be developed.

3. INVENTORIES

Inventories consist of the following at December 31, 1994 and 1995 and
September 29, 1996:

<TABLE>
<CAPTION>
1994 1995 SEPTEMBER 29, 1996
---------- ---------- ------------------
<S> <C> <C> <C>
Parts and components................ $1,898,484 $2,646,063 $3,209,726
Work-in-process..................... 1,338,525 1,695,172 1,052,571
Finished goods...................... 39,017 383,026 232,923
---------- ---------- ----------
Total............................... $3,276,026 $4,724,261 $4,495,220
========== ========== ==========
</TABLE>

F-10
<PAGE>

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4.PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31, 1994 and
1995 and September 29, 1996:

<TABLE>
<CAPTION>
1994 1995 SEPTEMBER 29, 1996
--------- ---------- ------------------
<S> <C> <C> <C>
Machinery and equipment........... $ 835,117 $1,062,094 $2,075,330
Office furniture and equipment.... 239,835 538,398 1,322,102
Leasehold improvements............ 187,216 199,586 1,242,122
Construction in progress.......... 32,885
--------- ---------- ----------
1,262,168 1,800,078 4,672,439
--------- ---------- ----------
Less accumulated depreciation and
amortization..................... (380,355) (734,285) (980,596)
--------- ---------- ----------
Net property and equipment........ $ 881,813 $1,065,793 $3,691,843
========= ========== ==========
</TABLE>

Included in property and equipment are assets under capital lease of
$351,801, $351,801 and $351,801 at December 31, 1994 and 1995 and September
29, 1996, respectively. Accumulated amortization of assets under capital
lease was $70,515, $140,875 and $193,642 at December 31, 1994 and 1995 and
the nine months ended September 29, 1996, respectively. The $32,885
construction in progress at September 29, 1996 relates to additional tenant
improvements at the Company's new headquarters facility.

5.FINANCING ARRANGEMENTS

The Company had a revolving line of credit of $3,000,000 secured by
substantially all of the Company's assets. The line of credit was
collateralized by machinery and equipment, inventory and accounts
receivable. Borrowings under the line bear interest at the bank's reference
rate plus .25% (8.5% at December 31, 1995). The line of credit agreement
contained covenants regarding certain financial statement amounts, ratios
and activities of the Company. At December 31, 1995, one of the covenants
was not met. The Company received a waiver related to this covenant. The
line of credit expired in May 1996.

On May 30, 1996, the Company entered into a new $5 million unsecured
revolving credit agreement. This agreement allows the Company to borrow at
the bank's reference rate (8.25% at September 29, 1996). The Company is
required to pay a commitment fee equal to .125% per annum based on the
average daily unused portion of the facility. The fee is payable quarterly
in arrears. The line of credit will expire on May 31, 1997. The credit
agreement contains covenants regarding certain financial statement amounts,
ratios and activities of the Company. At September 29, 1996, the Company
was in compliance with all covenants.

6.SHAREHOLDERS' EQUITY

Preferred Stock

Series A Preferred Stock shares are convertible, at the holder's option,
into shares of Common Stock on a 1 to 1.5 share basis. The conversion ratio
may be adjusted from time to time in the event of certain diluting events.
Conversion is automatic in the event of an initial public offering of the
Company's Common Stock meeting certain specified criteria ("Qualifying
IPO"). Unless a Qualifying IPO has occurred, the holders of the Series A
Preferred Stock and any Common Stock issued upon

F-11
<PAGE>

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
conversion of the Series A Preferred Stock can require that the Company
repurchase such securities upon a sale of substantially all the Company's
assets, certain mergers and corporate reorganizations, or in October 2001
(with a twelve-month payout, if needed). Such repurchase would occur at the
higher of fair market value or the initial purchase price. Dividends on
Series A Preferred Stock are cumulative beginning in January 1996 and may
be declared at the discretion of the Board of Directors; however, such
dividends will not become payable if the Company completes a Qualifying IPO
on or before December 31, 1996. The dividend rate is 12% per annum. Series
A Preferred Stock shareholders have voting rights equal to the number of
shares into which the Series A Preferred Stock is convertible into Common
Stock. In the event of liquidation, dissolution or merger of the Company,
each Series A Preferred Stock shareholder has a liquidation preference
equal to approximately $4.44 per share of Series A Preferred Stock plus any
declared but unpaid dividends or cumulative dividends beginning in January
1996. As of September 29, 1996, $1,350,000 of dividends payable had been
accrued. Such dividends will not be paid if the Company completes a
Qualifying IPO on or before December 31, 1996.

Each share of Series A Preferred Stock shall automatically be converted
into shares of Common Stock on a 1 to 1.5 basis on December 16, 2001 at a
conversion price of approximately $2.96 per share subject to certain
adjustments. Because there is no mandatory redemption of the Series A
Preferred Stock, no accretion of additional amounts to the carrying values
of such Series A Preferred Stock was recorded.

Capital Transactions

During October 1995, the Company sold 3,375,900 shares of Series A
Preferred Stock at $4.44 per share and raised net proceeds of $14,498,193.
The Company then used a portion of the proceeds to repurchase 5,063,850
shares of the Company's Common Stock at $2.47 per share from the
shareholders. These shares are being held as treasury stock by the Company
as of September 29, 1996.

7.INCOME TAXES

The provision for income taxes for the years ended December 31, 1993,
1994 and 1995 consists of the following:

<TABLE>
<CAPTION>
1993 1994 1995
-------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal................................... $201,909 $1,800,618 $2,900,929
State..................................... 52,118 506,915 824,646
-------- ---------- ----------
Total current provision................... 254,027 2,307,533 3,725,575
Deferred--federal and state................. 12,392 (399,127) (609,927)
-------- ---------- ----------
Provision for income taxes.................. $266,419 $1,908,406 $3,115,648
======== ========== ==========
</TABLE>

F-12
<PAGE>

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The difference between income taxes provided in the financial statements
and as required by the federal statutory rate of 35% for the years ended
December 31, 1993, 1994 and 1995 is as follows:

<TABLE>
<CAPTION>
1993 1994 1995
-------- ---------- ----------
<S> <C> <C> <C>
Taxes at federal statutory.................. $216,175 $1,699,159 $2,658,489
State taxes, net of federal benefit......... 37,583 286,608 460,427
Accruals without tax effect................. 204,000
Foreign sales corporation tax benefits...... (159,205)
Other....................................... 12,661 (77,361) (48,063)
-------- ---------- ----------
Provision for income taxes.................. $266,419 $1,908,406 $3,115,648
======== ========== ==========
</TABLE>

At December 31, 1994 and 1995, the Company's net deferred tax asset was
comprised of the following major components:
<TABLE>
<CAPTION>
1994 1995
-------- ----------
<S> <C> <C>
Depreciation of property............................... $(19,271) $ 2,434
Accruals and reserves.................................. 131,854 437,574
Costs capitalized into inventories..................... 148,356 362,452
State taxes............................................ 160,616 229,022
-------- ----------
Net deferred tax asset................................. $421,555 $1,031,482
======== ==========
</TABLE>

The Company did not adjust its deferred tax asset during the nine months
ended September 29, 1996 due to the immaterial effect on the financial
statements.

8.PROFIT-SHARING AND PENSION PLANS

The Company sponsors a 401(k) profit-sharing plan covering all eligible
employees. For the years ended December 31, 1993, 1994 and 1995, the Board
authorized $127,000, $270,000 and $340,000 in contributions to the profit-
sharing plan, respectively.

The 401(k) pension plan provides for Company matching participant
contributions up to a maximum of 10% of each participant's annual
contribution. Employee contributions are limited to 15% of base salary.
Contributions for the years ended December 31, 1993, 1994 and 1995 and the
nine months ended September 30, 1995 and September 29, 1996 were $3,647,
$9,594, $15,669, $12,326 and $15,683, respectively.

9.STOCK OPTION PLANS

1995 Stock Option Plan--Effective December 4, 1995, the Company adopted
the 1995 Stock Option Plan (the "1995 Plan"), as amended, to permit
executive personnel, key employees and nonemployee members of the Board of
Directors of the Company to participate in ownership of the Company. The
1995 Plan is administered by a committee consisting of two or more
nonemployee directors and one employee of the Company. Each option
agreement includes a provision requiring the optionee to consent to the
terms of the agreement. The 1995 Plan provides for the grant of
nonstatutory stock options under the applicable provisions of the Internal
Revenue Code. The option price per share may not be less than 85% of the
fair market value of a share of Common Stock on the grant date as
determined by the Company's Board of Directors. In addition, the exercise
price may not be less than 110% of the fair market value of a share of
Common Stock on the grant date, as

F-13
<PAGE>

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
determined by the Company's Board of Directors, for any individual
possessing 10% or more of the voting power of all classes of stock of the
Company. Options generally vest at the rate of 25% on the first anniversary
date and 2% per month thereafter and expire no later than ten years after
the grant date. Up to 1,938,615 shares of the Company's Common Stock were
reserved for issuance under the 1995 Plan. Under an agreement with the
Company, certain shareholders have agreed that, once the Company has issued
an initial 1,095,000 shares of Common Stock under the 1995 Stock Option
Plan, any additional shares issued under that Plan upon an option exercise
will be coupled with a pro rata redemption from those shareholders of an
equal number of shares at a redemption price equaling the option exercise
price.

The following table summarizes activity under the Option Plan:

<TABLE>
<CAPTION>
NUMBER OF
OPTIONS
NUMBER OF PRICE PER EXERCISABLE AS OF
SHARES SHARE SEPTEMBER 29, 1996
--------- ----------- ------------------
<S> <C> <C> <C>
Balance at January 1, 1995
Granted.......................... 562,500 $ 2.47-2.71 150,151
--------- ----------- -------
Balance at December 31, 1995....... 562,500 2.47-2.71 150,151
Granted.......................... 1,436,400 2.67-4.67 54,877
Exercised........................ (112,500) 2.67
Cancelled........................ (63,221) 2.47-4.67
--------- ----------- -------
Balance at September 29, 1996...... 1,823,179 $2.47-$4.66 205,028
========= =========== =======
</TABLE>

At September 29, 1996, 2,936 options were available for grant under the
Option Plan.

The price at which options were granted at during 1995 and 1996 were
based upon an independent appraisal of the value of the Company. The
Company will record compensation expense of approximately $123,175 relating
to the difference between estimated fair market value and the actual value
of 28,425 options granted in September 1996 over the vesting term of such
options. The first vesting of these options occurs during the third quarter
of fiscal 1997.

1996 Stock Incentive Plan--On October 7, 1996 the Company adopted the
1996 Stock Incentive Plan (the "1996 Plan"), to be effective upon the
completion of the Company's planned initial public offering. The 1996 Plan
covers an aggregate of 1,500,000 shares of Common Stock plus any shares
which are or become available for grant under the 1995 Plan. The 1996 Plan
provides for the granting of "incentive stock options," within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), nonstatutory options and restricted stock grants to directors,
officers, employees and consultants of the Company, except that incentive
stock options may not be granted to non-employee directors or consultants.
The purpose of the 1996 Plan is to provide participants with incentives
which will encourage them to acquire a proprietary interest in, and
continue to provide services to, the Company. The 1996 Plan is administered
by the Board of Directors, which has sole discretion and authority,
consistent with the provisions of the 1996 Plan, to determine which
eligible participants will receive options, the time when options will be
granted, the terms of options granted and the number of shares which will
be subject to options granted under the 1996 Plan. There are no options
outstanding under the 1996 Plan.

F-14
<PAGE>

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

1996 Director Stock Option Plan--On October 7, 1996 the Company adopted
the 1996 Stock Option Plan for Directors (the "Director Plan"), to be
effective upon the completion of the Company's planned initial public
offering. The Director Plan provides for the grant by the Company of
options to purchase up to an aggregate of 200,000 shares of Common Stock of
the Company. The Director Plan provides that each member of the Company's
Board of Directors who is not an employee or paid consultant of the Company
automatically will be eligible to receive options to purchase stock under
the Director Plan. Pursuant to the terms of the Director Plan, each
director elected after the Company's initial public offering under the
Securities Act of 1933 (the "Offering Date") will be granted an initial
option under the plan covering 30,000 shares of Common Stock. Furthermore,
on the Offering Date, and on each anniversary date thereof, each director
who shall have been an eligible participant under the Director Plan for at
least six (6) months shall be granted an annual option under the Director
Plan to purchase 5,000 shares of Common Stock. There are no options
outstanding under the Director Plan.

Employee Stock Purchase Plan--On October 7, 1996 the Company adopted the
Employee Stock Purchase Plan (the "Purchase Plan"), to be effective upon
completion of the Company's planned initial public offering. The Purchase
Plan covers an aggregate of 500,000 shares of Common Stock. The Purchase
Plan, which is intended to qualify as an "employee stock purchase plan"
under Section 423 of the Internal Revenue Code, will be implemented by six-
month offerings with purchases occurring at six month intervals commencing
on the date of this Prospectus. The Purchase Plan will be administered by
the Compensation Committee. Employees will be eligible to participate if
they are employed by the Company for at least 30 hours per week and if they
have been employed by the Company for at least 180 days. The Purchase Plan
permits eligible employees to purchase Common Stock through payroll
deductions, which may not exceed 15% of an employee's compensation. The
price of stock purchased under the Purchase Plan will be 85% of the lower
of the fair market value of the Common Stock at the beginning of each six-
month offering period or on the applicable purchase date. Employees may end
their participation in any offering at any time during the offering period,
and participation ends automatically on termination of employment. The
Board may at any time amend or terminate the Purchase Plan, except that no
such amendment or termination may adversely affect options previously
granted under the Purchase Plan. There are no rights to purchase
outstanding under the Purchase Plan.

10.RELATED PARTY TRANSACTIONS

As of December 31, 1994 and 1995 and the nine months ended September 30,
1995, the Company had an outstanding unsecured note payable in the amount
of $50,000 to a relative of the majority stockholder. The note bore
interest at 8%, matured in February 1996 and was repaid. As of September
29, 1996, the Company had no significant amounts payable to shareholders
other than that described below.

As disclosed in Note 11, the Company leases its manufacturing and office
facility from certain of the Company's shareholders. Rent paid to the
shareholders was $160,320, $160,320, $166,728, $125,046 and $219,780 for
the years ended December 31, 1993, 1994 and 1995 and the nine months ended
September 30, 1995 and September 29, 1996, respectively.

F-15
<PAGE>

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
totaling $300,000, of which $250,000 has been paid. A member of the Board
of Directors of the Company, is Executive Vice President of Unique
Technologies International, L.L.C., an affiliate of Unique Wireless
Developments, L.L.C. During the year ended December 31, 1995, the Company
expensed such royalty payment.

11.COMMITMENTS AND CONTINGENCY

During July 1996, the Company moved from its previous facility and into a
new facility in Irvine, California. The Company leases its new
manufacturing and headquarters facility from a limited liability company
owned by three of the Company's shareholders. The lease term commenced on
July 15, 1996 and will continue for ten years at a base rent of $58,687 per
month. The Company paid $1,000,000 to the limited liability company as
payment for additional tenant improvements made to the facility at the
request of the Company. The Company has an option to purchase the facility
at fair market value during the lease term. The Company also leases
equipment from unrelated parties. The Company leased its former
manufacturing and headquarters facility from its shareholders. Future
minimum lease payments required under operating leases and the present
value of future minimum lease payments for capital leases at December 31,
1995 are as follows:

<TABLE>
<CAPTION>
COMMITMENT TO OPERATING CAPITALIZED
SHAREHOLDERS LEASES LEASES
------------- ---------- -----------
<S> <C> <C> <C>
Year ending December 31:
1996................................. $ 168,592 $1,229,336 $ 88,200
1997................................. 170,064 1,201,731 82,463
1998................................. 170,064 1,199,936 48,402
1999................................. 170,064 1,197,683 11,969
2000................................. 170,064 1,195,461
Thereafter........................... 496,020
---------- ---------- --------
Total future minimum lease payments.... $1,344,868 $6,024,147 231,034
========== ==========
Less amount representing interest...... (26,684)
--------
Present value of future minimum lease
payments.............................. 204,350
Less current portion................... (66,824)
--------
$137,526
========
</TABLE>

Total rent expense was $78,725, $168,721, $173,142, $129,207 and $231,680
for the years ended December 31, 1993, 1994 and 1995 and the nine months
ended September 30, 1995 and September 29, 1996, respectively.

12.ROYALTY AGREEMENT

The Company has a royalty agreement related to the sale of air-to-ground
amplifiers which requires payment of a 10% commission on certain licensed
products. Total royalty expense was $387,061, $499,141, $393,197 and
$280,500 for the years ended December 31, 1994 and 1995 and the nine months
ended September 30, 1995 and September 29, 1996, respectively. For the
years ended December 31, 1994 and 1995 and the nine months ended September
30, 1995 and September 29, 1996, sales of the related product represented
17%, 14%, 18% and 6% of net sales, respectively. The Company does not
currently have any royalty commitments beyond October 1996.

F-16
<PAGE>

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13.OTHER INFORMATION

Accrued expenses and other liabilities consist of the following at
December 31, 1994, 1995 and September 29, 1996:
<TABLE>
<CAPTION>
1994 1995 SEPTEMBER 29, 1996
---------- ---------- ------------------
<S> <C> <C> <C>
Accrued expenses and other
liabilities:
Accrued warranty costs....... $ 186,756 $ 320,594 $ 871,330
Accrued sales returns........ 295,276 480,000 324,586
Accrued royalties............ 280,559 149,021 38,521
Accrued payroll and employee
benefits..................... 1,166,578 755,828 2,208,756
Other accrued expenses....... 8,652 375,003 938,964
---------- ---------- ----------
$1,937,821 $2,080,446 $4,382,157
========== ========== ==========
</TABLE>

F-17
<PAGE>

[PICTURE OF THE COMPANY'S HEADQUARTERS AND MANUFACTURING
FACILITY AND PICTURES OF SELECTED PRODUCTS.]
<PAGE>

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

NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRE- SENTATIONS NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDER-
WRITERS OR THE SELLING SHAREHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OF-
FERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UN-
LAWFUL TO MAKE SUCH OFFER TOP SOLICITATION. NEITHER THE DELIVERY OF THIS PRO-
SPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 18
Dividend Policy........................................................... 18
Capitalization............................................................ 19
Dilution.................................................................. 20
Selected Consolidated Financial Data...................................... 21
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................................................... 22
Business.................................................................. 31
Management................................................................ 43
Principal and Selling Shareholders........................................ 50
Description of Capital Stock.............................................. 52
Shares Eligible for Future Sale........................................... 54
Underwriting.............................................................. 56
Legal Matters............................................................. 57
Experts................................................................... 57
Additional Information.................................................... 57
Index to Consolidated Financial Statements................................ F-1
</TABLE>

--------

UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPAT-
ING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

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

2,400,000 Shares

[LOGO OF POWERWAVE TECHNOLOGIES]

Common Stock

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

PROSPECTUS

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

Alex. Brown & Sons
Incorporated

UBS Securities

Wessels, Arnold & Henderson

, 1996

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth all costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of the Common Stock being registered hereunder. All of the
amounts shown are estimates except for the SEC registration fee and the NASD
filing fee.
<TABLE>
<CAPTION>
TO BE PAID BY
THE COMPANY
-------------
<S> <C>
SEC registration fee........................................... $ 10,873
NASD filing fee................................................ 4,088
Nasdaq National Market application fee......................... 57,270
Printing expenses.............................................. 125,000
Legal fees and expenses........................................ 200,000
Accounting fees and expenses................................... 130,000
Blue sky fees and expenses..................................... 15,000
Transfer agent and registrar fees.............................. 5,000
Directors and officers insurance premiums...................... 250,000
Miscellaneous.................................................. 152,769
--------
Total...................................................... $950,000
========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

(a) As permitted by the Delaware General Corporation Law, the Amended and
Restated Certificate of Incorporation of the Company (Exhibit 3.2 hereto)
eliminates the liability of directors to the Company or its shareholders for
monetary damages for breach of fiduciary duty as a directors, except to the
extent otherwise required by the Delaware General Corporation Law.

(b) The Amended and Restated Certificate of Incorporation provides that the
Company will indemnify each person who was or is made a party to any
proceeding by reason of the fact that such person is or was a director or
officer of the Company against all expense, liability and loss reasonably
incurred or suffered by such person in connection therewith to the fullest
extent authorized by the Delaware General Corporation Law. The Company's
Amended and Restated Bylaws (Exhibit 3.4 hereto) provide for a similar
indemnity to directors and officers of the Company to the fullest extent
authorized by the Delaware General Corporation Law.

(c) The Amended and Restated Certificate of Incorporation also gives the
Company the ability to enter into indemnification agreements with each of its
directors and officers. The Company has entered into indemnification
agreements with each of its directors and officers and with Summit Partners
and Crosspoint Venture Partners (Exhibit 10.13 hereto), which provide for the
indemnification of such persons against any an all expenses, judgments, fines,
penalties and amounts paid in settlement, to the fullest extent permitted by
law.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

The following is a summary of transactions by the Company during the last
three years preceding the date hereof involving sales of the Company's
securities that were not registered under the Securities Act of 1933, as
amended (the "Act"):

(1) From time to time during the three years preceding the date hereof,
the Registrant issued nonqualified stock options to purchase Common Stock
pursuant to the Registrant's 1995 Stock

II-1
<PAGE>

Option (the "1995 Plan") to officers, directors and employees of the
Registrant. From inception through June 30, 1996, 112,500 options to
purchase Common Stock pursuant to the 1995 Plan were exercised for an
aggregate exercise price of $300,000. Exemption from the registration
provisions of the Act is claimed, among other exemptions, with respect to
the grant of options referred to above, on the basis that the grant of
options did not involve a "sale" of securities and, therefore, registration
thereof was not required and, with respect to the exercise of options
referred to above, on the basis that such transactions met the requirements
of Rule 701 as promulgated under Section 3(b) of the Act.

(2) On October 10, 1995, the Registrant issued 3,375,900 shares of Series
A Convertible Preferred Stock for an aggregate purchase price of
$15,000,000 pursuant to a Stock Purchase Agreement entered into as of
October 10, 1995 among the Company, Alfonso G. Cordero, Ki Y. Nam, Sussanne
Torretta, Charles Florman, Bill Doi, Arthur Cook, Thomas Ha, Ernest
Johnson, Summit Ventures IV, L.P., Summit Ventures III, L.P., Summit
Investors II, L.P., Crosspoint Venture Partners 1993 and Crosspoint Venture
Partners Entrepreneurs 1993. The foregoing transaction was completed
without registration under the Act in reliance upon Section 4(2) of the Act
for transactions not involving a public offering, among others, on the
basis that such transaction did not involve any public offering and the
purchasers were sophisticated with access to the kind of information
registration would provide. Broker commissions in the amount of $300,000
were paid in connection with the foregoing transaction.

II-2
<PAGE>

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.+
3.1 Certificate of Incorporation of the Company.+
3.1.1 Certificate of Amendment of Certificate of Incorporation.+
3.2 Form of Amended and Restated Certificate of Incorporation of the
Company.
3.3 Bylaws of the Company.+
3.4 Form of Amended and Restated Bylaws of the Company.
4.1 Stockholders' Agreement, dated October 10, 1995, among the Company
and certain shareholders.+
4.2 Amendment No. 1 to Stockholders' Agreement, dated November 8, 1996,
among the Company and certain shareholders.
5.1 Opinion of Stradling, Yocca, Carlson & Rauth, a Professional
Corporation.
10.1 Milcom International, Inc. 1995 Stock Option Plan (the "1995 Plan").+
10.2 Form of Stock Option Agreement for 1995 Plan.+
10.3 Amendment No. 1 to 1995 Stock Option Plan.
10.4 Powerwave Technologies, Inc. 1996 Stock Incentive Plan (the "1996
Plan").+
10.5 Form of Stock Option Agreement for 1996 Plan.+
10.6 Form of Restricted Stock Purchase Agreement for 1996 Plan.+
10.7 Powerwave Technologies, Inc. 1996 Director Stock Option Plan (the
"Director Plan").+
10.8 Form of Stock Option Agreement for Director Plan.+
10.9 Powerwave Technologies, Inc. Employee Stock Purchase Plan.+
10.10 Series A Convertible Preferred Stock Purchase Agreement, dated
October 10, 1995, among the Company and certain shareholders.+
10.11 Redemption Agreement, dated October 10, 1995, amount the Company and
certain shareholders.+
10.12 Registration Rights Agreement, dated October 10, 1995, among the
Company, and certain shareholders.+
10.13 Indemnification Agreement, dated October 10, 1995, between the
Company and certain shareholders.+
10.14 Form of Indemnification Agreement.+
10.15 Standard Industrial/Commercial Single-Tenant Lease, dated November 8,
1993, between the Company and 17500 Gillette Partnership.+
10.16 Standard Industrial/Commercial Single-Tenant Lease-Net, dated July 1,
1996, between the Company and CNH, LLC, a California limited
liability company.+
10.17 Business Loan Agreement, dated May 30, 1996 between the Company and
Bank of America.+
10.18 Agreement, dated February 16, 1996, between the Company and LG
Information & Communications, Ltd (portions omitted and filed
separately with the Securities and Exchange Commission pursuant to
Rule 406).+
10.19 Agreement, dated July 20, 1995, between the Company and Samsung
Electronics (portions omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule 406).+
10.20 Technology License Agreement, dated August 30, 1995, between the
Company and Unique Wireless Developments, L.L.C., a Delaware limited
liability company.+
11.1 Statement regarding computation of pro forma net income per share.+
21.1 Subsidiaries of the Registrant.+
</TABLE>

II-3
<PAGE>

<TABLE>
<S> <C>
23.1 Consent of Stradling, Yocca, Carlson & Rauth, a Professional Corporation (see Exhibit 5.1).
23.2 Consent of Deloitte & Touche, LLP.
24.1 Power of Attorney (see page II-5).+
27.1 Financial Data Schedule.+
</TABLE>
- --------

+ Previously filed.

(B) FINANCIAL STATEMENT SCHEDULES

Schedule II Valuation and Qualifying Accounts

ITEM 17. UNDERTAKINGS

The Company hereby undertakes to provide to the Underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.

The Company hereby undertakes that:

(1) For purposes of determining any liability under the Act, the information
omitted from the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form of prospectus
filed by the Company pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act
shall be deemed to be part of this registration statement as of the time it
was declared effective.

(2) For the purpose of determining any liability under the Act, each post-
effective amendment that contains a form of prospectus shall be deemed to be a
new registration statement relating to the securities offered therein, and the
Offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 3 to Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Irvine, State of California, on the 3rd day of December, 1996.

POWERWAVE TECHNOLOGIES, INC.

By /s/ Bruce C. Edwards
_____________________________________
Bruce C. Edwards
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----

<S> <C> <C>
/s/ Bruce C. Edwards President, Chief Executive December 3, 1996
____________________________________ Officer and Director
Bruce C. Edwards (Principal Executive
Officer)

/s/ Kevin T. Michaels Vice President, Finance and December 3, 1996
____________________________________ Chief Financial Officer
Kevin T. Michaels (Principal Financial and
Principal Accounting
Officer)

/s/ * Director December 3, 1996
____________________________________
Alfonso G. Cordero

/s/ * Director December 3, 1996
____________________________________
Gregory M. Avis

/s/ * Director December 3, 1996
____________________________________
Eugene L. Goda

/s/ * Director December 3, 1996
____________________________________
David L. George

/s/ * Director December 3, 1996
____________________________________
Rich Shapero

/s/ * Director December 3, 1996
____________________________________
Sam Yau
</TABLE>

*By: /s/Bruce C. Edwards
- ---------------------------------
Bruce C. Edwards
Attorney-In-Fact

II-5
<PAGE>

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
BALANCE CHARGES
AT TO COSTS BALANCE AT
BEGINNING AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
----------- --------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Nine months ended September 29, 1996:
Allowance for doubtful accounts..... $122,532 293,867 (14,031) $ 402,368
Inventory reserves.................. $791,942 865,000 (398,746) $1,258,196
Year ended December 31, 1995:
Allowance for doubtful accounts..... $ 10,000 120,946 (8,414) $ 122,532
Inventory reserves.................. $301,358 490,584 -- $ 791,942
Year ended December 31, 1994:
Allowance for doubtful accounts..... $ 10,000 -- $ 10,000
Inventory reserves.................. $ 88,935 212,423 -- $ 301,358
</TABLE>
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement.+
3.1 Certificate of Incorporation of the Company.+
3.1.1 Certificate of Amendment of Certificate of
Incorporation.+
3.2 Form of Amended and Restated Certificate of
Incorporation of the Company.
3.3 Bylaws of the Company.+
3.4 Form of Amended and Restated Bylaws of the Company.
4.1 Stockholders' Agreement, dated October 10, 1995, among
the Company and certain shareholders.+
4.2 Amendment No. 1 to Stockholders' Agreement, dated
November 8, 1996, among the Company and certain
shareholders.
5.1 Opinion of Stradling, Yocca, Carlson & Rauth, a
Professional Corporation.
10.1 Milcom International, Inc. 1995 Stock Option Plan (the
"1995 Plan").+
10.2 Form of Stock Option Agreement for 1995 Plan.+
10.3 Amendment No. 1 to 1995 Stock Option Plan.
10.4 Powerwave Technologies, Inc. 1996 Stock Incentive Plan
(the "1996 Plan").+
10.5 Form of Stock Option Agreement for 1996 Plan.+
10.6 Form of Restricted Stock Purchase Agreement for 1996
Plan.+
10.7 Powerwave Technologies, Inc. 1996 Director Stock
Option Plan (the "Director Plan").+
10.8 Form of Stock Option Agreement for Director Plan.+
10.9 Powerwave Technologies, Inc. Employee Stock Purchase
Plan.+
10.10 Series A Convertible Preferred Stock Purchase
Agreement, dated October 10, 1995, among the Company
and certain shareholders.+
10.11 Redemption Agreement, dated October 10, 1995, amount
the Company and certain shareholders.+
10.12 Registration Rights Agreement, dated October 10, 1995,
among the Company, and certain shareholders.+
10.13 Indemnification Agreement, dated October 10, 1995,
between the Company and certain shareholders.+
10.14 Form of Indemnification Agreement.+
10.15 Standard Industrial/Commercial Single-Tenant Lease,
dated November 8, 1993, between the Company and 17500
Gillette Partnership.+
10.16 Standard Industrial/Commercial Single-Tenant Lease-
Net, dated July 1, 1996, between the Company and CNH,
LLC, a California limited liability company.+
10.17 Business Loan Agreement, dated May 30, 1996 between
the Company and Bank of America.+
10.18 Agreement, dated February 16, 1996, between the
Company and LG Information & Communications, Ltd
(portions omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule
406).+
10.19 Agreement, dated July 20, 1995, between the Company
and Samsung Electronics (portions omitted and filed
separately with the Securities and Exchange Commission
pursuant to Rule 406).+
10.20 Technology License Agreement, dated August 30, 1995,
between the Company and Unique Wireless Developments,
L.L.C., a Delaware limited liability company.+
11.1 Statement regarding computation of pro forma net
income per share.+
21.1 Subsidiaries of the Registrant.+
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
23.1 Consent of Stradling, Yocca, Carlson & Rauth, a
Professional Corporation (see Exhibit 5.1).
23.2 Consent of Deloitte & Touche, LLP.
24.1 Power of Attorney.+
27.1 Financial Data Schedule.+
</TABLE>
- --------

+ Previously filed.

<PAGE>

EXHIBIT 3.2

FORM OF

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

POWERWAVE TECHNOLOGIES, INC.

(Duly adopted in accordance with Sections 242 and 245 of the
Delaware General Corporation Law)

It is hereby certified that:

1. The present name of the corporation (hereinafter called the
"Corporation") is Powerwave Technologies, Inc.

2. The Corporation was originally incorporated under the name Milcom
International, Inc.; the original Certificate of Incorporation was filed with
the Secretary of State of the State of Delaware on January 2, 1985. A
Certificate of Renewal was filed with the Secretary of State on January 28,
1994, and the Certificate of Incorporation was amended on October 10, 1995, June
25, 1996 and October 8, 1996, respectively, and a Certificate of Amendment were
each filed with the Secretary of State on January 28, 1994, October 10, 1995 and
October 8, 1996, respectively.

3. The Certificate of Incorporation of the Corporation, as amended and
restated herein, at the effective time of filing of this Amended and Restated
Certificate of Incorporation with the Delaware Secretary of State, shall read in
full as follows:

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
POWERWAVE TECHNOLOGIES, INC.

ARTICLE I - NAME

The name of the Corporation is Powerwave Technologies, Inc.

ARTICLE II - REGISTERED OFFICE AND AGENT

The address of the registered office of the corporation in the State of
Delaware is 32 Lockerman Square, Dover, Delaware 19901, County of Kent. The
name of the Corporation's registered agent at that address is The Prentice-Hall
Corporation System, Inc.
<PAGE>

ARTICLE III - PURPOSE

The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware, as amended from time to time.

ARTICLE IV - AUTHORIZED CAPITAL

The total number of shares of all classes of stock which the Corporation
shall have authority to issue is 45,000,000, of which (i) 40,000,000 shares
shall be designated "Common Stock" and shall have a par value of $0.0001 per
share; and (ii) 5,000,000 shares shall be designated "Preferred Stock" and shall
have a par value of $0.0001 per share. The Board of Directors is authorized,
subject to limitations prescribed by law, to provide for the issuance of the
shares of Preferred Stock in one or more series, and by filing a certificate
pursuant to the applicable law of the State of Delaware, to establish from time
to time the number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such series
and the qualifications, limitations or restrictions thereof. The authority of
the Board with respect to each series shall include, but not be limited to,
determination of the following:

(a) The number of shares constituting that series and the distinctive
designation of that series;

(b) The dividend rate on the shares of that series, whether dividends
shall be cumulative and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;

(c) Whether that series shall have voting rights, in addition to the
voting rights provided by law and, if so, the terms of such voting rights;

(d) Whether that series shall have conversion privileges and, if so,
the terms and conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board of Directors shall determine;

(e) Whether or not the shares of that series shall be redeemable and,
if so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable and the amount per share payable in
case of redemption, which amount may vary under different conditions and at
different redemption dates;

(f) Whether that series shall have a sinking fund for the redemption
or purchase of shares of that series and, if so, the terms and amount of such
sinking fund; and

(g) The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, and
the relative rights of priority, if any, of payment of shares of that series.

<PAGE>

ARTICLE V - BOARD OF DIRECTORS

A. Number of Directors. The number of directors of the Corporation shall
-------------------
be fixed from time to time by the Board of Directors either by a resolution or
Bylaw adopted by the affirmative vote of a majority of the entire Board of
Directors; provided, however, that such number shall be not less than four (4)
and not more than nine (9).

B. Written Ballot Not Required. Elections of directors need not be by
---------------------------
written ballot unless otherwise provided in the Bylaws.

C. Removal of Directors. Subject to the rights, if any, of the holders
--------------------
of shares of Preferred Stock then outstanding, any or all of the directors of
the Corporation may be removed from office at any time, for cause or otherwise,
by the affirmative vote of a majority of the outstanding stock of the
Corporation then entitled to vote generally for the election of directors,
considered for purposes herein as one class.

ARTICLE VI - STOCKHOLDERS

A. Meetings of Stockholders. Meetings of the stockholders may be held
------------------------
within or without the State of Delaware, as the Bylaws may provide. The books
of the Corporation may be kept (subject to any provision contained in the
Delaware Statutes) outside the State of Delaware at such place or places as may
be designated from time to time by the Board of Directors or by the Bylaws of
the Corporation.

B. Special Meetings of Stockholders. Special meetings of stockholders of
--------------------------------
the Corporation may be called by President, the Chief Executive Officer, the
Chairman of the Board of Directors or the Board of Directors pursuant to a
resolution approved by a majority of the entire Board of Directors, upon not
less than 10 nor more than 60 days' written notice.

ARTICLE VII - LIMITATION OF DIRECTORS' LIABILITY

A director of this Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that this provision shall not eliminate or limit
the liability of a director (i) for any breach of his duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law, (iii)
under Section 174 of the General Corporation Law of the State of Delaware, or
(iv) for any transaction from which the director derives an improper personal
benefit. If the General Corporation Law of the State of Delaware is hereafter
amended to authorize corporate action further limiting or eliminating the
personal liability of directors, then the liability of the directors of the
Corporation shall be limited or eliminated to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended from time to
time. Any repeal or modification of this Article VI by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.

<PAGE>

ARTICLE VIII - AMENDMENT OF BYLAWS

In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend, change,
add to or repeal the Bylaws of the Corporation. In addition, the Bylaws of the
Corporation may be adopted, repealed, altered, amended or rescinded by the
affirmative vote of a majority of the outstanding stock of the Corporation
entitled to vote thereon. In addition to the powers and authority hereinbefore
or by statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be exercised
or done by the Corporation, subject, nevertheless, to the provisions of the
statutes of Delaware, these Articles of Incorporation, and any Bylaws adopted by
the stockholders; provided, however, that no Bylaws hereafter adopted by the
stockholders shall invalidate any prior act of the directors which would have
been valid if such Bylaws had not been adopted.

IN WITNESS WHEREOF, said Powerwave Technologies has caused this certificate
to be signed by Bruce C. Edwards, its President and Chief Executive Officer,
this __________ day of December, 1996.

Powerwave Technologies

By: /s/ BRUCE C. EDWARDS
-------------------------------------
Bruce C. Edwards
President and Chief Executive Officer

<PAGE>

EXHIBIT 3.4

FORM OF

AMENDED AND RESTATED

BYLAWS OF

POWERWAVE TECHNOLOGIES, INC.

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

ARTICLE I

OFFICES

SECTION 1. REGISTERED OFFICE.--The registered office shall be
established and maintained at the office of the United States Corporation
Company, in the City of Dover, in the County of Kent, in the State of Delaware,
and said corporation shall be the registered agent of this corporation in charge
thereof.

SECTION 2. OTHER OFFICES.--The corporation may have other offices,
either within or without the State of Delaware, at such place or places as the
Board of Directors may from time to time appoint or the business of the
corporation may require.

ARTICLE II

MEETING OF SHAREHOLDERS

SECTION 1. ANNUAL MEETINGS.--Annual meetings of shareholders for the
election of directors and for such other business as may be stated in the notice
of the meeting, shall be held at such place, either within or without the State
of Delaware, and at such time and date as the Board of Directors, by resolution,
shall determine and as set forth in the notice of the meeting. In the event the
Board of Directors fails to so determine the time, date and place of meeting,
the annual meeting of shareholders shall be held at the registered office of the
corporation in Delaware on

If the date of the annual meeting shall fall upon a legal holiday, the
meeting shall be held on the next succeeding business day. At each annual
meeting, the shareholders entitled to vote shall elect a Board of Directors and
they may transact such other corporate business as shall be stated in the notice
of the meeting.

SECTION 2. OTHER MEETINGS.--Meetings of shareholders for any purpose
other than the election of directors may be held at such time and place, within
or without the State of Delaware, as shall be stated in the notice of the
meeting.

SECTION 3. VOTING.--Each shareholder entitled to vote in accordance
with the terms of the Certificate of Incorporation and in accordance with the
provisions of these the shall be entitled to one vote, in person or by proxy,
for each share of stock entitled to vote held by such shareholder, but no proxy
shall be voted after three years from its date unless such proxy provides
<PAGE>

for a longer period. Upon the demand of any shareholders, the vote for
directors and the vote upon any question before the meeting, shall be by ballot.
All elections for directors shall be decided by plurality vote; all other
questions shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of the State of Delaware.

A complete list of the shareholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
shareholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
shareholder who is present.

SECTION 4. QUORUM.--Except as otherwise required by law, by the
Certificate of Incorporation or by these Bylaws, the presence, in person or by
proxy, of shareholders holding a majority of the stock of the corporation
entitled to vote shall constitute a quorum at all meetings of the shareholders.
In case a quorum shall not be present at any meeting, a majority in interest of
the shareholders entitled to vote thereat, present in person or by proxy, shall
have the power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until the requisite amount of stock entitled
to vote shall be present. At any such adjourned meeting at which the requisite
amount of stock entitled to vote shall be represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed; but only those shareholders entitled to vote at the meeting as
originally noticed shall be entitled to vote at any adjournment or adjournments
thereof.

SECTION 5. SPECIAL MEETINGS.-- Except as otherwise specifically
provided in the corporation's Amended and Restated Certificate of Incorporation,
special meetings of the shareholders for any purpose or purposes may be called
only by the President, the Chief Executive Officer, the Chairman of the Board of
Directors or upon resolution of a majority of the Board of Directors and shall
be called by the Chief Executive Officer or Secretary at the request of the
President, the Chief Executive Officer or a majority of the Board of Directors
in the form of written notice provided not less than 10 nor more than 60 days
prior to the proposed meeting. Such request shall state the purpose or purposes
of the proposed meeting and the business transacted at any special meeting shall
be limited to the purpose or purposes state in the notice.

SECTION 6. NOTICE OF MEETINGS.-- Written notice, stating the place,
date and time of the meeting, and the general nature of the business to be
considered, shall be given to each shareholder entitled to vote thereat at his
address as it appears on the records of the corporation, not less than ten nor
more than sixty days before the date of the meeting. No business other than
that stated in the notice shall be transacted at any meeting without the
unanimous consent of all the shareholders entitled to vote thereat.

SECTION 7. ACTION WITHOUT MEETING.-- Unless otherwise provided by the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of shareholders, or any action which may be taken at any annual
or special meeting, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum

2
<PAGE>

number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those shareholders who have not
consented in writing.

SECTION 8. NOTIFICATIONS OF NOMINATIONS AND PROPOSAL BUSINESS.--
Subject to the rights of holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation, (a)
nominations for the election of directors, and (b) business proposed to be
brought before any shareholder meeting may be made by or at the direction of the
Board of Directors or by any shareholder entitled to vote in the election of
directors generally. However, any such shareholder may nominate one or more
persons for election as directors at a meeting or propose business to be brought
before a meeting, or both, only if such shareholder has given timely notice in
proper written form of his intent to make such nomination or nominations or to
propose such business. To be timely, a shareholder's notice must be delivered
to or mailed and received by the Secretary of the corporation not later than
forty-five (45) days nor more than ninety (90) days prior to such meeting;
provided, however, in the event that less than fifty-five (55) days' notice or
prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be so received not
later than the close of business on the tenth (10th) day following the date of
which such notice of the date of the meeting was mailed or such public
disclosure was made. To be in proper written form, a shareholder's notice to
the Secretary shall set forth:

(i) the name and address of the shareholder who intends to make the
nominations or propose the business and, as the case may be, of the person
or persons to be nominated or of the business to be proposed;

(ii) a representation that the shareholder is a holder of record of
stock of the corporation entitled to vote at such meeting and, if
applicable, intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice;

(iii) if applicable, a description of all arrangements or
understandings between the shareholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder;

(iv) such other information regarding each nominee or each matter of
business to be proposed by such shareholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or
intended to be nominated, or the matter been proposed, or intended to be
proposed by the Board of Directors; and

(v) if applicable, the consent of each nominee to serve as director
of the corporation if so elected.

3
<PAGE>

ARTICLE III

DIRECTORS

SECTION 1. NUMBER AND QUALIFICATION.--The number of directors of the
corporation which shall constitute the whole board shall be nine (9). The
number of directors may be increased or deceased from time to time by amendment
of the by-laws but the number thereof shall in no event be less than four (4),
nor more than nine (9). The directors shall be elected at the annual meeting of
the shareholders and each director shall be elected to serve until his or her
successor shall be elected and qualified. Directors need not be shareholders.

SECTION 2. RESIGNATIONS.--Any director, member of a committee or
other officer may resign at any time. Such resignation shall be made in
writing, and shall take effect at the time specified therein, and if no time be
specified, at the time of its receipt by the President or Secretary. The
acceptance of a resignation shall not be necessary to make it effective.

SECTION 3. VACANCIES.--If the office of any director, member of a
committee or other officer become vacant, the remaining directors in office,
though less than a quorum by a majority vote, may appoint any qualified person
to fill such vacancy, who shall hold office for the unexpired term and until his
successor shall be duly chosen.

SECTION 4. REMOVAL.-- Subject to any requirement for a larger vote
contained in any applicable law, the Certificate of Incorporation or these
Bylaws, any director may be removed, at any time, for cause or otherwise, by the
affirmative vote of a majority of the outstanding stock of the Corporation then
entitled to vote generally for the election of directors, considered for
purposes herein as one class.

SECTION 5. POWERS.--The Board of Directors shall exercise all of the
powers of the corporation except such as are by law, or by the Certificate of
Incorporation of the corporation or by these Bylaws conferred upon ore reserved
to the shareholder.

SECTION 6. COMMITTEES.--The Board of Directors may, by resolution or
resolutions passed by a majority of the whole board, designate one or more
committees, each committee to consist of two or more of the directors of the
corporation. The board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence of disqualification of any member of
such committee or committees, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member.

Any such committee, to the extent provided in the resolution of the
Board of Directors, or in these Bylaws, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to amending the Certificate of
Incorporation, adopting an agreement of merger or consolidation, recommending to
the shareholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the shareholders

4
<PAGE>

a dissolution of the corporation or a revocation of a dissolution, or amending
the Bylaws of the corporation; and, unless the resolution, these Bylaws or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock.

SECTION 7. MEETINGS.--The newly elected directors may hold their
first meeting for the purpose of organization and the transaction of business,
if a quorum be present, immediately after the annual meeting of the
shareholders; or the time and place of such meeting may be fixed by consent in
writing of all the directors.

Regular meetings of the directors may be held without notice at such
places and times as shall be determined from time to time by resolution of the
directors.

Special meetings of the board may be called by the President or by the
Secretary on the written request of any two directors on at least two days'
notice to each director and shall be held at such place or places as may be
determined by the directors, or as shall be stated in the call of the meeting.

Unless otherwise restricted by the Certificate of Incorporation or
these Bylaws, members of the Board of Directors, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.

SECTION 8. QUORUM.--A majority of the directors shall constitute a
quorum for the transaction of business. If at any meeting of the board there
shall be less than a quorum present, a majority of the present may adjourn the
meeting from time to time until a quorum is obtained, and no further notice
thereof need be given other than by announcement at the meeting which shall be
so adjourned.

SECTION 9. COMPENSATION.--Directors shall not receive any stated
salary for their services as directors or as members of committees, but by
resolution of the board a fixed fee and expenses of attendance may be allowed
for attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation therefor.

SECTION 10. ACTION WITHOUT MEETING.--Any action required or permitted
to be taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken without a meeting, if prior to such action a written
consent thereto is signed by all members of the board, or of such committee as
the case may be, and such written consent if filed with the minutes of
proceedings of the board or committee.

5
<PAGE>

ARTICLE IV

OFFICERS

SECTION 1. OFFICERS.--The officers of the corporation shall be a
President, a Treasurer, and a Secretary, all of whom shall be elected by the
Board of Directors and who shall hold office until their successors are elected
and qualified. In addition, the Board of Directors may elect a Chairman, one or
more Vice-Presidents and such Assistant Secretaries and Assistant Treasurers as
they may deem proper. None of the officers of the corporation need be
directors. The officers shall be elected at the first meeting of the Board of
Directors after each annual meeting. More than two offices may be held by the
same person.

SECTION 2. OTHER OFFICERS AND AGENTS.--The Board of Directors may
appoint such other officers and agents as it may deem advisable, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board of Directors.

SECTION 3. CHAIRMAN.--The chairman of the Board of Directors, if one
be elected shall preside at all meetings of the Board of Directors and he shall
have and perform such other duties as from time to time may be assigned to him
by the Board of Directors.

SECTION 4. PRESIDENT.--The President shall be the chief executive
officer of the corporation and shall have the general powers and duties of
supervision and management usually vested in the office of President of a
corporation. He shall preside at all meetings of the shareholders if present
thereat, and in the absence or non-election of the Chairman of the Board of
Directors, at all meetings of the Board of Directors, and shall have general
supervision, direction and control of the business of the corporation. Except
as the Board of Directors shall authorize the execution thereof in some other
manner, he shall execute bonds, mortgages and other contracts in behalf of the
corporation, and shall cause the seal to be affixed to any instrument requiring
it and when so affixed the seal shall be attested by the signature of the
Secretary or the Treasurer or an Assistant Secretary or an Assistant Treasurer.

SECTION 5. VICE PRESIDENT.--Each Vice-President shall have such
powers and shall perform such duties as shall be assigned to him by the
directors.

SECTION 6. TREASURER.--The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
corporation in such depositaries as may be designated by the Board of Directors.

The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board of Directors, or the President, taking proper vouchers for
such disbursements. He shall render to the President and Board of Directors at
the regular meetings of the Board of Directors, or whenever they may request it,
an account of all his transactions as Treasurer and of the financial condition
of the corporation. If required by the Board of Directors, he shall give the
corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the board shall prescribe.

6
<PAGE>

SECTION 7. SECRETARY.--The Secretary shall give, or cause to be
given, notice of all meetings of shareholders and directors, and all other
notices required by law or by these Bylaws, and in case of his absence or
refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the President, or by the directors, or shareholders, upon
whose requisition the meeting is called as provided in these Bylaws. He shall
record all the proceedings of the meetings of the corporation and of the
directors in a book to be kept for that purpose, and shall perform such other
duties as may be assigned to him by the directors in a book to be kept for that
purpose, and shall perform such other duties as may be assigned to him by the
directors or the President. He shall have custody of the seal of the
corporation and shall affix the same to all instruments requiring it, when
authorized by the directors or the President, and attest the same.

SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES.--Assistant
Treasurers and Assistant Secretaries, if any, shall be elected and shall have
such powers and shall perform such duties as shall be assigned to them,
respectively, by the directors.

ARTICLE V

MISCELLANEOUS

SECTION 1. CERTIFICATES OF STOCK.--Certificate of stock, signed by
the Chairman or Vice Chairman of the Board of Directors, if they be elected,
President or Vice-President, and the Treasurer or an Assistant Treasurer, or
Secretary or an Assistant Secretary, shall be issued to each shareholder
certifying the number of shares owned by him in the corporation. Any of or all
the signatures may be facsimiles.

SECTION 2. LOST CERTIFICATES.--A new certificate of stock may be
issued in the place of any certificate theretofore issued by the corporation,
alleged to have been lost or destroyed, and the directors may, in their
discretion, require the owner of the lost or destroyed certificate, or his legal
representatives, to give the corporation a bond, in such sum as they may direct,
no exceeding double the value of the stock, to indemnify the corporation against
any claim that may be made against it on account of the alleged loss of any such
certificate, or the issuance of any such new certificate.

SECTION 3. TRANSFER OF SHARES.--The shares of stock of the
corporation shall be transferable only upon its books by the holders thereof in
person or by their duly authorized attorneys or legal representatives, and upon
such transfer the old certificates shall be surrendered to the corporation by
the delivery thereof to the person in charge of the stock and transfer books and
ledgers, or to such other person as the directors may designate, by whom they
shall be cancelled, and new certificates shall thereupon be issued. A record
shall be made of each transfer and whenever a transfer shall be made for
collateral security, and not absolutely, it shall be so expressed in the entry
of the transfer.

SECTION 4. SHAREHOLDERS RECORD DATE.--In order that the corporation
may determine the shareholders entitled to notice of or to vote at any meeting
of shareholders or any adjournment without a meeting, or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange
of stock or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty nor less
than ten days before the date of

7
<PAGE>

such meeting, nor more than sixty days prior to any other action. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.

SECTION 5. DIVIDENDS.--Subject to the provisions of the Certificate
of Incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the corporation as and when they deem expedient. Before declaring any
dividend there may be set apart out of any funds of the corporation available
for dividends, such sum or sums as the directors from time to time in their
discretion deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
directors shall deem conducive to the interests of the corporation.

SECTION 6. SEAL.--The corporate seal shall be circular in form and
shall contain the name of the corporation, the year of its creation and the
words "CORPORATE SEAL DELAWARE." Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.

SECTION 7. FISCAL YEAR.--The fiscal year of the corporation shall be
determined by resolution of the Board of Directors.

SECTION 8. CHECKS.--All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation shall be signed by such officer or officers, agent or agents of
the corporation, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.

SECTION 9. NOTICE AND WAIVER OF NOTICE.--Whenever any notice is
required by these By-laws to be given, personal notice is not meant unless
expressly so stated, and any notice so required shall be deemed to be sufficient
if given by depositing the same in the United States mail, postage prepaid,
addressed to the person entitled thereto at his address as it appears on the
records of the corporation, and such notice shall be deemed to have been given
on the day of such mailing. Shareholders not entitled to vote shall not be
entitled to receive notice of any meetings except as otherwise provided by
Statute.

Whenever any notice whatever is required to be given under the
provisions of any law, or under the provisions of the Certificate of
Incorporation of the corporation or these Bylaws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or after
the time stated herein, shall be deemed equivalent thereto.

ARTICLE VI

AMENDMENTS

Subject to applicable law and the Certificate of Incorporation, these
Bylaws may be altered or repealed, in any particular, and new Bylaws, not
inconsistent with any provision of the Certificate of Incorporation or any
provision of law, may be adopted, by affirmative vote of a majority of the whole
Board.

<PAGE>

EXHIBIT 4.2

AMENDMENT NO. 1 TO
STOCKHOLDERS' AGREEMENT

This AMENDMENT NO. 1 TO STOCKHOLDERS' AGREEMENT (the "Amendment") is made
as of November 8, 1996, by and among Powerwave Technologies, Inc., a Delaware
corporation formerly called Milcom International, Inc. (the "Company"), the
persons named as Investors on Exhibit A hereto (the "Investors") and the persons
named as Stockholders on Exhibit B hereto (the "Stockholders").

WHEREAS, the parties entered into a Stockholders' Agreement as of October
10, 1995 (the "Original Agreement");

WHEREAS, since the date of the Original Agreement, the Company effected a 3
for 2 stock split (the "Stock Split");

WHEREAS, in connection with a Settlement and Release Agreement by and among
the Company and the Stockholders other than Ernest Johnson on the one hand and
Ernest Johnson on the other hand, of even date herewith, the Stockholders other
than Ernest Johnson have agreed to transfer to Ernest Johnson an aggregate of
45,000 shares (after giving effect to the Stock Split) of Common Stock of the
Company (the "Settlement Shares") which are currently held by the Corporate
Secretary pursuant to the Original Agreement;

WHEREAS, in consideration of the Stockholders entering into the Settlement
and Release Agreement which the Investors believe will benefit the Company, the
Investors have agreed to allow the Settlement Shares to be transferred out of
escrow and thus no longer be subject to Section 4 of the Original Agreement; and

WHEREAS, Section 5.4 of the Original Agreement provides that the Original
Agreement may be amended by the written consent of the persons holding or having
the right to acquire more than 75% of (i) the Series A Preferred Stock, (ii) the
Voting Stock, and (iii) shares of Voting Stock held by the Stockholders or their
permitted transferees pursuant to Section 3 of the Original Agreement.

NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:

1. The Corporate Secretary is hereby directed, subject to the terms and
conditions of the Settlement and Release Agreement, to transfer the Settlement
Shares to Ernest Johnson, from the Stockholders other than Ernest Johnson as set
forth on Exhibit C hereto, and is hereby appointed attorney-in-fact to transfer,
or cause to be transferred, said Settlement Shares on the stock transfer books
of the Company. The Company, the Stockholders and the Investors consent to the
transfer of Settlement Shares in accordance with the terms and conditions of the
Settlement and Release Agreement and further agree that the Settlement Shares
shall not be deemed Repurchase Shares and shall not be subject to Section 4 of
the Original Agreement, as amended hereby.

2. The Company, Investors and the Stockholders acknowledge and agree that
the transfer of the Settlement Shares to Ernest Johnson as set forth on Exhibit
A, shall constitute a full and final release of any and all claims, known or
unknown, against or between any of the
<PAGE>

parties hereto or any other shareholder of the Company, related to ownership of
or entitlement to shares of stock of the Company. Without limiting the
generality of the foregoing, each of the parties hereto hereby releases each of
the other parties hereto from any claim, commitment, obligation or requirement
to restore, replenish or contribute any shares to or to otherwise compensate or
make whole, any such person or entity as a result of the transfer of shares to
Ernest Johnson or for any other reason relating to the transactions which are
the subject of this Amendment. The parties hereto acknowledge of agree to the
terms and conditions of the Original Agreement, as amended or supplemented
hereby, and agree to be bound thereby. This Section shall in no way limit or
otherwise affect any release or other provisions set forth in the Settlement and
Release Agreement or this Amendment.

3. The specific releases set forth in paragraph 2 above are not intended
to, and shall not, constitute general releases within the meaning of Section
1542 of the Civil Code. HOWEVER, TO THE EXTENT APPLICABLE TO THE CLAIMS BEING
RELEASED IN PARAGRAPH 2 ABOVE, THE COMPANY, THE STOCKHOLDERS AND THE INVESTORS,
AND EACH OF THEM, DO HEREBY MUTUALLY WAIVE AND RELINQUISH ANY AND ALL RIGHTS
WHICH ANY OF THEM MAY HAVE UNDER THE PROVISIONS OF (S) 1542 OF THE CIVIL CODE OF
THE STATE OF CALIFORNIA, WHICH SECTION READS AS FOLLOWS:

"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."

4. Section 4 of the Original Agreement is hereby amended and restated in
its entirety as follows:

"4. Transfers Upon Exercise of Certain Options.
------------------------------------------

Substantially concurrently herewith, the Company has established its
1995 Stock Option Plan (the "Plan") covering 1,938,615 shares of Common Stock.
The Company, the Investors and the Stockholders have agreed that the first
1,095,000 options exercised pursuant to the Plan (whether or not such options
represent the first 1,095,000 options granted under such Plan) (the "Dilutive
Options") shall be equally dilutive to all such parties, and that the exercise
of any other options under the Plan (the "Non-Dilutive Options") shall only
dilute the holdings of the Stockholders.

Therefore, the parties acknowledge and agree that upon exercise of any
Non-Dilutive Option, the Stockholders shall sell to the Company, and the Company
shall purchase from the Stockholders, a number of shares of Common Stock equal
to the number of shares of Common Stock issued upon the exercise of such Non-
Dilutive Option (the "Repurchase Shares"). Each Stockholder shall sell to the
Company his or her pro rata share (based upon such Stockholder's percentage
ownership of Common Stock held by all Stockholders on the date hereof) of the
Repurchase Shares. The aggregate purchase price for the Repurchase Shares shall
be equal to the exercise price paid upon exercise of the Non-Dilutive Options
and shall be paid out to the Stockholders in proportion to the percentage of
Repurchase Shares sold by each Stockholder.

2
<PAGE>

The aggregate 843,615 shares of Common Stock of the Stockholders which
initially are subject to becoming Repurchase Shares shall be represented by
separate stock certificates (each a "Repurchase Certificate" and together the
"Repurchase Certificates"). The Repurchase Certificates shall be held by the
Secretary of the Company (the "Corporate Secretary") until such time as all of
the Non-Dilutive Options have been exercised or lapsed (the "Termination Date").
Each Stockholder has executed and delivered, substantially concurrently with the
execution of the Original Agreement, a power of attorney in favor of the
Corporate Secretary, which power of attorney remains in full force and effect,
pursuant to which the Corporate Secretary has the power, upon exercise of a Non-
Dilutive Option, to execute on behalf of such Stockholder a stock power
transferring the appropriate number of shares of such Stockholder's Common Stock
to the Company. Each such power of attorney states that it is irrevocable until
the Termination Date, coupled with an interest and not to be affected by the
disability or incapacity of the Stockholder. If and when Non-Dilutive Options
are exercised, new Repurchase Certificates representing the shares of Common
Stock still subject to becoming Repurchase Shares shall be issued in the
respective names of the Stockholders and delivered to the Corporate Secretary to
be held pursuant to the terms of this Section 4. If and when Non-Dilutive
Options lapse or upon the cancellation of the portion of the Plan pertaining to
the Non-Dilutive Options (which cancellation may be effected in the sole
discretion of Al Cordero), (i) new Repurchase Certificates representing the
shares of Common Stock still subject to becoming Repurchase Shares shall be
issued in the respective names of the Stockholders and delivered to the
Corporate Secretary to be held pursuant to the terms of this Section 4 and (ii)
new stock certificates representing the shares of Common Stock no longer subject
to becoming Repurchase Shares shall be issued in the respective names of the
Stockholders and delivered to the Stockholders to be held pursuant to the other
terms of this Agreement. In recognition of the fact that issuance of stock
certificates on each lapse of Dilutive or Non-Dilutive Options may become
cumbersome, the Company may wait a reasonable period of time before issuing the
Repurchase Certificates and new stock certificates referenced in the immediately
preceding sentence."

5. The Company, Stockholders and Investors agree that, upon the written
demand of the Company or the Investors, the Repurchase Certificates shall be
transferred to an independent escrow agent (which escrow agent may be the
Company's transfer agent) and such new escrow agent shall be deemed the
Corporate Secretary for purposes of Section 4 of the Original Agreement. The
new escrow agent shall have all of the rights and powers of the Corporate
Secretary pursuant to the Special Power of Attorney granted to the Corporate
Secretary by each Stockholder in connection with the Original Agreement.

6. Effective upon the closing of a Qualified Public Offering, for
purposes of the Original Agreement, as amended hereby, the maximum number of
options that may be deemed Dilutive Options (and thus trigger the redemption
provisions of Section 4 of the Original Agreement, as amended hereby) shall be
843,615, which number shall be subject to adjustment in the event of a stock
split, reverse stock split, stock dividend, reorganization or recapitalization
affecting the number of shares of Common Stock of the Company outstanding.

7. This Amendment is and shall remain strictly confidential and shall not
be disclosed by any party except to enforce such party's rights under the
Amendment or as required by law or applicable federal securities or other
regulations.

3
<PAGE>

8. Except as amended herein, all terms and conditions of the Original
Agreement shall remain in full force and effect.

9. Unless the context otherwise requires, all capitalized terms not
defined herein shall be defined as set forth in the Original Agreement.

10. This Amendment may be executed in counterparts, each of which shall be
an original, but all of which together shall constitute one instrument.

IN WITNESS WHEREOF, the parties have executed this Amendment as the first
date set forth above.

COMPANY

POWERWAVE TECHNOLOGIES, INC., a Delaware
corporation

By: /s/ BRUCE C. EDWARDS
---------------------------------------------
Bruce C. Edwards, Chief Executive Officer

STOCKHOLDERS

/s/ ALFONSO G. CORDERO
-------------------------------------------------
Alfonso G. Cordero

/s/ KI NAM
-------------------------------------------------
Ki Nam

/s/ SUSSANNE TORRETTA
-------------------------------------------------
Sussanne Torretta

/s/ ERNEST JOHNSON
-------------------------------------------------
Ernest Johnson

/s/ CHARLES FLORMAN
-------------------------------------------------
Charles Florman

/s/ BILL H. DOI
-------------------------------------------------
Bill H. Doi

4
<PAGE>

[continuation of signature page
to Amendment No. 1 to Stockholders'
Agreement]

/s/ ARTHUR COOK
--------------------------------------------------
Arthur Cook

/s/ THOMAS HA
--------------------------------------------------
Thomas Ha

INVESTORS

SUMMIT VENTURES IV, L.P.

By: Summit Partners IV, L.P., its General
Partner
By: Stamps, Woodsum & Co. IV, its General
Partner

By: /s/ GREGORY M. AVIS
---------------------------------------
General Partner

SUMMIT VENTURES III, L.P.

By: Summit Partners III, L.P., its General
Partner
By: Stamps, Woodsum & Co. III, its General
Partner

By: /s/ GREGORY M. AVIS
---------------------------------------
General Partner

SUMMIT INVESTORS II, L.P.

By: /s/ GREGORY M. AVIS
---------------------------------------
General Partner

5
<PAGE>

[continuation of signature page
to Amendment No. 1 to Stockholders'
Agreement]

CROSSPOINT VENTURE PARTNERS 1993

By: /s/ RICH SHAPERO
---------------------------------------

CROSSPOINT VENTURE PARTNERS
ENTREPRENEURS 1993

By: /s/ RICH SHAPERO
---------------------------------------

6
<PAGE>

EXHIBIT A
---------

LIST OF INVESTORS
-----------------

Summit Ventures IV, L.P.
499 Hamilton Avenue, Suite 200
Palo Alto, California 94301

Summit Ventures III, L.P.
499 Hamilton Avenue, Suite 200
Palo Alto, California 94301

Summit Investors II, L.P.
499 Hamilton Avenue, Suite 200
Palo Alto, California 94301

Crosspoint Venture Partners 1993
One First Street
Los Altos, California 94022

Crosspoint Venture Partners Entrepreneurs 1993
One First Street
Los Altos, California 94022

7
<PAGE>

EXHIBIT B
---------

LIST OF STOCKHOLDERS
--------------------

Alfonso G. Cordero
26862 Windsor Drive
San Juan Capistrano, CA 92675

Ki Nam
18626 Grayland
Artesia, 90701

Sussanne Torretta
10121 Constitution Drive
Huntington Beach, CA 92646

Ernest Johnson
P.O. Box 7976
Newport Beach, CA 92660

Charles Florman
414A Main Street
Port Jefferson, NY 11777

Bill H. Doi
13802 Tustin East Drive
Tustin, CA 92680

Arthur Cook
55 Greenfield
Irvine, CA 92714

Thomas Ha
8392 Satinwood Circle
Westminster, CA 92683

8
<PAGE>

EXHIBIT C
---------

Settlement Shares to be transferred to Ernest Johnson

Stockholder Transferor No. of Shares
- ---------------------- -------------
<S> <C>
Alfonso G. Cordero 28,325
Ki Y. Nam 8,681
Sussanne Torretta 686
Charles Florman 3,883
Bill H. Doi 1,371
Arthur Cook 1,142
Thomas Ha 912
------

Total: 45,000
======
</TABLE>

<PAGE>

EXHIBIT 5.1

[LETTERHEAD OF STRADLING, YOCCA, CARLSON & RAUTH]

December 3, 1996

Powerwave Technologies, Inc.
2026 McGaw Avenue
Irvine, California 92614

RE: Registration Statement on Form S-1 -- Registration No. 333-13679

Ladies and Gentlemen:

At your request, we have examined the Registration Statement on Form S-1,
Registration No. 333-13679, filed by Powerwave Technologies, Inc., a Delaware
corporation (the "Company"), with the Securities and Exchange Commission on
October 8, 1996 (as amended, the "Registration Statement"), in connection with
the registration under the Securities Act of 1933, as amended, of 2,760,000
shares of Common Stock, $.0001 par value per share, of the Company (the "Common
Stock"). Said shares of Common Stock, which include 360,000 shares which will
be subject to an over-allotment option to be granted to the underwriters by the
Company, are to be sold to the underwriters as described in the Registration
Statement for sale to the public.

As your counsel in connection with this transaction, we have examined the
proceedings taken and are familiar with the proceedings proposed to be taken by
you in connection with the authorization, issuance and sale of the shares of the
Common Stock.

Based on the foregoing, and subject to compliance with applicable state
securities laws, it is our opinion that the 2,760,000 shares of Common Stock,
when issued and sold in the manner described in the Registration Statement, will
be legally issued, fully paid and nonassessable.
<PAGE>

Powerwave Technologies, Inc.
December 3, 1996
Page 2

We consent to the use of this opinion as an exhibit to the Registration
Statement and to the use of our name under the caption "Legal Matters" in the
Prospectus which is a part of the Registration Statement.

Very truly yours,

STRADLING, YOCCA, CARLSON & RAUTH

<PAGE>

EXHIBIT 10.3

AMENDMENT NO. 1 TO
1995 STOCK OPTION PLAN

This Amendment No. 1 (the "Amendment") to the 1995 Stock Option Plan (the
"1995 Plan") of Powerwave Technologies, Inc., a Delaware corporation (formerly
Milcom International, Inc.) (the "Company"), is hereby adopted by the Board of
Directors of the Company effective upon the closing of an underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale of the Company's Common
Stock, $.0001 par value per share, from which the aggregate net proceeds to the
Company exceed $15,000,000 and in which the price per share is at least
$8.886519 (such amount to be equitably adjusted whenever there shall occur a
stock split, combination, reclassification or other similar event affecting the
Common Stock).

The 1995 Plan is hereby amended as follows:

1. Section 7 is amended to provide for a new Section 7(q) which read in
its entirety as follows:

"(q) Limit on Grants. In no event shall any participant in the Plan
---------------
be granted Rights to Purchase or Options in any one calendar year
pursuant to which the aggregate number of shares of Common Stock may
be acquired thereunder exceeds 450,000 shares."

Attest:

/s/ KEVIN T. MICHAELS
----------------------------------------
Kevin T. Michaels, Secretary

<PAGE>

EXHIBIT 23.2

INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE

To the Board of Directors and Shareholders of
Powerwave Technologies, Inc.

We consent to the use in Amendment No. 3 to Registration Statement No. 333-
13679 of Powerwave Technologies, Inc. on Form S-1 of our report dated October
24, 1996, appearing in the Prospectus, which is a part of this Registration
Statement, and to the references to us under the heading "Selected
Consolidated Financial Data" and "Experts" in such Prospectus.

Our audits of the financial statements referred to in our aforementioned
report also included the financial statement schedule of Powerwave
Technologies, Inc., listed in Item 16. This financial statement schedule is
the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.

DELOITTE & TOUCHE LLP

Costa Mesa, California

December 3, 1996