POWER ONE INC, S-3, 1999-08-02

POWER ONE INC
S-3, 1999-08-02
ELECTRONIC COMPONENTS, NEC

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 2, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------

FORM S-3

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

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

POWER-ONE, INC.

(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 3679 77-0420182
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>

740 CALLE PLANO
CAMARILLO, CALIFORNIA 93012
(805) 987-8741

(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

STEVEN J. GOLDMAN
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT
POWER-ONE, INC.
740 CALLE PLANO
CAMARILLO, CALIFORNIA 93012
(805) 987-8741

(Name and address, including zip code, and telephone number,
including area code, of agent for service)

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

COPIES TO:

KENDALL R. BISHOP, ESQ. C. DOUGLAS BUFORD, JR., ESQ.
O'MELVENY & MYERS LLP WRIGHT, LINDSEY & JENNINGS LLP
1999 AVENUE OF THE STARS, SUITE 700 200 WEST CAPITOL AVENUE, SUITE 2200
LOS ANGELES, CALIFORNIA 90067 LITTLE ROCK, ARKANSAS 72201
(310) 246-6780 (501) 212-1239

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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 the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

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, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, 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
under the Securities Act, please check the following box. / /

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF SHARES AMOUNT TO AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED BE REGISTERED PRICE(1) REGISTRATION FEE
<S> <C> <C> <C>
Common stock, $0.001 par value................................. 7,475,000 $188,977,344 $52,536
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act.

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

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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, 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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<PAGE>
SUBJECT TO COMPLETION DATED AUGUST 2, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
6,500,000 SHARES

[LOGO]

Common Stock

This is a public offering of 6,500,000 shares of common stock of Power-One,
Inc. We are selling 4,000,000 shares of common stock being sold in this
offering. We will not receive any proceeds from the sale of the remaining
2,500,000 shares being sold by our stockholders identified in this prospectus.

Our common stock is traded on the Nasdaq National Market under the symbol
"PWER." The last reported sales price on the Nasdaq National Market of our
common stock on July 30, 1999 was $25 5/8.

SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN RISKS
THAT PURCHASERS OF OUR COMMON STOCK SHOULD CONSIDER.

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

<TABLE>
<CAPTION>
PER SHARE TOTAL
<S> <C> <C>
Public offering price............................................................ $ $
Underwriting discount and commissions............................................ $ $
Proceeds, before expenses, to Power-One.......................................... $ $
Proceeds to selling stockholders................................................. $ $
</TABLE>

We have granted the underwriters an option for a period of 30 days to
purchase up to 975,000 additional shares of common stock.

The underwriters are severally underwriting the shares being offered. The
underwriters expect to deliver the shares on or about , 1999.

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

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OF ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

STEPHENS INC.

BANCBOSTON ROBERTSON STEPHENS

THOMAS WEISEL PARTNERS LLC

The date of this prospectus is August 2, 1999.
<PAGE>

<TABLE>
<S> <C>
POWERING GROWTH TECHNOLOGIES

OVER 40% OF POWER-ONE'S SALES ARE IN THE HIGH-GROWTH VOICE AND DATA COMMUNICATIONS MARKET
SEGMENTS.

[Picture of Telecommunications Product]

Power-One's leading-edge power conversion
products target customers with advanced
technologies, such as those that provide the
infrastructure for e-commerce.

[Picture of high power-density product used
in data communications]

A HIGH POWER-DENSITY PRODUCT USED IN DATA
COMMUNICATIONS.

POWERING DIVERSIFIED TECHNOLOGIES

POWER-ONE HAS PROVIDED POWER SOLUTIONS TO A DIVERSIFIED CUSTOMER BASE FOR OVER 20 YEARS.

[Pictures of various users and products]

Over 10,000 customers purchase over two
million Power-One products annually.
Customers rank among the Fortune 500 of
high-technology companies producing medical
imaging, automated test, semiconductor
manufacturing, industrial, transportation,
and EDP equipment.

[Picture of Power-One Products]

POWER-ONE PROVIDES OVER 2,500 PRODUCTS FROM
ONE WATT TO 4,000 WATTS. THIS PROVIDES
CUSTOMERS WITH A ONE-STOP-SHOP POWER SUPPLY
VENDOR.
</TABLE>
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
PROSPECTUS SUMMARY......................................................................................... 4

SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA.......................................................... 6

RISK FACTORS............................................................................................... 8

USE OF PROCEEDS............................................................................................ 13

DIVIDEND POLICY............................................................................................ 13

CAPITALIZATION............................................................................................. 14

MARKET PRICES OF COMMON STOCK.............................................................................. 15

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA......................................................... 16

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND OPERATING RESULTS.......................... 18

BUSINESS................................................................................................... 29

MANAGEMENT................................................................................................. 40

SELLING STOCKHOLDERS....................................................................................... 42

UNDERWRITING............................................................................................... 44

DESCRIPTION OF CAPITAL STOCK............................................................................... 46

LEGAL MATTERS.............................................................................................. 48

EXPERTS.................................................................................................... 48

WHERE YOU CAN FIND MORE INFORMATION........................................................................ 48
</TABLE>

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AS USED IN THIS PROSPECTUS, REFERENCES TO "WE," "OUR," "US," "POWER-ONE," AND
"THE COMPANY" REFER TO
POWER-ONE, INC. AND ITS CONSOLIDATED SUBSIDIARIES AND NOT TO THE UNDERWRITERS OR
TO THE SELLING STOCKHOLDERS.

3
<PAGE>
PROSPECTUS SUMMARY

THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS. YOU
SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, ESPECIALLY THE INFORMATION
DISCUSSED UNDER "RISK FACTORS."

POWER-ONE, INC.

We are a leading designer and manufacturer of more than 2,500 high-quality
brand name power supplies. Our power supplies are designed to meet the power
needs of various subsystems and components within electronic equipment. Power
supplies primarily supply, regulate and distribute electrical power within
electronic equipment. AC/DC power supplies convert alternating current to direct
current, while DC/DC power supplies modify direct current into other levels of
direct current. Power supplies are typically classified as standard, modified
standard or custom. While we manufacture and sell all three product
classifications, we focus on standard and modified standard products. We believe
that as time-to-market is becoming a more important factor for success,
electronics companies increasingly prefer standard and modified standard power
supplies.

We are a merchant manufacturer. As such, we produce power supplies for use
by others, whereas captive manufacturers produce power supplies primarily for
their own use. We sell our products both to original equipment manufacturers, or
OEMs, and distributors who value quality, reliability, technology and service.
We have more than 10,000 customers in the communications, industrial,
automatic/semiconductor test equipment, transportation, medical equipment and
other electronic equipment industries. Our OEM customers include industry
leaders such as Cisco, Nortel, Teradyne, Lucent, Hewlett-Packard, Siemens and
Ericsson. We are also a leading provider of power supplies to domestic
distributors, including Pioneer Standard Electronics, Sterling, Arrow, Kent
Electronics and Future Electronics.

In the last year, we substantially expanded our product offerings, scale and
geographic breadth through two significant acquisitions. Our net sales have
increased from $75.4 million in 1996 to pro forma net sales of $161.6 million in
1998, a compound annual growth rate of 46.4%. We believe that we are one of the
largest power supply companies in the world that specializes in standard and
modified standard power supplies. We also believe that our gross margins are
among the highest in the industry. Our gross profit margin has been
approximately 40% during the past three years.

RECENT ACQUISITIONS

In August 1998, we increased our international presence and our portfolio of
products by acquiring Melcher Holding AG, or Melcher, for $53 million, including
debt assumed. Located in Uster, Switzerland, Melcher primarily designs and
manufactures high-reliability DC/DC and AC/DC power supplies which it sells to
leading OEMs throughout Europe and North America, including Ericsson, Daimler-
Chrysler and Siemens. Melcher has manufacturing operations in three European
locations and sales and application engineering offices in six European
countries. By acquiring Melcher, we added approximately 750 products to our
portfolio and gained better access to the $4 billion European power supply
market.

In January 1999, we further broadened our portfolio of DC/DC products by
acquiring International Power Devices, or IPD. We acquired IPD for $32 million,
including capitalized lease obligations and other indebtedness of IPD. IPD is a
leading supplier of high-density DC/DC power supplies, which it distributes
primarily in North America. High-density DC/DC power technology is preferred in
applications using high-speed / low-voltage logic, including the fast growing
voice and data communications industries. IPD sells over 90 models of
high-density DC/DC products to leading OEMs, including Cisco, Newbridge Networks
and Nortel. Our acquisition of IPD has given us greater access to the $2.9
billion worldwide merchant market for DC/DC power supplies. It has also made us
a leader in distributed

4
<PAGE>
power architecture, or DPA, which distributes DC/DC power supplies throughout
the electronic infrastructure of the end product. The worldwide market for DC/DC
products and, in particular, DPA products is estimated to grow faster during the
next five years than the overall power supply market.

BUSINESS STRATEGY

We focus on customers in high-end electronics industries who value quality,
reliability, technology and service. Our goal is to be the leading manufacturer
of standard and modified standard power supplies. To accomplish our goal, we
plan to:

- broaden our standard product line;

- expand relationships with key OEMs;

- strengthen our position as a leader in DC/DC power supplies and, in
particular, DPA products;

- pursue acquisitions; and

- maintain strong relationships with distributors.

We were incorporated in Delaware in January 1996 as a successor to a company
formed in 1973. Our principal executive offices are located at 740 Calle Plano,
Camarillo, California 93012, and our telephone number is (805) 987-8741. You can
find our web site at www.power-one.com.

THE OFFERING

The following information assumes that the underwriters do not exercise the
option that we granted to them to purchase additional shares in the offering.

<TABLE>
<S> <C>
Common stock offered by us........ 4,000,000 shares

Common stock offered by selling
stockholders.................... 2,500,000 shares

Common stock to be outstanding
after the offering.............. 21,137,851 shares

Use of proceeds................... To repay debt, to pay earn-out consideration to the
former stockholders of IPD and for general corporate
purposes, including possible acquisitions.

Nasdaq National Market symbol..... "PWER"
</TABLE>

5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND PERCENTAGES)

You should read the following financial information together with the
"Selected Consolidated Financial and Operating Data" and "Management's
Discussion and Analysis of Financial Condition and Operating Results" included
elsewhere in this prospectus.

<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31,(1) SIX MONTHS ENDED JUNE 30,(1)
-------------------------------------------- -----------------------------------------
PRO FORMA PRO FORMA
1996 1997 1998 (2) 1998 (3) 1998 1999 (4) 1999 (5)
--------- --------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS:
Net sales........................ $ 75,434 $ 93,068 $ 102,519 $ 161,567 $ 51,046 $ 81,402 $ 83,631
Gross profit..................... 30,129 37,587 39,073 71,401 21,176 33,128 34,463
Income from operations........... 8,002 14,617 8,102 11,919 8,017 1,098 3,358
Net income (loss)................ 3,396(6) 8,234 5,730 5,797 6,121 (1,538) 638
Net income (loss) attributable to
common stockholders............ $ 1,981 $ 6,720 $ 5,730 $ 5,797 $ 6,121 $ (1,538) $ 638
--------- --------- --------- ----------- ------------- ----------- -------------
--------- --------- --------- ----------- ------------- ----------- -------------
Basic earnings (loss) per common
share.......................... $ 0.20 $ 0.58 $ 0.34 $ 0.34 $ 0.36 $ (0.09) $ 0.04
--------- --------- --------- ----------- ------------- ----------- -------------
--------- --------- --------- ----------- ------------- ----------- -------------
Basic weighted average shares
outstanding.................... 10,000 11,659 17,073 17,073 17,060 17,099 17,099
--------- --------- --------- ----------- ------------- ----------- -------------
--------- --------- --------- ----------- ------------- ----------- -------------
Diluted earnings (loss) per
common share................... $ 0.20 $ 0.56 $ 0.33 $ 0.33 $ 0.35 $ (0.09) $ 0.04
--------- --------- --------- ----------- ------------- ----------- -------------
--------- --------- --------- ----------- ------------- ----------- -------------
Diluted weighted average shares
outstanding.................... 10,153 11,934 17,325 17,325 17,334 17,099 17,524
--------- --------- --------- ----------- ------------- ----------- -------------
--------- --------- --------- ----------- ------------- ----------- -------------
SELECTED OPERATING DATA:
Gross profit margin.............. 39.9% 40.4% 38.1% 44.2% 41.5% 40.7% 41.2%
EBITDA (7)....................... $ 12,215 $ 18,833 $ 14,439 $ 24,480 $ 10,274 $ 11,382 $ 10,399
EBITDA margin.................... 16.2% 20.2% 14.1% 15.2% 20.1% 14.0% 12.4%
Backlog (8)...................... $ 17,298 $ 32,232 $ 25,795 $ 30,411 $ 19,494 $ 62,505 $ 62,505
Cash flows from (used in):
Operating activities........... 4,249 8,481 21,836 14,772 (2,453)
Investing activities........... (3,457) (5,332) (52,954) (6,687) (42,207)
Financing activities........... (2,859) 27,185 9,291 -- 36,950
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1999
--------------------------------
PRO FORMA
ACTUAL AS ADJUSTED (9)
--------------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................................................... $ 2,751 $ 54,087
Working capital............................................................... 1,483 98,483
Total assets.................................................................. 197,506 248,842
Total debt.................................................................... 60,942 15,278
Total stockholders' equity.................................................... 101,658 198,658
</TABLE>

(FOOTNOTES ON FOLLOWING PAGE)

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<PAGE>
(1) Our fiscal year is the 52- or 53-week period ending on the Sunday nearest to
December 31, and our quarters are the 13- and 14-week periods ending on the
Sunday nearest to March 31, June 30, September 30 and December 31. For
clarity of presentation, we have described year-ends presented as if the
year ended on December 31 and quarter-ends presented as if the quarters
ended on March 31, June 30, September 30 and December 31. As such, the years
ended December 31, 1996 through 1998 represent 52-week years and the six
months ended June 30, 1998 and 1999 represent 26-week periods.

(2) On August 31, 1998, we acquired Melcher for a purchase price of $53 million,
including $11.2 million of debt assumed. In addition, we incurred
transaction costs of approximately $1.6 million. We accounted for the
acquisition using the purchase method of accounting. The year ended December
31, 1998 includes a non-recurring expense of $2.3 million, which consists of
an inventory fair market value write-up of $2.9 million related to the
purchase of Melcher, which increased cost of goods sold expense, and a
related income tax benefit of $0.6 million.

(3) This unaudited pro forma financial information combines the consolidated
results of operations as if the acquisitions of Melcher and IPD had occurred
at the beginning of the period presented. Pro forma adjustments include only
the effects of the events directly attributable to the transactions that are
expected to have a continuing impact and that are factually supportable. The
pro forma amounts for the fiscal year ended December 31, 1998 exclude
non-recurring items totaling $6.7 million, which consist of the following:
inventory fair market value write-up of $2.9 million and $0.8 million
related to the purchases of Melcher and IPD, respectively, which increased
cost of goods sold expense; in-process research and development charge of
$3.3 million and write-off of $1.0 million technology and license agreement,
both of which related to the purchase of IPD; and related income tax benefit
of $1.3 million.

(4) On January 29, 1999, we purchased IPD for $32 million, including certain
capitalized lease obligations and other indebtedness of IPD. In addition, we
incurred approximately $1.2 million of transaction costs. We accounted for
the acquisition using the purchase method of accounting. Amounts for the six
months ending June 30, 1999 include non-recurring items totaling $4.4
million, which consist of the following: inventory fair market value
write-up of $0.8 million related to the purchase of IPD, which increased
cost of goods sold expense; in-process research and development charge of
$3.3 million and write-off of $1.0 million technology and license agreement,
both of which related to the purchase of IPD; and related income tax benefit
of $0.7 million.

(5) This unaudited pro forma financial information combines the consolidated
results of operations as if the acquisition of IPD had occurred at the
beginning of the period presented. Pro forma adjustments include only the
effects of the events directly attributable to the transaction that are
expected to have a continuing impact and that are factually supportable. The
pro forma amounts for the six months ended June 30, 1999 exclude
non-recurring items totaling $4.4 million, which consist of the following:
inventory fair market value write-up of $0.8 million related to the purchase
of IPD, which increased cost of goods sold expense; in-process research and
development charge of $3.3 million and write-off of $1.0 million technology
and license agreement, both of which related to the purchase of IPD; and
related income tax benefit of $0.7 million. The pro forma amounts include
non-recurring items totalling $1.0 million, which consist of the following:
$0.4 million of bonuses and $0.8 million of stock compensation paid by IPD
in January, 1999; $0.5 million of professional fees; and related income tax
benefit of $0.7 million.

(6) On January 29, 1996, we converted from a limited liability company to a C
corporation. Had we been a C corporation for the entire 1996 fiscal year,
the effect would have been a $0.5 million increase to provision for income
taxes from $0.4 million to $0.9 million resulting in a similar decrease in
net income from $3.4 million to $2.9 million. For presentation purposes,
U.S. federal and state income taxes have not been provided on earnings of
our Puerto Rico subsidiary as we do not intend to remit these earnings.

(7) EBITDA, which we calculate as income from operations before depreciation,
amortization and compensation charges for stock option plans, is a
supplemental financial measurement used by us in the evaluation of business
and by many analysts in our industry. However, EBITDA should only be read in
conjunction with all of our financial data summarized above and our
financial statements prepared in accordance with generally accepted
accounting principles and incorporated herein by reference. EBITDA should
not be construed as an alternative either to income from operations (as
determined in accordance with generally accepted accounting principles) as
an indicator of our operating performance or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) as a measure of our liquidity.

(8) Consists of purchase orders on hand having delivery dates scheduled within
the next six months.

(9) Adjusted to reflect the sale of the 4,000,000 shares of the common stock
being offered by us pursuant to this prospectus at $25.625 per share, and
the application of the estimated net proceeds therefrom. See "Use of
Proceeds."

7
<PAGE>
RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS AND OTHER INFORMATION IN
THIS PROSPECTUS BEFORE PURCHASING SHARES OF COMMON STOCK.

OUR BUSINESS IS CYCLICAL.

In recent years, the power supply industry has experienced dramatic shifts
in demand and has become more cyclical. As a result, our quarterly results of
operations have fluctuated in the past and may continue to fluctuate in the
future. These fluctuations have significantly affected our net sales, which has
had a negative effect on our operating results. Any such fluctuations in the
future could have a material adverse effect on our operating results.

IF WE FAIL TO MANAGE OUR GROWTH EFFECTIVELY, WE MAY LOSE BUSINESS AND EXPERIENCE
REDUCED PROFITABILITY.

We have significantly increased our business within a short period of time
through our acquisitions of Melcher and IPD. As a result of these acquisitions,
internal growth and the transfer of production to our Mexico and Dominican
Republic factories, the number of our employees has grown from 1,685 as of June
30, 1998 to 2,971 as of June 30, 1999. If we are to grow successfully, we must:

- train our new employees;

- effectively manage increases in our production levels and transfers of
production;

- attract and retain qualified management and technical personnel;

- improve our operational, administrative and financial systems;

- implement our Oracle Enterprise Resource Planning, or ERP, system in our
operations; and

- manage multiple relationships with various customers and suppliers.

We may not be able to accomplish any of these requirements, and our failure
to do so would have a material adverse effect on our operating results. In
addition, our inability to manage our growth could lead to delayed shipment and
cancellation of customer orders.

CANCELLATIONS, REDUCTIONS OR DELAYS IN PURCHASES COULD CAUSE OUR QUARTERLY
RESULTS TO FLUCTUATE.

We do not obtain long-term purchase orders or commitments from our
customers, and customers may cancel, reduce or postpone orders without penalty.
Cancellations, reductions or delays in orders could substantially reduce our
backlog and adversely affect our net sales, gross profit and operating results,
especially if we are unable to replace such orders. Our expense levels are
based, in part, on expected future revenues and are relatively fixed once set.
Therefore, fluctuations in sales (particularly if customers cancel, postpone or
delay sales or sales fail to meet our expectations) may adversely impact our
operating results. Fluctuations in sales and customer needs may also affect our
mix of products and volume of orders, which in turn affect our gross margin and
operating results. High-volume orders, especially custom orders, if cancelled,
may substantially increase the risk of inventory obsolescence, write-offs due to
excess manufacturing capacity and collection problems. These factors have caused
our quarterly results to fluctuate in the past and may continue to do so in the
future, which could have a material adverse effect on our operating results.

WE RELY ON A FEW MAJOR CUSTOMERS FOR A MATERIAL PORTION OF OUR BUSINESS.

A few customers account for a material portion of our net sales each year.
During the first six months of 1999, our top three customers accounted for
approximately 20% of our net sales. If we lose one of these customers, or if one
of them reduces or cancels a significant order, our net income and operating
results could decrease significantly.

8
<PAGE>
FAILURE TO ANTICIPATE TRENDS IN THE ELECTRONIC EQUIPMENT INDUSTRY AND PRICE
EROSION MAY ADVERSELY AFFECT OUR BUSINESS.

Because we have many customers in the electronic equipment industry, the
factors and economic trends that affect these companies also affect our
business. Companies in the electronic equipment industry must continuously
develop new products to respond to rapid changes in technology. In addition,
because consumer demand for electronic equipment fluctuates frequently and the
industry is highly competitive, these companies must continuously develop and
produce higher-performance products at lower prices. To respond to the needs of
our customers in the electronic equipment industry, we must also continuously
develop new and more advanced products at lower prices. Our inability to
properly assess developments in the electronic equipment industry or to
anticipate the needs of our customers could cause us to lose some or all of
these customers and prevent us from obtaining new customers. Moreover, the power
supply industry has experienced significant price erosion in order to meet the
electronic equipment industry's demand for lower-costs. Future downward pressure
on prices could have a material adverse effect on our operating results.

WE MAY ENCOUNTER PROBLEMS IN INTEGRATING THE OPERATIONS OF COMPANIES THAT WE
ACQUIRE.

To implement our strategy of growing through acquisitions, we need to:

- retain key management members and technical personnel of an acquired
company;

- successfully merge corporate cultures and business processes;

- realize sales and cost reduction synergies; and

- possibly operate in areas of the world in which we have little or no prior
experience.

In addition, after we have completed an acquisition, our management must be
able to assume significantly greater responsibilities, and this in turn may
cause them to divert their attention from our existing operations. We acquired
Melcher in August of 1998 and IPD in January of 1999. We are in the process of
transferring production to our Mexico and Dominican Republic facilities. We
expect to begin installing our Oracle ERP system in IPD's and Melcher's
operations in the middle of next year. If we are unable to completely integrate
Melcher's and IPD's businesses and operations into our business, including the
completion of planned transfers of production to our Dominican Republic and
Mexico facilities and implementation of our Oracle ERP system at Melcher and
IPD, our results of operations and financial condition would be adversely
affected.

MUCH OF OUR BUSINESS IS SUBJECT TO RISKS ASSOCIATED WITH OPERATIONS IN FOREIGN
COUNTRIES.

Many of our operations are located outside of the U.S. and consequently, are
vulnerable to:

- imposition of tariffs, quotas, taxes and other market barriers;

- restrictions on the export or import of technology;

- political and economic instability and work stoppages;

- difficulties in staffing and managing international operations; and

- fluctuations in the value of the U.S. dollar relative to foreign
currencies.

Historically, we have not hedged against any currency exchange rate risks.
The occurrence of any of these factors may adversely affect our operating
results.

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<PAGE>
WE MAY NOT BE ABLE TO GROW BY ACQUIRING OTHER COMPANIES.

We will not be able to acquire other companies if we cannot identify
acquisition opportunities or obtain acceptable financing. We may have to incur
debt to acquire other companies. If our cash flow and existing working capital
are not sufficient to fund our general working capital requirements and debt
service needs, we will have to raise additional funds by selling equity,
refinancing some or all of our existing debt or selling assets or subsidiaries.
None of these alternatives to raise additional funds may be available on
acceptable terms to us or in amounts sufficient for us to meet our requirements.

OUR SUCCESS DEPENDS ON OUR ABILITY TO RETAIN OUR SENIOR MANAGEMENT AND TO
ATTRACT AND RETAIN KEY TECHNICAL PERSONNEL.

If we lose one or more members of our senior management, our business and
financial results could be adversely affected. Our capacity to develop and
implement new technologies depends on our ability to employ personnel with
highly technical skills. Competition for such qualified technical personnel is
intense due to the relatively limited number of power supply engineers
worldwide. If we cannot attract and retain qualified management or highly
technical personnel, our business will be adversely affected.

WE MAY NOT BE ABLE TO COMPETE WITH COMPETITORS WHO ARE SIGNIFICANTLY LARGER AND
MAY HAVE SUBSTANTIALLY LOWER MATERIALS COSTS.

The merchant power supply manufacturing industry is characterized by intense
competition. We believe that the principal bases of competition in our targeted
markets are breadth of product line, quality, reliability, technical knowledge,
flexibility, readily available products and competitive price. In times of an
economic downturn, or when dealing with high volume orders, we believe that
price becomes a more important competitive factor. Moreover, we believe price
will become a more important competitive factor in the future as the power
supply industry consolidates, OEMs become larger and more entrants from Asia
begin to compete with us. Many of our competitors are larger than us, and they
may be able to obtain materials at significantly lower prices. Depending on the
location of our plants, we may not be able to procure materials at costs as low
as the materials costs of some of our competitors. This may have a material
adverse effect on our operating results.

WE WILL BE REQUIRED TO PAY SUBSTANTIAL UNITED STATES INCOME TAX IF WE REPATRIATE
EARNINGS FROM OUR PUERTO RICO OPERATIONS.

We do not pay U.S. federal or state income taxes on earnings from our Puerto
Rico operations as long as we do not repatriate the earnings. As of June 30,
1999, our Puerto Rico subsidiary had accumulated unremitted earnings of
approximately $11.3 million. If we decide to bring these funds into the U.S., we
will have to pay U.S. taxes on them at the normal rates. The resulting increase
in income tax expense would decrease our net income.

OUR INABILITY TO PROTECT OUR INTELLECTUAL PROPERTY COULD SERIOUSLY DAMAGE OUR
BUSINESS.

We rely upon a combination of patents, trademarks and trade secret laws to
protect our proprietary rights in certain of our products. Our competitors may,
however, misappropriate our technology or independently develop technologies
that are as good as or better than ours. Additionally, the laws of some foreign
countries do not protect our proprietary rights as much as U.S. laws. We
currently have several patents and may apply for additional patents, but the
U.S. Patent and Trademark Office may reject some or all of our patent
applications. The patents that the U.S. government issues to us may not provide
us with a competitive advantage or create a sufficiently broad claim to protect
the technology that we develop. Furthermore, our competitors may challenge or
circumvent our patents, and some of our patents may be invalidated. If we have
to initiate or defend against a patent infringement claim

10
<PAGE>
in the future to protect our proprietary rights, the litigation over such claims
could be time-consuming and costly to us, adversely affecting our financial
condition.

STEPHENS GROUP, INC. MAY BE ABLE TO CONTROL OUR MANAGEMENT, OPERATIONS AND
AFFAIRS.

Stephens Group, Inc., and certain of its affiliates have contributed their
shares of our common stock to a voting trust, which owns approximately 39.5% of
our outstanding common stock (24.7% after this offering). The voting trust must
vote the shares "for" or "against" proposals submitted to our stockholders in
the same proportion as votes cast "for" and "against" such shares by all other
stockholders. As long as these shares are held in the voting trust, Stephens
Group, Inc. cannot control our business. If Stephens Group, Inc., however,
decides to terminate the voting trust agreement, which it can do at its sole
option, depending on the number of shares voted on a particular matter, Stephens
Group, Inc. could effectively be able to elect our entire Board of Directors,
approve any action requiring stockholder approval (except as provided by law)
and control our management, operations and affairs. If Stephens Group, Inc.
terminates the voting trust, Stephens Inc. would no longer be able to make a
market in our common stock.

SYSTEMS FAILURES DUE TO HARDWARE OR SOFTWARE FAILURES OR THE YEAR 2000 PROBLEM
COULD ADVERSELY AFFECT OUR BUSINESS.

Many existing computer systems and software programs are coded to accept two
digit entries rather than four digits to define the applicable year. These
systems may, for example, recognize the year "00" as 1900 instead of 2000. If
the problem is not corrected, many systems and computer applications could fail
or create erroneous results. Our Oracle Enterprise Resource Planning, or ERP
system, which is Year 2000 compliant, is operational in our California and
Mexico facilities. We may experience difficulties in installing it in our
remaining operations. If we do, it could adversely affect our business and our
operating results. We may experience unforeseen problems with some of our
suppliers and customers whose computer systems are not Year 2000 compliant, and
these problems could adversely affect our operations. Melcher has not yet
finished assessing its products or computer systems or the effect that problems
with its suppliers' systems may have on its operations. At this point, Melcher
expects to finish its Year 2000 remediation and testing efforts by the end of
the third quarter of 1999, but Melcher may experience delays, which could
adversely affect Melcher's results of operations.

OUR BUSINESS IS SUBJECT TO CERTAIN ENVIRONMENTAL RISKS.

We are subject to federal, state, local and foreign environmental laws and
regulations that govern the handling, transportation and discharge of materials
into the air, water and soil. If environmental laws become more stringent over
time, or existing laws are more stringently enforced, we could incur greater
compliance costs and be subject to increased risks and penalties for violations.
We could be held liable for significant damages for violating environmental laws
and could lose certain licenses or permits, which in turn could adversely affect
our financial results.

OUR CHARTER CONTAINS PROVISIONS THAT MAY HINDER OR PREVENT A CHANGE IN CONTROL
OF OUR COMPANY.

Certain provisions of our Certificate of Incorporation could make it more
difficult for a third party to acquire control of us, even if such a change in
control would benefit our stockholders. We have a staggered Board of Directors,
which means that our stockholders can only elect approximately one-third of the
board at each annual meeting of stockholders. Stockholders must inform our
corporate secretary before a stockholders' meeting of any business they wish to
discuss and any directors they wish to nominate. Our Certificate of
Incorporation also requires approval of 75% of our voting stock to amend certain
provisions. Finally, our Board of Directors can issue preferred stock without
stockholder approval. Your rights could be adversely affected by the rights of
holders of preferred stock that we

11
<PAGE>
issue in the future. Any one of the provisions discussed above could discourage
third parties from taking over control of the Company. Such provisions may also
impede a transaction in which you could receive a premium over then current
market prices and your ability to approve transactions that you consider in your
best interests.

THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS.

This prospectus contains statements which, to the extent that they do not
recite historical fact, constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934. The words "believe," "expect," "estimate," "may," "will,"
"could," "plan" or "continue" and similar expressions are intended to identify
forward-looking statements. Such forward-looking information involves important
risks and uncertainties that could materially alter results in the future from
those expressed in any forward-looking statements made by, or on behalf of, us.
These risks and uncertainties include, but are not limited to, our ability to:

- manage our growth;

- maintain existing and form new relationships with customers; and

- successfully integrate the businesses of companies that we acquire,
including Melcher and IPD.

Other risks and uncertainties include uncertainties relating to general
domestic and international economic conditions including interest rate and
currency exchange rate fluctuations, electronics industry market conditions and
growth rates, acquisitions, the cyclical nature of our business, government and
regulatory policies, technological developments and changes in the competitive
environment in which we operate. We caution you that such forward-looking
statements are only predictions and that actual events or results may differ
materially. In evaluating such statements, you should specifically consider the
various factors which could cause actual events or results to differ materially
from those indicated by such forward-looking statements, including the factors
that we discuss in this section.

12
<PAGE>
USE OF PROCEEDS

We estimate that our net proceeds (after we pay the underwriters and our
expenses) from the sale of the 4,000,000 shares that we are selling will be
$97.0 million ($120.8 million if the underwriters exercise their option to
acquire additional shares). We expect to use the net proceeds from sales of our
common stock to repay all of the $45.5 million of indebtedness outstanding under
our credit agreement with Bank of America, National Association and
approximately $0.2 million of other debt. At June 30, 1999, our interest rate on
the debt that we are repaying was 7.26% per annum. We incurred approximately
$28.3 million of this debt to acquire IPD, $1.2 million to pay transaction
costs, $4.3 million to acquire IPD's facility and the remainder for working
capital purposes. In addition, we may use up to $13.0 million of the net
proceeds to pay earn-out consideration to the former stockholders of IPD if IPD
achieves the performance objectives set forth in the IPD acquisition agreement.
We expect to use the remaining net proceeds for general corporate purposes,
including acquisitions, additions to working capital and capital expenditures.
We do not have any agreements or understandings with respect to an acquisition.
We may invest the net proceeds not required immediately in short-term marketable
securities.

We will not receive any of the proceeds from sales of common stock by our
selling stockholders.

DIVIDEND POLICY

We have not declared or paid any cash dividends on our capital stock since
we became a public company in 1997. We currently intend to retain future
earnings, if any, to operate and expand our business and do not anticipate
paying any cash dividends in the foreseeable future. In addition, our credit
agreement prohibits us from paying cash dividends without obtaining prior
approval from our lender.

13
<PAGE>
CAPITALIZATION

The following table sets forth our capitalization as of June 30, 1999 and on
a pro forma as adjusted basis, giving effect to our sale of the common stock in
this offering at an assumed offering price of $25.625 per share and the
application of the net proceeds as described under "Use of Proceeds."

<TABLE>
<CAPTION>
JUNE 30, 1999
-----------------------
PRO FORMA
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................................................ $ 2,751 $ 54,087
---------- -----------
---------- -----------
Debt:
Notes payable to banks................................................................. $ 49,917 $ 4,253(1)
Current portion of long-term debt...................................................... 3,376 3,376(1)
Long-term debt, less current portion................................................... 5,466 5,466(1)
Capitalized leases..................................................................... 2,183 2,183
---------- -----------
Total debt........................................................................... 60,942 15,278
---------- -----------

Stockholders' equity:
Common stock, $.001 par value per share, 60,000,000 shares authorized; 17,137,851
shares issued and 21,137,851 shares issued as adjusted (2)........................... 17 21
Additional capital....................................................................... 92,409 189,405
Accumulated other comprehensive income................................................... (2,930) (2,930)
Retained earnings........................................................................ 12,162 12,162
---------- -----------
Total stockholders' equity........................................................... 101,658 198,658
---------- -----------
Total capitalization..................................................................... $ 162,600 $ 213,936
---------- -----------
---------- -----------
</TABLE>

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

(1) All of our remaining debt will have an average interest rate of 4.1% per
annum.

(2) Excludes 1,762,465 shares issuable upon the exercise of outstanding stock
options at a weighted average exercise price of $7.02 per share and
3,418,645 additional shares reserved for issuance under our Amended and
Restated 1996 Stock Incentive Plan and 3,000,000 additional shares reserved
for issuance under our Employee Stock Purchase Plan.

14
<PAGE>
MARKET PRICES OF COMMON STOCK

Since the initial public offering of our common stock at $14.00 per share,
effective September 30, 1997, our common stock has been listed on the Nasdaq
National Market under the symbol "PWER." At June 30, 1999, we had 130 record
holders of our common stock. The last reported sales price of our common stock
is shown on the cover page of this prospectus. The following table sets forth
the high and low sales price per share as reported on the Nasdaq National Market
for the periods indicated.

<TABLE>
<CAPTION>
PRICE RANGE
---------------------
HIGH LOW
--------- ----------
<S> <C> <C>
1997
Fourth Quarter........................................................ $19 5/8 $13 7/8

1998
First Quarter......................................................... 16 3/4 13
Second Quarter........................................................ 17 7 3/4
Third Quarter......................................................... 10 6 7/16
Fourth Quarter........................................................ 7 1/2 5 1/2

1999
First Quarter......................................................... 12 1/4 6 1/4
Second Quarter........................................................ 19 1/2 6 1/2
Third Quarter (through July 30, 1999)................................. 29 19 1/4
</TABLE>

15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND PERCENTAGES)

In the table below, we provide you with selected consolidated historical
financial and operating data. We have prepared this information using financial
statements for the fiscal years ended December 31, 1996, 1997 and 1998 and the
six-month periods ended June 30, 1998 and 1999. The financial statements for
1996, 1997 and 1998 have been audited by Deloitte & Touche LLP, independent
auditors. The financial statements for the six-month periods ended June 30, 1998
and 1999 have not been audited. We have prepared this unaudited information on
substantially the same basis as the audited financial statements and included
all adjustments, consisting only of normal recurring adjustments, that we
consider necessary for a fair presentation of the financial position and results
of operations for the period. When you read this selected historical financial
and operating data, it is important that you read along with it the section
titled "Management's Discussion and Analysis of Financial Condition and
Operating Results" included elsewhere in this prospectus and the historical
financial statements and related notes incorporated by reference into this
prospectus. Historical results are not necessarily indicative of future results.

Selling expense......................... 7,537 8,199 11,771 22,106 4,994 10,244 10,487
General and administrative expense...... 6,486 6,778 8,311 14,084 3,567 7,083 9,538
Engineering expense..................... 4,215 3,937 6,257 14,683 2,399 6,210 6,679
Quality assurance expense............... 1,886 2,027 2,007 2,928 1,185 1,633 1,687
Amortization of intangibles............. 2,003 2,029 2,625 5,681 1,014 3,560 2,714
In-process research and development..... -- -- -- -- -- 3,300 --
--------- --------- --------- ----------- ----------- ----------- -----------
Total expense......................... 22,127 22,970 30,971 59,482 13,159 32,030 31,105

Income from operations.................. 8,002 14,617 8,102 11,919 8,017 1,098 3,358
Interest income......................... 28 358 1,387 148 915 37 37
Interest expense........................ (4,222) (3,181) (806) (4,275) (185) (1,710) (1,909)
Other income (expense).................. (16) (18) (627) 64 155 276 (246)
--------- --------- --------- ----------- ----------- ----------- -----------
Income (loss) before income taxes....... 3,792 11,776 8,056 7,856 8,902 (299) 1,240
Income taxes............................ 396(6) 3,542 2,326 2,059 2,781 1,239 602
--------- --------- --------- ----------- ----------- ----------- -----------
Net income (loss)....................... 3,396(6) 8,234 5,730 5,797 6,121 (1,538) 638

Less: preferred stock accretion and
dividends............................. 1,415 1,514 -- -- -- -- --
--------- --------- --------- ----------- ----------- ----------- -----------
Net income (loss) attributable to common
stockholders............................ $ 1,981 $ 6,720 $ 5,730 $ 5,797 $ 6,121 $ (1,538) $ 638
--------- --------- --------- ----------- ----------- ----------- -----------
--------- --------- --------- ----------- ----------- ----------- -----------
Basic earnings (loss) per common
share................................. $ 0.20 $ 0.58 $ 0.34 $ 0.34 $ 0.36 $ (0.09) $ 0.04
--------- --------- --------- ----------- ----------- ----------- -----------
--------- --------- --------- ----------- ----------- ----------- -----------
Basic weighted average shares
outstanding........................... 10,000 11,659 17,073 17,073 17,060 17,099 17,099
--------- --------- --------- ----------- ----------- ----------- -----------
--------- --------- --------- ----------- ----------- ----------- -----------
Diluted earnings (loss) per common
share................................. $ 0.20 $ 0.56 $ 0.33 $ 0.33 $ 0.35 $ (0.09) $ 0.04
--------- --------- --------- ----------- ----------- ----------- -----------
--------- --------- --------- ----------- ----------- ----------- -----------
Diluted weighted average shares
outstanding........................... 10,153 11,934 17,325 17,325 17,334 17,099 17,524
--------- --------- --------- ----------- ----------- ----------- -----------
--------- --------- --------- ----------- ----------- ----------- -----------
SELECTED OPERATING DATA:
Gross profit margin..................... 39.9% 40.4% 38.1% 44.2% 41.5% 40.7% 41.2%
EBITDA (7).............................. $ 12,215 $ 18,833 $ 14,439 $ 24,480 $ 10,274 $ 11,382 $ 10,399
EBITDA margin........................... 16.2% 20.2% 14.1% 15.2% 20.1% 14.0% 12.4%
Depreciation & amortization............. $ 4,213 $ 4,216 $ 6,337 $ 12,561 $ 2,257 $ 6,984 $ 6,260
Capital expenditures.................... 2,903 5,185 11,569 13,514 6,791 12,301 12,346
Backlog (8)............................. 17,298 32,232 25,795 30,411 19,494 62,505 62,505
Cash flows from (used in):
Operating activities.................. 4,249 8,481 21,836 14,772 (2,453)
Investing activities.................. (3,457) (5,332) (52,954) (6,687) (42,207)
Financing activities.................. (2,859) 27,185 9,291 -- 36,950
</TABLE>

16
<PAGE>

<TABLE>
<CAPTION>
JUNE 30, 1999
--------------------------------
PRO FORMA AS
ACTUAL ADJUSTED (9)
--------------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................................... $ 2,751 $ 54,087
Working capital..................................................................... 1,483 98,483
Total assets........................................................................ 197,506 248,842
Total debt.......................................................................... 60,942 15,278
Total stockholders' equity.......................................................... 101,658 198,658
</TABLE>

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

(1) Our fiscal year is the 52- or 53-week period ending on the Sunday nearest to
December 31, and our quarters are the 13- and 14-week periods ending on the
Sunday nearest to March 31, June 30, September 30 and December 31. For
clarity of presentation, we have described year-ends presented as if the
year ended on December 31 and quarter-ends presented as if the quarters
ended on March 31, June 30, September 30 and December 31. As such, the years
ended December 31, 1996 through 1998 represent 52-week years and the six
months ended June 30, 1998 and 1999 represent 26-week periods.

(5) This unaudited pro forma financial information combines the consolidated
results of operations as if the acquisition of IPD had occurred at the
beginning of the period presented. Pro forma adjustments include only the
effects of the events directly attributable to the transaction that are
expected to have a continuing impact and that are factually supportable. The
pro forma amounts for the six months ended June 30, 1999 exclude
non-recurring items totaling $4.4 million, which consist of the following:
inventory fair market value write-up of $0.8 million related to the purchase
of IPD, which increased cost of goods sold expense; in-process research and
development charge of $3.3 million and write-off of $1.0 million technology
and license agreement, both of which related to the purchase of IPD and
related income tax benefit of $0.7 million. The pro forma amounts include
non-recurring items totalling $1.0 million, which consist of the following:
$0.4 million of bonuses; $0.8 million of stock compensation paid by IPD in
January, 1999; $0.5 million of professional fees; and related income tax
benefit of $0.7 million.

(8) Consists of purchase orders on hand having delivery dates scheduled within
the next six months.

17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND OPERATING RESULTS

YOU SHOULD READ THE FOLLOWING DISCUSSION IN CONJUNCTION WITH OUR FINANCIAL
STATEMENTS AND THE RELATED NOTES AND THE OTHER FINANCIAL INFORMATION
INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. IN ADDITION TO HISTORICAL
INFORMATION, THE FOLLOWING DISCUSSION AND OTHER PARTS OF THIS PROSPECTUS CONTAIN
FORWARD-LOOKING INFORMATION THAT INVOLVES RISKS AND UNCERTAINTIES. OUR ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED BY FORWARD-LOOKING
INFORMATION DUE TO FACTORS DISCUSSED UNDER "RISK FACTORS," "BUSINESS" AND
ELSEWHERE IN THIS PROSPECTUS.

GENERAL

We are a leading designer and manufacturer of more than 2,500 high-quality
brand name power supplies. We sell our products both to OEMs and distributors
who value quality, reliability and service. We have more than 10,000 customers
in the communications, automatic/semiconductor test equipment, medical
equipment, transportation, industrial and other electronic equipment industries.

We were founded in 1973 as a manufacturer of AC/DC power supplies and until
1981 operated solely from our Southern California facility. During the 1980s, we
established additional operations in Puerto Rico and Mexico to take advantage of
certain labor, manufacturing and, in Puerto Rico, tax efficiencies. Between 1994
and 1996, we moved most of our Puerto Rico manufacturing operations to the
Dominican Republic to capitalize on certain labor benefits. In September 1995,
Stephens Group, Inc., an affiliate of Stephens Inc., and our management
purchased Power-One from its previous owners and formulated a more aggressive
growth strategy, which included a plan to grow through acquisitions.

In August 1998, we increased our international presence and our product
offerings by acquiring Melcher for $53 million, including debt assumed. In
January 1999, we further broadened our DC/DC product offerings by acquiring IPD
for $32 million, including certain capitalized lease obligations and other
indebtedness of IPD.

All references herein to Power-One and to operating data for the year ended
December 31, 1998, include four months of Melcher's operations. For the six
months ended June 30, 1999, financial results are consolidated to include both
Melcher and, for five months, IPD.

18
<PAGE>
The following table sets forth, for the periods indicated, certain Combined
and Consolidated Statements of Operations for the periods presented:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31, SIX MONTHS
ENDED JUNE 30,
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales.................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold........................................... 60.1 59.6 61.9 58.5 59.3
--------- --------- --------- --------- ---------
Gross profit................................................. 39.9 40.4 38.1 41.5 40.7
Selling expense.............................................. 10.0 8.8 11.5 9.8 12.6
General and administrative expense........................... 8.6 7.3 8.1 7.0 8.7
Engineering expense.......................................... 5.6 4.2 6.1 4.7 7.6
Quality assurance expense.................................... 2.5 2.2 1.9 2.3 2.0
Amortization of intangibles.................................. 2.6 2.2 2.6 2.0 4.4
In-process research and development.......................... 0.0 0.0 0.0 0.0 4.1
--------- --------- --------- --------- ---------
Income from operations....................................... 10.6 15.7 7.9 15.7 1.3
Interest expense............................................. (5.6) (3.4) (0.8) (0.4) (2.1)
Other, net................................................... 0.0 0.4 0.8 2.1 0.4
--------- --------- --------- --------- ---------
Income (loss) before income taxes............................ 5.0 12.7 7.9 17.4 (0.4)
Income taxes................................................. 0.5 3.8 2.3 5.4 1.5
--------- --------- --------- --------- ---------
Net (loss) income............................................ 4.5 8.8 5.6 12.0 (1.9)
Preferred stock accretion and dividends...................... 1.9 1.6 0.0 0.0 0.0
--------- --------- --------- --------- ---------
Net income to common shareholders............................ 2.6% 7.2% 5.6% 12.0% (1.9%)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998.

NET SALES. Our net sales increased $30.4 million, or 59.5%, to $81.4
million for the six months ended June 30, 1999 from $51.0 million for the same
period last year. Included in net sales for the first half of 1999 are $22.1
million contributed by Melcher and $18.4 million contributed by IPD since the
date of acquisition. The principal contributors to the $30.4 million increase in
net sales were DC/DC power supplies, which contributed $35.7 million, low-range
power supplies, which contributed $5.9 million, and custom power supplies, which
contributed $2.8 million. These increases were offset by declines in our
high-range power supply line of $9.8 million, linear power supplies of $3.4
million and all other product lines of $0.8 million, net. Excluding Melcher and
IPD, our net sales decreased $10.2 million, or 20.0%, to $40.8 million in the
first half of 1999 from $51.0 million for the comparable period in 1998. This
decrease was primarily due to general weak demand for our high-range and linear
power supplies in the first four months of 1999.

Sales to OEMs in the first six months of 1999 were $60.7 million, or 74.5%
of net sales, up from $29.2 million, or 57.1% of net sales, over the comparable
period in 1998. Sales to Cisco, one of our primary OEM customers, represented
10.9% of net sales. Cisco was the only customer that exceeded 10% of net sales
in the first six months of 1999. Sales in the first six months of 1999 through
distributors were $20.7 million, or 25.5% of net sales, down $1.2 million from
$21.9 million, or 42.9% of net sales, in the same period last year. The lower
percentage of net sales through distributors in the first six months of 1999 is
primarily due to the change in the mix of our customer base, since most of
Melcher's and IPD's customers are OEMs.

Our recent acquisition of IPD has significantly broadened our customer base
by increasing sales to key OEMs and adding new OEMs in the communications
market.

19
<PAGE>
Sales by markets for the six months ended June 30, 1998 and June 30, 1999
were:

<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1998 JUNE 30, 1999
--------------- ---------------
<S> <C> <C>
Communications.................................................. 13% 42%
Industrial...................................................... 23% 19%
Transportation.................................................. 0% 8%
Automatic/semiconductor test equipment.......................... 27% 8%
Medical equipment............................................... 15% 8%
Computer, retail and other...................................... 22% 15%
----- -----
Total......................................................... 100.0% 100.0%
----- -----
----- -----
</TABLE>

The changes in our percentage distribution of sales for
automatic/semiconductor test equipment, communications, and transportation
markets are primarily due to the downturn in the automatic/semiconductor test
equipment market and a larger concentration of sales in the communications and
transportation markets by IPD and Melcher, respectively.

During the first six months of 1999, demand for our products increased
significantly. Our combined backlog on June 30, 1999 was $62.5 million, an
increase of 142.3% compared to backlog of $25.8 million on December 31, 1998.
Pro forma backlog, which assumes IPD's backlog was in place at December 31,
1998, increased 105.5% at the end of June 1999 as compared to year-end 1998. For
comparison, our backlog on June 30, 1998 was $19.5 million. For the quarter
ended June 30, 1999 we achieved record bookings of $69.3 million, with much of
this growth coming from strong demand in the communications market, as well as
increased demand for our high-power product line, which are typically sold to
the automatic/semiconductor test equipment market.

GROSS PROFIT. Gross profit increased $12.0 million, or 56.4%, to $33.1
million for the six months ended June 30, 1999 from $21.2 million for the six
months ended June 30, 1998. As a percent of net sales, our gross profit margin
decreased to 40.7% for the first half of 1999 from 41.5% for the same period in
1998. The decline in gross profit margin primarily resulted from the inventory
write-up related purchase accounting adjustments due to the IPD acquisition.
Excluding the non-recurring IPD purchase related adjustments, gross profit
margin would have been 41.6% for the first six months of 1999.

SELLING EXPENSE. Selling expense increased $5.2 million, or 105.1%, to
$10.2 million for the six months ended June 30, 1999 from $5.0 million for the
comparable period in 1998. As a percent of net sales, selling expense increased
to 12.6% for the first half of 1999 from 9.8% for the same period last year. The
increase of $5.2 million in the first half of 1999 was primarily due to
Melcher's and IPD's selling expense of $3.9 million and $1.4 million,
respectively. Excluding Melcher and IPD, Power-One's core selling expense
remained unchanged at $5.0 million in the first half of 1999 as compared to the
prior year. The increase in selling expense as a percentage of net sales is
primarily due to Melcher, which has higher selling expenses than Power-One and
IPD as a percentage of net sales.

GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
increased $3.5 million, or 98.6%, to $7.1 million for the six months ended June
30, 1999 from $3.6 million for the six months ended June 30, 1998. As a percent
of net sales, general and administrative expense increased to 8.7% for the first
half of 1999 from 7.0% for the comparable period in 1998. The increase of $3.5
million was primarily attributable to Melcher's and IPD's general and
administrative expenses of $1.3 million and $1.0 million, respectively, as well
as an increase of $1.2 million in our core general and administrative expense.
The increase in our core general and administrative expense was primarily due to
higher

20
<PAGE>
employee costs related to an increase in employee performance bonuses, higher
professional fees, and increased depreciation expense primarily related to the
Oracle ERP project.

ENGINEERING EXPENSE. Engineering expense increased $3.8 million, or 158.9%,
to $6.2 million for the six months ended June 30, 1999 from $2.4 million for the
six months ended June 30, 1998. As a percent of net sales, engineering expense
increased to 7.6% for the first half of 1999 from 4.7% for the comparable period
in 1998. The increase of $3.8 million was primarily due to Melcher's and IPD's
engineering expense of $2.4 million and $1.3 million, respectively.

QUALITY ASSURANCE EXPENSE. Quality assurance expense increased $448,000, or
37.8%, to $1.6 million for the six months ended June 30, 1999 from $1.2 million
for the six months ended June 30, 1998. As a percent of net sales, quality
assurance expense decreased to 2.0% for the first half of 1999 from 2.3% for the
comparable period in 1998. The increase of $448,000 was primarily due to higher
quality assurance expense related to Melcher and IPD.

AMORTIZATION EXPENSE. Amortization of intangibles increased $2.5 million,
or 251.1%, to $3.6 million for the six months ended June 30, 1999 from $1.0
million for the same period in 1998. The majority of the increase is
attributable to a $1.0 million charge taken to write-off the unamortized balance
of the intangible asset value of a technology and license agreement related to
substantially similar product technology acquired as a result of the IPD
acquisition. The balance of the increase is due to five months of amortization
of the intangibles initially recorded upon the acquisition of IPD on January 29,
1999 totaling approximately $768,000, as well as $836,000 of amortization of
intangibles related to the Melcher acquisition.

IN-PROCESS RESEARCH & DEVELOPMENT. In connection with the IPD acquisition,
we recorded a one time charge of $3.3 million for purchased in-process
technology that had not reached technological feasibility.

INCOME FROM OPERATIONS. As a result of the items discussed above, income
from operations decreased $6.9 million, or 86.3%, to $1.1 million for the six
months ended June 30, 1999 from $8.0 million for the comparable period in 1998.
The lower income from operations for the first half of 1999 resulted from
several significant non-recurring items totaling approximately $5.1 million,
including an $0.8 million inventory write-up related purchase accounting
adjustment for IPD, $1.0 million write-off of a previously acquired technology
license, and $3.3 million charge for in-process research and development.
Excluding these items, income from operations would have been $6.2 million.

INTEREST INCOME. Interest income decreased $878,000, or 96.0%, to $37,000
for the six months ended June 30, 1999 from $915,000 for the six months ended
June 30, 1998. The decrease is primarily due to the decrease in short-term,
interest-bearing financial instruments due to cash used for the Melcher
acquisition in the third quarter of 1998.

INTEREST EXPENSE. Interest expense increased $1.5 million, or 824.3%, to
$1.7 million for the six months ended June 30, 1999 from $185,000 for the
comparable period in 1998. The increase is primarily due to advances under our
credit facilities to finance the IPD acquisition, as well as additional
investments in facilities and capital equipment to increase our capacity to
support the rapid growth in our business.

OTHER INCOME (EXPENSE), NET. Other income, net, increased $121,000, to
$276,000 for the six months ended June 30, 1999 from $155,000 for the six months
ended June 30, 1998. Other income increased primarily due to gains on sales of
fixed assets and foreign currency transactions.

INCOME TAXES. The provision for income taxes decreased to $1.2 million for
the six months ended June 30, 1999 from $2.8 million income tax for the
comparable period in 1998. The recorded loss for the first half of 1999 did not
generate a significant income tax benefit primarily due to the $3.3 million

21
<PAGE>
charge for in-process research and development and $768,000 amortization of
goodwill related to the IPD acquisition, both of which were nondeductible for
tax purposes.

YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997.

NET SALES. Net sales increased $9.5 million, or 10.2%, to $102.5 million
for the year ended December 31, 1998 from $93.1 million for the year ended
December 31, 1997. The increase in net sales resulted primarily from a $18.8
million contribution from Melcher since the date of acquisition, as well as
strong growth in unit shipments of standard and modified standard power
supplies, particularly in high-range power configurations, during the first half
of 1998. Including Melcher's results, the principal contributors to the $9.5
million increase in net sales were DC/DC power products, which contributed $14.1
million in net sales, and low-range power products, which contributed $4.4
million. These increases were offset by declines in linear and custom power
products of $3.4 million and $3.9 million, respectively, and decreases in all
other product lines of $1.7 million, net. Excluding Melcher, our net sales
decreased $9.4 million, or 10.1%, to $83.7 million in 1998 from $93.1 million in
1997. This was primarily due to the general slowdown in demand for products
within the electronics industry, as well as domestic inventory reductions at
OEMs, including some of our customers, in the second half of 1998.

Sales to OEMs for the year ended December 31, 1998 were $62.2 million, or
61% of net sales, an increase of $10.2 million or 19.7% over the comparable
period in 1997, when sales to OEMs represented 56% of net sales. Sales through
distributors for the year ended December 31, 1998 were $40.3 million, or 39% of
net sales, a decrease of $0.8 million or 1.9% compared to the same period in
1997, when such sales represented 44% of net sales. As a result of the Melcher
acquisition, our OEM sales to the communications and transportation markets
increased $7.1 million and $3.6 million, respectively.

Our total backlog on December 31, 1998 was $25.8 million, which is comprised
of Power-One's backlog of $13.4 million and Melcher's backlog of $12.4 million.
Power-One's backlog stood at $32.2 million on December 31, 1997.

Beginning in the three month period ended June 30, 1998, demand for products
slowed significantly within the electronics industry. This was the result of a
softening trend in capital equipment markets, which in turn has been negatively
influenced by weak demand due to the business recessions in various Asian
economies, as well as an overall slowing in global economic activities. Demand
for our products was further weakened by domestic inventory reduction
initiatives at OEMs and distributors, including some of our customers. The
contribution of Melcher, which sells primarily into the European market, more
than offset the decline in our North American business. We expect that the
Melcher acquisition will continue to have a positive impact on our overall
business growth, particularly in data communications and telecommunications.

To counter the impact of the soft business climate in 1998, management
pursued action steps to position us for increased growth in 1999. Some of these
initiatives included actively pursuing new business synergies with Melcher in
the areas of sales and cost reductions; aggressively pursuing acquisitions which
culminated in the acquisition of IPD on January 29, 1999; and providing for
additional investment in research and development. Additionally, we made
significant progress to further upgrade our core business systems with the
implementation of a new Oracle ERP system. Although this fully integrated Oracle
ERP system is Year 2000 certified, the key reasons for implementing the new
system are to further enhance our technical infrastructure by providing to
management the tools available in a new generation of systems and software to
speed information retrieval; to position us for business growth; to facilitate
business integration of acquired companies; and to provide a clearer audit trail
for the source of information.

22
<PAGE>
GROSS PROFIT. Gross profit increased $1.5 million, or 4.0%, to $39.1
million for the year ended December 31, 1998 from $37.6 million for the year
ended December 31, 1997, which is primarily due to the inclusion of Melcher's
gross profit since the date of the acquisition. As a percent of net sales, gross
profit decreased to 38.1% for the year ended December 31, 1998 from 40.4% for
the same period in 1997. The decline in gross profit margin primarily resulted
from the inventory write-up related purchase accounting adjustments related to
the Melcher acquisition. Excluding the Melcher related inventory fair market
value purchase write-up adjustments, gross profit margin would have been 40.9%
in 1998 and 40.4% in 1997.

SELLING EXPENSE. Selling expense increased $3.6 million, or 43.6%, to $11.8
million for the year ended December 31, 1998 from $8.2 million for the year
ended December 31, 1997. The increase of $3.6 million is primarily due to the
inclusion of Melcher's selling expense of $3.6 million since the date of
acquisition. Excluding Melcher, selling expense was unchanged at $8.2 million
compared to the prior year. As a percent of net sales, selling expense increased
to 11.5% in 1998 from 8.8% for the year ended December 31, 1997, which is
primarily due to our decision to maintain its sales resources intact during the
business downturn in the latter portion of 1998, and due to the addition of
Melcher which had proportionately higher selling expense on a stand-alone basis.

GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
increased $1.5 million, or 22.6%, to $8.3 million for the year ended December
31, 1998 from $6.8 million for the year ended December 31, 1997. As a percent of
net sales, general and administrative expense increased to 8.1% in 1998 from
7.3% in 1997. The increase of $1.5 million is primarily due to higher public
company expenses of $268,000, higher travel costs primarily related to pursuing
other acquisitions of $149,000, higher depreciation expense of $244,000, higher
general office expenses of $291,000, other expenses aggregating $385,000 and the
inclusion of Melcher's general and administrative expenses of $748,000 since the
date of acquisition. These increases are partially offset by decreases in
salaries of $270,000 and bad debt expense of $315,000.

ENGINEERING EXPENSE. Engineering expense increased $2.3 million, or 58.9%,
to $6.3 million for the year ended December 31, 1998 from $3.9 million for the
year ended December 31, 1997. As a percent of net sales, engineering expense
increased to 6.1% for the year ended December 31, 1998 from 4.2% for the year
ended December 31, 1997. The increase is primarily due to higher employee costs
of $484,000, increased product development expense of $109,000, and the
inclusion of Melcher's engineering expenses of $1.7 million since the date of
acquisition.

QUALITY ASSURANCE EXPENSE. Quality assurance expense remained flat at $2.0
million for both 1998 and 1997. As a percent of net sales, quality assurance
expense decreased to 1.9% for the year ended December 31, 1998 from 2.2% from
the year ended December 31, 1997. Excluding Melcher, quality assurance expense
decreased $153,000, or 7.5%, to $1.9 million in 1998 compared to $2.0 million in
1997. This decrease is primarily attributable to a decrease in salary expense.

AMORTIZATION EXPENSE. The amortization of intangibles increased $596,000,
or 29.4%, to $2.6 million for the year ended December 31, 1998 from $2.0 million
for the year ended December 31, 1997. As a percent of net sales, amortization of
intangibles increased to 2.6% for the year ended December 31, 1998 from 2.2% for
the year ended December 31, 1997. The increase is directly attributable to four
months of amortization of intangibles initially recorded upon the acquisition of
Melcher on August 31, 1998.

INCOME FROM OPERATIONS. As a result of the above factors, income from
operations decreased $6.5 million, or 44.6%, to $8.1 million for the year ended
December 31, 1998 from $14.6 million for the year ended December 31, 1997. As a
percent of sales, income from operations decreased to 7.9% for the year ended
December 31, 1998 from 15.7% for the year ended December 31, 1997. Excluding the
charge to cost of sales of $2.9 million for the Melcher-related inventory fair
market value purchase

23
<PAGE>
write-up adjustments, income from operations would have been $11.0 million in
1998 compared to $14.6 million in 1997.

INTEREST INCOME. Interest income increased $1.0 million, or 287.4%, to $1.4
million for the year ended December 31, 1998 from $0.4 million for the year
ended December 31, 1997. This increase is primarily due to the interest income
derived from investment of a portion of the net proceeds from our initial public
offering, or IPO, in short-term, interest-bearing investment-grade financial
instruments.

INTEREST EXPENSE. Interest expense decreased $2.4 million, or 74.7%, to
$0.8 million for the year ended December 31, 1998 from $3.2 million for the year
ended December 31, 1997. This decrease is primarily the result of the repayment
of all bank borrowings under our existing bank credit facility using the net
proceeds from our IPO completed in the fourth quarter of 1997.

OTHER INCOME (EXPENSE), NET. Other expense increased $609,000, to $627,000
for the year ended December 31, 1998, from $18,000 for the year ended December
31, 1997, and is primarily due to foreign currency translation losses of
$455,000 related to Melcher since the date of acquisition and other expenses
aggregating $154,000.

INCOME TAXES. The provision for income taxes decreased $1.2 million, to
$2.3 million for the year ended December 31, 1998, from $3.5 million for the
year ended December 31, 1997. Income taxes as a percent of net sales decreased
to 2.3% in 1998 from 3.8% in 1997. The decrease is due to a $721,000 reduction
in tax provision related to the $7.2 million write-up of assets to fair value as
a result of purchase accounting adjustments made for the Melcher acquisition.
The remainder is attributable to a $122,000 tax credit related to a pre-tax loss
incurred by our U.S. operations in the third quarter of 1998, as well as a
decrease in the overall effective tax rate due to a relatively lower portion of
operating income generated in the second half of 1998, primarily as a result of
lower sales of high-power products.

YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996.

We have reclassified certain reimbursements from customers from selling,
engineering and quality assurance expenses to net sales for consistency with the
current year presentation.

NET SALES. Net sales increased $17.6 million, or 23.4%, to $93.1 million
for the year ended December 31, 1997 from $75.4 million for the year ended
December 31, 1996. The increase in revenue resulted primarily from strong growth
in unit shipments of standard, modified standard and custom power supplies in
both low-range and high-range power configurations during the third and fourth
quarter of 1997. Price changes in 1997 were not a significant contributor to
overall sales growth. Mirroring the sales increase, our backlog grew to $32.2
million at December 31, 1997, compared to $17.3 million at December 31, 1996.
Power conversion product sales increased over 1996 as the result of our wide
range of product offerings, continued growth in existing OEM customer accounts
and distributors, as well as an increased focus by our strategic national
accounts team on key OEM customers.

GROSS PROFIT. Gross profit increased $7.5 million, or 24.8%, to $37.6
million for the year ended December 31, 1997 from $30.1 million for the year
ended December 31, 1996, primarily as a result of higher sales. For the year
ended December 31, 1997, gross profit margin as a percent of sales increased
slightly to 40.4%, up from 39.9% for the prior year ended December 31, 1996. The
improvement in gross profit margin was primarily due to lower costs of
production following the transfer of manufacturing from our Puerto Rico facility
to our Dominican Republic facility, which was completed towards the end of 1996.

SELLING EXPENSE. Selling expense increased $662,000, or 8.8%, to $8.2
million for the year ended December 31, 1997 from $7.5 million for the year
ended December 31, 1996. The increase of $662,000

24
<PAGE>
is primarily due to higher payroll costs related to an increase in bonuses to
our sales force of $465,000, reclassification of certain distribution expense
from manufacturing to selling expense related to our operations in the Dominican
Republic totaling $340,000 and other operating costs aggregating $496,000. These
increases were partially offset by a $639,000 reduction in commissions paid to
manufacturers' representatives as a result of our renegotiating these commission
agreements. As a percent of net sales, selling expense decreased to 8.8% for the
year ended December 31, 1997 from 10.0% for the year ended December 31, 1996,
which is primarily attributable to higher sales volume.

GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
increased $292,000, or 4.5%, to $6.8 million for the year ended December 31,
1997 from $6.5 million for the year ended December 31, 1996. As a percent of net
sales, general and administrative expense decreased to 7.3% in 1997 from 8.6% in
1996. The increase of $292,000 is primarily due to an $861,000 increase in
employee performance bonuses as well as growth in staffing levels of
administrative personnel, offset by $613,000 of expenses incurred in connection
with the transfer of production from Puerto Rico to the Dominican Republic in
1996.

ENGINEERING EXPENSE. Engineering expense declined $278,000, or 6.6%, to
$3.9 million for the year ended December 31, 1997 from $4.2 million for the year
ended December 31, 1996. As a percent of net sales, engineering expense
decreased to 4.2% for the year ended December 31, 1997 from 5.6% for the year
ended December 31, 1996. Certain engineering expenses, which had been increased
in the first half of 1996 based upon anticipated sales increases, were reduced,
primarily by the reduction of administrative personnel as well as a reduction in
the use of consultants, in the last half of 1996 as sales declined. We believe
that no strategic business was affected by this reduction. We refilled many of
these positions by the end of the third quarter of 1997, and management expects
its investment in engineering to increase in 1998.

QUALITY ASSURANCE EXPENSE. Quality assurance expense increased $141,000, or
7.5%, to $2.0 million for the year ended December 31, 1997 from $1.9 million for
the year ended December 31, 1996. As a percent of net sales, quality assurance
expense decreased slightly to 2.2% in 1997 from 2.5% in 1996. The increase of
$141,000 is primarily due to higher payroll costs related to growth in staffing
levels to support the increase in quality activities generated by the increase
in sales volume.

INCOME FROM OPERATIONS. As a result of the above factors, income from
operations increased $6.6 million, or 82.7%, to $14.6 million for the year ended
December 31, 1997 from $8.0 million for the year ended December 31, 1996. As a
percent of sales, income from operations increased to 15.7% for the year ended
December 31, 1997 from 10.6% for the year ended December 31, 1996.

INTEREST EXPENSE. Interest expense decreased $1.0 million, or 24.7%, to
$3.2 million for the year ended December 31, 1997 from $4.2 million for the year
ended December 31, 1996. This decrease was the result of lower bank borrowings
and the repayment of all amounts outstanding under our existing bank credit
facility with the net proceeds from our IPO in the fourth quarter.

INTEREST AND OTHER INCOME, NET. Interest and other income increased
$328,000, to $340,000 for the year ended December 31, 1997, from $12,000 for the
year ended December 31, 1996, and is due to interest income generated from
investment of a portion of the proceeds from the IPO in short-term,
interest-bearing instruments.

INCOME TAXES. The provision for income taxes increased $2.6 million, to
$3.5 million for the year ended December 31, 1997, from the pro forma tax
expense of $923,000 for the year ended December 31, 1996. Income taxes as a
percent of net sales increased to 3.8% in 1997 from a pro forma 1.2% in 1996.
The percentage increase primarily reflects an increase in our effective tax rate
from 24.3% in 1996 to 30.1% in 1997 resulting from a higher proportion of our
earnings being generated in the U.S. rather than in Puerto Rico.

25
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents balance decreased $8.0 million, or 74.5% from
$10.8 million at December 31, 1998 to $2.8 million at June 30, 1999. The primary
source of cash for the first six months of 1999 consisted of net borrowings from
credit facilities of $34.5 which was primarily used to finance the purchase of
IPD and its manufacturing facility. The primary uses of cash for the first six
months of 1999 consisted of $28.3 million for the purchase of IPD, $1.2 million
of transaction costs, $12.3 million for the acquisition of property and
equipment and $2.5 million for operating activities.

The $2.5 million used for operating activities was primarily attributable to
cash earnings from operations of $8.7 million (net income plus depreciation,
amortization and in-process research and development charge) offset by $11.2
million used in working capital. The $11.2 million use of working capital was
primarily due to an increase in accounts receivable and inventories of $11.4
million and $8.1 million, respectively, offset by an increase in accounts
payable of $7.5 million.

The $12.3 million for acquisition of property and equipment included
approximately $4.3 million for the purchase of IPD's manufacturing facility,
$2.5 million for hardware, software and implementation support related to our
Oracle ERP system conversion, and the balance reflected additional property,
plant and capital equipment expenditures consistent to support our growth plans.

We have a $50 million revolving line of credit in the U.S. which bears
interest on amounts outstanding payable quarterly based on our leverage ratio
and one of the following rates as selected by us: LIBOR plus 1.0% to 2.25%, or
the bank's base rate plus 0% to 1.25%. The credit agreement (a) provides for
restrictions on additional borrowings, leases and capital expenditures; (b)
prohibits us, without prior approval, from paying dividends, liquidating,
merging, consolidating or selling our assets or business; and (c) requires us to
maintain a specified net worth, minimum working capital and certain ratios of
current liabilities and total debt to net worth. At June 30, 1999, amounts
outstanding under our line of credit in the U.S. were $45.5 million.

As a result of the Melcher acquisition, we have various credit facilities
with banks in Switzerland and Germany which can be drawn upon in the form of
term loans. The aggregate credit limit for all such credit facilities is
approximately $13.6 million. Melcher's credit facilities in Switzerland bear
interest on amounts outstanding payable at various time intervals and market
rates based on Swiss LIBOR plus a margin ranging from 1.25% to 2.00%. Some of
Melcher's credit agreements require Melcher to maintain certain financial
covenants and to provide certain financial reports to the lenders, none of which
materially restricts Melcher. At June 30, 1999, short-term and long-term amounts
outstanding under Melcher's credit facilities were $4.3 million and $8.8
million, respectively, and Melcher was in compliance with all debt covenants.

As a result of the IPD acquisition, we have an additional line of credit in
the U.S., which bears interest at the bank's prime rate plus 0.75%. Borrowings
are limited to the lesser of $4.5 million or 80% of IPD's eligible accounts
receivable, as defined. At June 30, 1999, amounts outstanding under IPD's line
of credit were $0.2 million.

At June 30, 1999, short-term and long-term amounts outstanding under all
credit facilities with banks were $49.9 million and $8.8 million, respectively.
Borrowings are collateralized by substantially all of our assets.

We currently anticipate that our total capital expenditures for 1999 will be
approximately $16 million, of which approximately $2.8 million represents costs
to complete the implementation of our Oracle ERP system, approximately $4.6
million represents investments in surface mount technology automation and
approximately $2.9 million represents investments in manufacturing improvements.
The amount of these anticipated capital expenditures will frequently change
based on future changes in business plans, our financial condition and general
economic conditions.

26
<PAGE>
Based on current plans and business conditions, we believe our existing
working capital and borrowing capacity, coupled with the funds generated from
our operations, will be sufficient to fund our anticipated working capital,
capital expenditures and debt payment requirements for the foreseeable future.
However, if we make a large acquisition, it may be necessary to raise debt or
equity in the private or public securities markets.

QUARTERLY RESULTS

The following table presents our unaudited quarterly operating results. In
the opinion of our management, this information has been prepared on the same
basis as the financial statements incorporated by reference in this prospectus
and includes all adjustments (consisting of only normal recurring accruals) that
management considers necessary for a fair presentation of the results for such
periods. Such quarterly results are not necessarily indicative of the results of
operations of any future period. Our results of operations have fluctuated and
may continue to fluctuate from period to period, including on a quarterly basis.
<TABLE>
<CAPTION>
1999
QUARTERS
1997 QUARTERS ENDED 1998 QUARTERS ENDED ENDED
-------------------------------------------- -------------------------------------------- ---------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31
--------- --------- ----------- --------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CONSOLIDATED STATEMENTS
OF OPERATIONS:
Net sales................ $ 17,910 $ 23,023 $ 24,852 $ 27,283 $ 26,673 $ 24,373 $ 23,101 $ 28,372 $ 34,834
Gross profit............. 7,308 9,277 10,073 10,929 10,810 9,656 8,851 9,756 13,181
Income from operations... 2,295 3,100 3,945 5,277 4,088 3,929 328 (243) (3,364)
Net income (loss)
attributable to common
stockholders........... 586 1,146 1,706 3,282 3,073 3,048 287 (678) (3,517)
Diluted earnings (loss)
per share.............. $ 0.06 $ 0.11 $ 0.17 $ 0.20 $ 0.18 $ 0.18 $ 0.02 $ (0.04) $ (0.21)

JUNE 30
---------
<S> <C>

CONSOLIDATED STATEMENTS
OF OPERATIONS:
Net sales................ $ 46,568
Gross profit............. 19,947
Income from operations... 4,462
Net income (loss)
attributable to common
stockholders........... 1,979
Diluted earnings (loss)
per share.............. $ 0.11
</TABLE>

YEAR 2000 ISSUE

Our business faces risk from unforeseen problems with our own information
systems and systems of our third party suppliers and customers. To address these
risks, we established a task force in early 1998, and since then have been
actively engaged in ensuring that our systems are Year 2000 compliant.

We have substantially completed an extensive review to ensure the internal
readiness of our computer systems and the embedded systems commonly found in
manufacturing equipment such as microcontrollers. We have assessed our products,
and they are not date sensitive.

We have also assessed the readiness of our key suppliers, subcontractors and
customers for the Year 2000 calendar change. To date we have received survey
responses from approximately 85% of our most important suppliers, which indicate
that they are aware of the Year 2000 compliance issue and that they intend to be
fully Year 2000 compliant and certified by year-end 1999. We expect the balance
of critical vendors to respond to our surveys by the third quarter of 1999.

In April 1999, we significantly reduced our exposure to the Year 2000
compliance issue by partially implementing a new Oracle ERP system, which is
Year 2000 compliant, in our California and Mexico facilities. However, we may
experience difficulties in completing implementation in California and Mexico
and in installing it in our remaining operations. If we do, it could adversely
affect our business and our operating results.

27
<PAGE>
We are also modifying or replacing, as necessary, other third party software
applications in order to ensure that they are Year 2000 compliant. We expect to
substantially complete the remediation of our computer systems in California,
Mexico and the Dominican Republic by the end of September 1999, before any
potential adverse impact on our business. Melcher, however, has not yet finished
assessing its products or computer systems or the effect that problems with its
suppliers' systems may have on its operations. At this point, Melcher expects to
finish its Year 2000 remediation and testing efforts by the end of the third
quarter of 1999, but Melcher may experience delays, which could adversely affect
Melcher's results of operations. In any event, we do not expect the overall
costs to complete our Year 2000 project to be material. We believe that the most
significant adverse effect on our business related to Year 2000 compliance would
be that some of our smaller and less relied-upon suppliers may not have systems
that are Year 2000 compliant, delaying our receipt of materials from them and
our fulfillment of customers' orders.

28
<PAGE>
BUSINESS

- primarily supply, regulate and distribute electrical power within
electronic equipment;

- either convert alternating current to direct current, an AC/DC power
supply, or modify direct current into other levels of direct current, a
DC/DC power supply;

- provide electronic components with a precise and constant supply of
electrical power at one or more voltage levels;

- regulate and monitor voltages to protect electronic components within
equipment from surges or drops in voltage, to prevent electronic equipment
from being damaged by its own malfunction and to provide back-up power if
a primary power source fails; and

- are typically classified as standard, modified standard and custom. While
we manufacture and sell all three product classifications, we focus on
standard and modified standard products.

We sell our products both to OEMs and distributors who value quality,
reliability, technology and service. We have more than 10,000 customers in the
communications, industrial, automatic/semiconductor test equipment,
transportation, medical equipment, and other electronic equipment industries.
Our OEM customers include industry leaders such as Cisco, Nortel, Teradyne,
Lucent, Hewlett-Packard, Siemens and Ericsson. We are also a leading provider of
power supplies to domestic distributors, including Pioneer Standard Electronics,
Sterling, Arrow, Kent Electronics and Future Electronics.

We were founded in 1973 as a manufacturer of AC/DC power supplies and until
1981 operated solely from our Southern California facility. During the 1980's,
we established additional operations in Puerto Rico and Mexico to take advantage
of certain labor, manufacturing and, in Puerto Rico, tax efficiencies. Between
1994 and 1996, we moved most of our Puerto Rico manufacturing operations to the
Dominican Republic to capitalize on certain labor benefits. In September 1995,
Stephens Group Inc., an affiliate of Stephens Inc., and our management purchased
Power-One from its previous owners and formulated a more aggressive growth
strategy, which included a plan to grow through acquisitions. In the last year,
we substantially expanded our product offerings, scale and geographic breadth
through two significant acquisitions. Our pro forma net sales have increased
from $75.4 million in 1996 to pro forma net sales of $161.6 million in 1998, a
compound annual growth rate of 46.4%. We believe that we are one of the largest
power supply companies in the world that specializes in standard and modified
standard power supplies. We also believe that our gross margins are among the
highest in the industry. Our gross profit margin has been approximately 40%
during the past three years.

RECENT ACQUISITIONS

In August 1998, we increased our international presence and our portfolio of
products by acquiring Melcher for $53 million, including debt assumed. Located
in Uster, Switzerland, Melcher primarily designs and manufactures
high-reliability DC/DC and AC/DC power supplies which it sells to leading OEMs
throughout Europe and North America, including Ericsson, Daimler-Chrysler and
Siemens. High-reliability power supplies are designed for rugged use in
heavy-duty equipment in industries such as transportation and
telecommunications. Melcher has manufacturing operations in three European
locations and sales and application engineering offices in six European
countries. By acquiring Melcher, we added approximately 750 products to our
portfolio and gained better access to the $4 billion European power supply
market. In addition, we are now able to use Melcher's direct sales force of 59
sales professionals and its marketing channels to sell Power-One's portfolio of
products both to new customers and Melcher's existing customers in Europe.

29
<PAGE>
In January 1999, we further broadened our portfolio of DC/DC products by
acquiring IPD. We acquired IPD for $32 million including capitalized lease
obligations and other indebtedness of IPD, or a total capital outlay of $28.3
million. In addition, we are required to pay up to $13 million to IPD's former
shareholders, if IPD attains certain defined operational performance objectives
in the 13 month period ending on March 31, 2000. We subsequently acquired IPD's
facility in Boston, Massachusetts for approximately $4 million. IPD is a leading
supplier of high-density DC/DC power supplies, which it distributes primarily in
North America. High-density DC/DC power technology is preferred in applications
using high-speed/low-voltage logic, including the fast growing voice and data
communications industries. IPD sells over 90 models of high-density DC/DC
products to leading OEMs, including Cisco, Newbridge Networks and Nortel. As
part of the acquisition, we also acquired IPD's 49% ownership position in
Shenzhen SED-IPD International Electronic Device Co., Ltd., a joint-venture
based in Shenzhen, China. We are currently moving the production of IPD's higher
volume products from its Boston facility to our lower cost manufacturing
facility in Mexico. Our acquisition of IPD has given us greater access to the
$2.9 billion worldwide merchant market for DC/DC power supplies. It has also
made us a leader in distributed power architecture, which distributes DC/DC
power supplies throughout the electronic infrastructure of the end product. The
worldwide market for DC/DC products is estimated to grow faster during the next
five years than the overall power supply market.

INDUSTRY AND MARKET OVERVIEW

The two primary types of power supplies are AC/DC and DC/DC power supplies.
AC/DC power supplies convert alternating current from a primary power source,
such as a wall outlet, into a precisely controlled direct current. Virtually
every electronic device that plugs into an AC wall socket requires some type of
AC/DC power supply. DC/DC power supplies modify an existing DC voltage level to
other DC levels to meet the power needs of various subsystems and components
within electronic equipment.

Power supplies are configured using both linear and switching technology.
Linear power supplies offer low noise and precise voltage regulation
specifications, which are characteristics required for specialized applications
such as analog-to-digital converters and operational amplifiers used in the
instrumentation industry. Switching power supplies utilize energy more
efficiently, are smaller and weigh less than linear power supplies. The market
for switching power supplies is estimated to be the fastest growing segment of
the power supply market. Switching power supplies comprise most of our product
line.

Power supplies are typically classified as standard, modified standard or
custom. Standard power supplies are not typically industry-wide standards.
Rather, they are power supplies that a particular company, such as Power-One,
manufactures as its own standard catalog products that customers can use for
many different applications. Modified standard products are standard products
that are modified slightly to meet a customer's specific design requirements.
Because they have already been designed and manufactured, standard and modified
standard products allow end customers to reduce their time-to-market and
minimize costs for new product introductions. Custom power supplies are designed
for a specific customer to meet the specifications for a unique application. It
typically takes four to six months to produce a custom product and requires the
expenditure of significant up-front engineering costs. In addition, users of
custom products frequently have high-volume production requirements and operate
in more price sensitive industries. As a result, profit margins on custom
products are typically lower than margins on standard products. Unlike some
technology products, power supplies, whether standard, modified standard, or
custom, can be difficult to match exactly or replace with products manufactured
by another supplier without considerable investment. Thus, once a power supply
has been designed into a customer's product, it is normally difficult and costly
for the customer to change suppliers during that product's life cycle. However,
customers who manufacture their products in high volumes typically require two
sources for power supplies.

30
<PAGE>
MARKET SIZE AND TRENDS

The power supply industry is highly fragmented, consisting of an estimated
1,000 companies worldwide, including over 300 in North America. Only six power
supply companies in the world, most of which specialize in custom products, had
merchant market sales greater than $200 million in 1997. The average power
supply company is estimated to have annual sales of approximately $15 million.
In 1998, the worldwide market for switching power supplies was estimated to be
approximately $16 billion, including approximately $7 billion in North America.
The worldwide market is expected to grow to approximately $21 billion in 2002,
and the North American market is expected to grow to approximately $9 billion by
2002.

We see the significant trends in the power supply industry as:

USE OF DISTRIBUTED POWER ARCHITECTURE. The communications and networking
industries are utilizing lower voltage semiconductors that require the power
supply to be located closer to the specific application. As a result, many new
products are designed with distributed power architecture, or DPA, that
distributes high-density switching DC/DC power supplies throughout the
electronic infrastructure of the end product. This DPA segment of the power
supply industry is expected to grow faster than the overall market for the next
several years.

SHORTENED TIME-TO-MARKET. To compete successfully in their industries, OEMs
must bring products with a wider variety of features to market as quickly as
possible. We believe that as OEMs face greater competition to accelerate the
time-to-market for their new products, they are increasingly incorporating
standard and modified standard power supplies into their products.

RELIANCE ON FEWER SUPPLIERS. In the past, customers typically purchased
power supplies from multiple suppliers. However, in order to lower costs and
accelerate delivery schedules, OEMs and electronic distributors are increasingly
reducing their supplier base to include only vendors who can offer a broad range
of products and service most of their needs. In addition, OEMs who purchase
power supplies have merged with or acquired other companies as part of
consolidation trends in their own industries. These larger OEM customers
increasingly rely on suppliers with greater financial resources and broader
product lines.

OUTSOURCING TO MERCHANT MANUFACTURERS. Captive power supply manufacturers
design and manufacture power supplies primarily for use in their own products.
Merchant power supply manufacturers design and manufacture power supplies for
use by OEMs. The merchant segment of the power supply market in North America
was estimated to be approximately 62% of the total power supply market in 1997.
The merchant segment is expected to grow to approximately 69% of the overall
market by 2002 as OEMs increasingly focus on core competencies and outsource the
manufacturing of power supplies to more efficient suppliers. In many cases, we
believe that as this outsourcing occurs, many OEMs will divest their power
supply businesses.

BUSINESS STRATEGY

BROADEN OUR STANDARD PRODUCT LINE. We believe that we offer customers one
of the broadest ranges of AC/DC and DC/DC standard and modified standard power
supplies in the world. Our standard product line includes over 2,500 different
models that are available from 1 to 4,000 watts. We are a leader in power supply
design, innovation and new product introduction. We plan to continue to develop
and expand our standard and modified standard product lines. We believe this
expansion,

31
<PAGE>
together with our highly flexible and quick changeover manufacturing process,
will allow us to meet the requirements of our customers to bring new products to
market more rapidly and cost effectively.

EXPAND RELATIONSHIPS WITH KEY OEMS. We focus on maintaining and
establishing long-term relationships with leading OEMs in high growth
industries. As part of our efforts to develop and expand these key
relationships, we implemented our Strategic National Accounts Program, or SNAP,
in 1997. As part of SNAP, we have seven professionals who work directly with
OEMs who are large enough to have annual orders of more than $3 million. In
addition, our recent acquisitions have significantly expanded our OEM customer
base, and we are implementing programs to aggressively cross-sell our broad
range of products to these new customers.

STRENGTHEN OUR POSITION AS A LEADER IN DC/DC POWER SUPPLIES AND, IN
PARTICULAR, DPA PRODUCTS. By acquiring Melcher and IPD, we have become a
leading supplier of DC/DC power supplies with over 1,750 products. In addition,
we believe that our acquisition of IPD, a technological leader in high-density
DC/DC products, has positioned us to better fulfill our customers' DPA
requirements. We intend to continue expanding our DC/DC product offerings so
that we can strengthen our competitive position in the DPA market.

PURSUE ACQUISITIONS. We plan to pursue growth opportunities by continuing
to acquire other power supply companies. We believe the fragmentation of the
power supply market, our customers' consolidation of their supplier bases and
the limited product offerings and relative undercapitalization of most of our
smaller competitors will present opportunities for further consolidation in our
industry. We also believe that an acquisition in Asia will significantly lower
our materials and labor costs.

MAINTAIN STRONG RELATIONSHIPS WITH DISTRIBUTORS. We believe that we were
one of the first manufacturers to sell power supplies through distributors.
Additionally, as a result of Power-One's strong brand name for quality and
service, we have developed one of the largest networks of distributors in the
U.S. We believe that our large network of distributors enables us to efficiently
sell our products to significantly more customers than we could using our direct
sales force. In addition, our relationships with our distributors provide us
with readily available shelf-space for our new products that we develop and
acquire.

32
<PAGE>
PRODUCTS

Our products are divided primarily into the following categories:

<TABLE>
<CAPTION>
REPRESENTATIVE
SALES
RANGE WATTS TYPICAL CHARACTERISTICS REPRESENTATIVE APPLICATIONS PRICE RANGE (1)
- ------------------ --------------- --------------------------- ------------------------------ ---------------
<S> <C> <C> <C> <C>
AC/DC PRODUCTS

Low-Power 30-200 watts -Higher unit volume -Small industrial $15 - 125
-Low technology implementation
systems
-Point-of-sale terminals
-Small networking systems

Mid-Power 200-500 watts -Medium unit volume -Work stations $125 - 400
-Moderate technology -Data/voice communication
systems
-Medical diagnostic equipment

High-Power 500-4000 watts -Lower unit volume -Semiconductor test systems $400 - 2,500
-High technology -Flight simulators
-Advanced medical imaging
equipment
-Large scale data processors

DC/DC PRODUCTS

Low-Power/ 1-50 watts -More compatible with -Diverse industrial $5 - 90
Low-Density power supplies applications
manufactured by -Communication products
competitors -Transportation
-Easily sold through
distributors

High-Power/ 50-300 watts -Technologically complex -Telecommunication equipment $55 - 145
High-Density -Complex manufacturing -Data communication equipment
process -Diverse industrial
-Relatively new technology applications
-Very small size

LINEAR PRODUCTS

5-150 watts -Low noise -Analog to digital converters $20 - 150
-Excellent voltage -Operational amplifiers
regulation -Medical electronics
-High voltage isolation
</TABLE>

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

(1) Melcher products, which are designed for high reliability and rugged
conditions, are typically sold for substantially higher prices than those
represented here.

LOW-POWER AC/DC PRODUCTS. Most of our low-power AC/DC power supplies use a
universal input voltage circuit, which automatically detects if the AC line is
110 or 220 volts, allowing the products to be used worldwide without
modification. In 1997, we introduced a new generation of low-range power
supplies targeted to our higher volume customers and the communications markets.
In addition, we have designed a line of low-power, high-reliability AC/DC
products that are specifically designed for our customers in the transportation
and high-reliability industrial markets.

MID-POWER AC/DC PRODUCTS. Most of our mid-power AC/DC products have the
universal input voltage circuit described above. We offer a range of products
that provide our customers a variety of features and options within the
mid-range power area. In 1999, we added a new line of 250-watt power supplies to
address the needs of customers in the communications market.

33
<PAGE>
HIGH-POWER AC/DC PRODUCTS. Our high-power AC/DC power supplies are based
upon a modular configuration. We have nine platforms and 83 modules that we have
sold in more than 1,400 configurations. Additionally, through our acquisition of
Melcher, we have a non-modular line of high-power telecommunications power
supplies that are designed for use in rugged applications.

LOW-POWER/LOW-DENSITY DC/DC PRODUCTS. We manufacture over 500 different
types of low-power DC/DC power supplies. Unlike AC/DC products, DC/DC power
supplies are typically more compatible with power supplies manufactured by
others and can often replace competitors' DC/DC products.

HIGH-POWER/HIGH-DENSITY DC/DC PRODUCTS. We manufacture high-density DC/DC
products, which are best suited for DPA. These products are essentially the same
size as low-density DC/DC products but have significantly greater output power.
We also manufacture a line of DC/DC products specifically for use by OEMs in the
transportation and high-reliability industrial markets, as well as sectors of
the communications industry that require rugged, high-reliability products.

LINEAR PRODUCTS. We are an industry leader in and have manufactured
standard linear AC/DC products since our founding in 1973. Linear power supplies
are larger, heavier and less efficient than switching power supplies. However,
linear products are better suited for equipment with low noise requirements,
such as high precision medical and industrial equipment. We expect that sales of
our linear products, which accounted for 17% of our revenues in 1998, will
decline in dollar volume in the coming years, as end-users redesign their
products to use switching power supplies. Also, as a result of rapid growth in
sales of our other products, we expect that sales of linear products as a
percentage of overall sales will decline significantly.

In addition to the standard and modified standard products described above,
we design and manufacture AC/DC and DC/DC custom products for select OEM
customers to meet unique requirements in size, wattage or configuration. We
believe that we can use our large base of standard products and standard circuit
designs as platforms to address the custom needs of our customers quickly and
effectively.

CUSTOMERS

We sell our power supplies to over 10,000 OEMs either directly or indirectly
through our distributors. Teradyne and Cisco are the only OEM customers who have
accounted for more than 10% of our net sales in any year since 1995. Teradyne
accounted for 15% of our net sales in 1997 and 13% in 1998. Cisco accounted for
11% of net sales in 1997 and 11% in the first half of 1999.

Our top 25 OEM customers accounted for 45% of sales in the first half of
1999, up from 41% in 1998, and included Cisco, Nortel, Teradyne, Lucent,
Hewlett-Packard, Siemens and Ericsson.

Sales in 1996, 1997, 1998 and the first six months of 1999 were to the
following markets:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31, SIX MONTHS
ENDED
1996 1997 1998 JUNE 30, 1999
----- ----- ----- -----------------
<S> <C> <C> <C> <C>
Communications............................................ 26% 30% 29% 42%

Industrial................................................ 10% 9% 14% 19%

Automatic/Semiconductor Test Equipment.................... 21% 32% 23% 8%

Medical Equipment......................................... 22% 12% 10% 8%

Transportation............................................ 0% 0% 7% 8%

Computer, Retail and Other................................ 21% 17% 17% 15%
--- --- --- ---

Total..................................................... 100% 100% 100% 100%
--- --- --- ---
--- --- --- ---
</TABLE>

34
<PAGE>
SALES AND MARKETING

At June 30, 1999, we had 112 sales and marketing professionals. Our domestic
sales and marketing department consisted of 53 professionals, including 25
salespeople, 12 regional sales managers, two product line managers, six
strategic national account managers and a comprehensive technical support and
service staff. Our European sales and marketing department consisted of 59 sales
professionals located in six sales offices in Switzerland, Germany, France,
England, Italy, and the Netherlands. Six product managers and a technical and
service staff located in Switzerland and Germany support our European sales
force. Additionally, we sell products in China through IPD's joint venture in
Shenzhen and through one of our distributors.

The percentage break-down of products that we sold to OEMs and distributors
in 1996, 1997, 1998 and the first six months of 1999 is as follows:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31, SIX MONTHS
ENDED
1996 1997 1998 JUNE 30, 1999
----- ----- ----- -----------------
<S> <C> <C> <C> <C>
OEMs...................................................... 49% 56% 61% 75%
Distributors.............................................. 51% 44% 39% 25%
</TABLE>

Although dollar volume sales to distributors have remained relatively constant,
they have decreased as a percentage of our total sales because our acquisitions
and SNAP program have increased sales to OEMs.

OEM AND STRATEGIC ACCOUNT SALES. In North America, we use our direct sales
force and manufacturers' representatives to sell our products to OEMs. In
Europe, we primarily use our direct sales force but also utilize some
manufacturers' representatives and distributors. Our manufacturers'
representatives cover North America, Eastern Europe, Northern Europe, the Middle
East, Asia, Africa and Australia. In 1997, we formed SNAP to target existing and
potential OEM customers who are leaders in high-growth industries and who we
believe could order over $3 million of power supplies annually. We expect that
our sales to OEMs will increase in the future as we increasingly emphasize sales
to strategic accounts.

SMALL ACCOUNT SALES BY DISTRIBUTORS. We have one of the largest domestic
distribution networks in the power supply industry. We have contracts with over
48 distributors with locations in more than 478 cities worldwide. Twenty-eight
of our distributors are headquartered in the U.S. with branch offices throughout
the U.S. and Canada. Many of these distributors have been selling our products
for over ten years. We believe that customer loyalty to the Power-One brand and
our wide range of standard products enhances our distribution network. Pioneer
Standard Electronics accounted for 15% and 12% of net sales in 1996 and 1997,
respectively. No other distributor accounted for more than 10% of our annual net
sales during the last three years. Pioneer has distributed our products for more
than ten years.

RESEARCH AND DEVELOPMENT/ENGINEERING

Our research and development group consists of 20 design teams and 118
full-time employees located in California, Massachusetts, Switzerland and
Ireland. We invested over 6% of our 1998 revenues in engineering. Our research
and development department primarily develops new standard power supply
products, as well as modifications and improvements for existing products.
Within our target markets, we strive to expand applications that use our power
supplies by approaching current and potential customers and discussing their
future product directions and requirements. We also direct a limited amount of
our engineering activities toward creating custom products. Additionally, we
focus our research activities on improving power conversion efficiency, reducing
product and component

35
<PAGE>
costs, improving manufacturability, reducing product size, and implementing new
manufacturing processes.

MANUFACTURING PROCESS AND QUALITY CONTROL

A typical power supply consists primarily of a printed circuit board,
electronic components, transformers and other electromagnetic components, and a
sheet metal chassis. Production of our power supplies entails the assembly of
structural hardware combined with a sophisticated assembly of circuit boards. In
response to market demands for increased quality and reliability, design
complexity, and sophisticated technology, we automated many electronic assembly
and testing processes which we previously performed manually. We also
standardized our manufacturing processes to utilize our resources efficiently
and optimize our capacities.

Our manufacturing process is designed to quickly produce a wide variety of
quality products at a low cost. We use many techniques such as cell-based
manufacturing, common componentry in our product designs and state-of-the-art
production equipment to achieve this goal. We recently purchased four new
surface mount technology, or SMT, assembly lines. We have already installed
three of these lines in our Mexico facility, and we expect the fourth to be
operational in our Dominican Republic facility by the end of September. These
SMT lines are capable of changeovers in under five minutes and up to 56,000
component placements per hour. SMT permits us to reduce board size by
eliminating the need for holes in the printed circuit boards and by allowing us
to use smaller components. We believe our substantial investment in SMT
technology will significantly increase throughput and capacity while also
increasing product quality.

Many of our customers and other end-users increasingly require that their
power supplies meet or exceed established international safety and quality
standards as their operations expand internationally. In response to this need,
we design and manufacture power supplies in accordance with the certification
requirements of many international agencies. These agencies include Underwriters
Laboratories (UL) in the U.S.; the Canadian Standards Association (CSA) in
Canada; Technischer Uberwachungs-Verein (TUV) and Verband Deutscher
Electrotechniker (VDE) in Germany; the British Approval Board for
Telecommunications (BABT) in the United Kingdom; and International
Electrotechnical Committee (IEC), a European standards organization.

Quality products and responsiveness to the customer's needs are of critical
importance in our efforts to compete successfully. Given their importance, we
emphasize quality and reliability in both the design and manufacture of our
products. In addition to testing throughout the design and manufacturing
process, we test and burn-in 100% of all products using automated equipment and
customer-approved processes. We perform an additional out-of-box test or
pre-ship audit on randomly selected units before shipment, further ensuring
manufacturing quality and integrity.

We manufacture and assemble our products primarily at our facilities in
Slovakia, the Dominican Republic, Mexico and Massachusetts. All of our
facilities are ISO 9000 certified. We are currently in the process of moving
much of our high volume IPD business to our lower cost facilities in Mexico and
the Dominican Republic and our high volume Melcher business to Slovakia, the
Dominican Republic and Mexico.

SUPPLIERS

We typically design products using components readily available from several
sources and attempt to minimize our use of components that we can obtain through
only one source. Raw materials are generally available in large quantities from
a number of different suppliers who provide electronic bonding and safety stock
programs to ensure availability. We have a number of volume purchase agreements,
or VPA's, with selected suppliers of key items such as wire, fuses, resistors,
connectors, capacitors, sheet metal and semiconductors. We use VPA's, which
typically have 12 to 18 month terms,

36
<PAGE>
to ensure that we have a constant source for required supplies. This practice
enables us to reduce inventory expense and produce substantial cost savings
through volume purchase discounts. We have not had a supply shortage that had a
material adverse effect on our business.

MANAGEMENT INFORMATION TECHNOLOGY

In April 1999, we installed an Oracle ERP system. The Oracle ERP system
enables us to better organize and share critical information for our management
team. The web-based system allows for the input and access of important
information from any location. The system is capable of supporting a much larger
business and will allow us to easily integrate future acquisitions into our
operations. The system is Year 2000 compliant, and although it is not fully
operational, we have already used it to close our second quarter financials for
1999.

BACKLOG

We sell our products pursuant to purchase orders rather than long-term
contracts. Backlog consists of purchase orders on-hand having delivery dates
scheduled within the next six months. The table below illustrates our backlog at
December 31, 1998, March 31, 1999 and June 30, 1999:

<TABLE>
<CAPTION>
DECEMBER 31, 1998 MARCH 31, 1999 JUNE 30, 1999
----------------- -------------- -------------
<S> <C> <C> <C>
Backlog........................... $ 26 million $ 42 million $ 63 million
</TABLE>

Customers may cancel or reschedule most deliveries without penalty. Our
backlog has historically been a reliable indicator of future financial results;
however, backlog may not be as reliable an indicator in the future as customers
switch more orders to just-in-time deliveries. As a result, backlog may decrease
even if sales increase.

37
<PAGE>
COMPETITION

The merchant power supply manufacturing industry is highly fragmented and
characterized by intense competition. As of October 1997, there were estimated
to be over 1,000 power supply manufacturers worldwide, including over 300 in
North America, of which approximately 200 had annual revenues of less than $5.0
million. No single company dominates the overall power supply market, and our
competitors vary depending upon the power range of the product. Our competition
includes companies located throughout the world including Artesyn, Astec and
Lucent. We believe that the principal bases of competition in our targeted
markets are breadth of product line, quality, reliability, technical knowledge,
flexibility, readily available products and a competitive price. In times of an
economic downturn, or when dealing with high volume orders, we believe that
price becomes a more important competitive factor. Moreover, we believe price
will become a more important competitive factor in the future as the power
supply industry consolidates, OEMs become larger and more entrants from Asia
begin to compete with us. Many of our competitors are larger than us, and they
may be able to obtain materials at significantly lower prices. Depending on the
location of our plants, we may not be able to procure materials at costs as low
as the materials costs of some of our competitors.

INTELLECTUAL PROPERTY MATTERS

We regard certain equipment, processes, information and knowledge that we
have developed and use to design and manufacture our products as proprietary. We
rely on a combination of trade secret and other intellectual property laws,
confidentiality agreements executed by most of our Camarillo employees and other
measures to protect our proprietary rights. We currently hold 20 issued patents,
most of which are protected in more than one country. The remaining terms of
these patents vary with the earliest expiring in 2003. We also have various
patents pending as well as nine trademarks.

EMPLOYEES

At June 30, 1999, we employed 2,971 employees at our facilities in the
following functions:

<TABLE>
<CAPTION>
NUMBER OF
CAPACITY EMPLOYEES
- ------------------------------------------------------------------------ -----------
<S> <C>
Manufacturing........................................................... 2,386
Engineering............................................................. 210
General and administrative.............................................. 151
Sales and marketing..................................................... 145
Quality assurance....................................................... 79
-----
Total............................................................... 2,971
-----
-----
</TABLE>

We believe that our continued success depends, in part, on our ability to
attract and retain qualified personnel. We consider our relations with our
employees to be good. None of our employees are represented by a union.

38
<PAGE>
FACILITIES

The table below lists the Company's principal manufacturing and research and
development facilities.

<TABLE>
<CAPTION>
APPROXIMATE SIZE
LOCATION (SQUARE FEET) EMPLOYEES PRIMARY ACTIVITY
- --------------------------------- ---------------- ---------- -----------------------------------------------
<S> <C> <C> <C>
San Luis, Mexico 110,000 956 Manufacturing and Assembly

Santo Domingo, Dominican Republic 100,000 931 Manufacturing and Assembly, Warehousing

Camarillo, California 98,000 219 Administration, Research and Development,
Manufacturing, Sheet Metal Fabrication,
Warehousing, Marketing and Sales

Boston, Massachusetts 60,000 444 Administration, Research and Development,
Manufacturing, Warehousing, Marketing and Sales

Uster, Switzerland 55,000 207 Administration, Research and Development,
Manufacturing, Warehousing, Marketing and Sales

Isabela, Puerto Rico 46,000 29 Sub-assembly

Dubnica Nad Vahom, Slovakia 36,000 120 Manufacturing and Assembly

Limerick, Ireland 10,000 19 Research and Development, Small-volume
Manufacturing and Assembly
</TABLE>

We own our facilities in Mexico, Massachusetts, Slovakia and one 29,000
square foot facility in Uster, Switzerland included in the facilities listed
above. We lease the rest of our facilities pursuant to lease agreements with
expiration dates through 2004 in North America and 2005 in Europe.

LEGAL PROCEEDINGS

We are involved in routine litigation arising in the ordinary course of our
business. In our opinion, none of the pending litigation matters will have a
material adverse effect on our consolidated financial condition or results of
operations.

39
<PAGE>
MANAGEMENT

The following is a list of our current directors and executive officers:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- --- ---------------------------------------------------------------------
<S> <C> <C>
Steven J. Goldman.................... 42 President, Chief Executive Officer and Chairman of the Board

Eddie K. Schnopp..................... 41 Sr. Vice President, Finance, Chief Financial Officer and Secretary

Dennis R. Roark...................... 52 Executive Vice President and Chief Technology Officer

Brad W. Godfrey...................... 39 Sr. Vice President, Operations

David J. Hage........................ 52 Sr. Vice President, Sales and Marketing

Dr. Hanspeter Brandli................ 60 Director

Jon E.M. Jacoby...................... 61 Director
</TABLE>

STEVEN J. GOLDMAN. Mr. Goldman, who joined us in 1982, became our President
and Chief Executive Officer in 1990 and was named Chairman of the Board in
February 1997. He received his B.S. degree in electrical engineering from the
University of Bridgeport and his M.B.A. degree from Pepperdine University's
Executive program. Mr. Goldman is a contributing member and Co-Membership
Chairman of the San Fernando Valley Chapter of the Young President's
Organization.

EDDIE K. SCHNOPP. Mr. Schnopp, who joined us in 1981, was appointed Vice
President of Finance and Logistics in 1993 and Secretary and Chief Financial
Officer in 1995. He was appointed Sr. Vice President, Finance, Chief Financial
Officer and Secretary in February 1999. He received his B.S. degree in
Accounting from California State University Northridge. Mr. Schnopp is married
to Ms. Koep.

DENNIS R. ROARK. Mr. Roark, who joined us in 1988, was appointed Executive
Vice President of the Company in 1990. He was appointed Chief Technology Officer
in February 1999. Before joining us, Mr. Roark co-owned and managed California
D.C. Power Supplies, Inc., a designer and manufacturer of power supplies. He
received his B.S. degree in Engineering from California Polytechnic University-
Pomona.

BRAD W. GODFREY. Mr. Godfrey, who joined us in 1988, was appointed Vice
President of Worldwide Manufacturing in 1993. He was appointed Sr. Vice
President, Operations in February 1999. Before joining us, Mr. Godfrey owned
Reflections Manufacturing, a furniture and glass manufacturing company in
Canada.

DAVID J. HAGE. Mr. Hage was appointed Vice President of Sales and Marketing
when he joined us in 1993. He was appointed Sr. Vice President, Sales and
Marketing in February 1999. Before joining us, Mr. Hage was the Executive Vice
President of Power Convertibles Corporation, a subsidiary of Burr/Brown, Inc.
His previous experience includes Marketing Manager of International Electric
Utility and Field Systems Support Manager at Honeywell, and Director of
Marketing Systems and Director of Marketing Planning at SGS-Thomson
Semiconductors. Mr. Hage received his B.S. degree in Electrical Engineering from
Northern Arizona University and his M.B.A. degree from Arizona State University.

DR. HANSPETER BRANDLI. Dr. Brandli, who became a director in 1998, is
Chairman of the Board of Danzas Holding Ltd. Since 1993, Dr. Brandli has owned
and operated HPB Management Services, a management services company. He received
a Diploma in Physics in 1963 from the Federal Institute of Technology (ETH) in
Zurich, Switzerland and Ph.D. in Physics from the University of
Berne/Switzerland in 1968. Dr. Brandli is also President of the Board of
Directors of Melcher Ltd., Uster, Domenic Melcher Ltd., Uster, Melcher Holding
Ltd., Cham, and Melcher Produktion Ltd., Cham, which are all subsidiaries of the
Company's subsidiary, Melcher Holding AG.

40
<PAGE>
JON E.M. JACOBY. Mr. Jacoby is a director and an Executive Vice President
of Stephens Group, Inc. Mr. Jacoby is a Senior Executive Vice President of
Stephens Inc., an affiliate of Stephens Group, Inc., where he has been employed
since 1963. He received his B.S. degree from the University of Notre Dame and
his M.B.A. from Harvard Business School. He is a director of Delta & Pine Land
Company and Beverly Enterprises, Inc.

41
<PAGE>
SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of our common stock by the selling stockholders immediately before
this offering and as adjusted to reflect their sales of our common stock
pursuant to this offering. The selling stockholders have provided us with all
information with respect to their beneficial ownership.

<TABLE>
<CAPTION>
OWNERSHIP
OF COMMON STOCK OWNERSHIP
PRIOR TO THE OF COMMON STOCK
OFFERING(2) NUMBER OF AFTER THE OFFERING(2)(3)
----------------------- SHARES ---------------------------
NUMBER PERCENTAGE OFFERED NUMBER PERCENTAGE
OWNER(1) OF SHARES OWNERSHIP HEREBY OF SHARES OF OWNERSHIP
- ------------------------------------------------ ---------- ----------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Voting Trust dated as of June 8, 1998 (4)....... 6,771,188 39.5 1,540,600 5,230,588 24.7
Steven J. Goldman (5)........................... 1,835,847 10.7 459,200 1,376,647 6.5
Eddie K. Schnopp (6)............................ 253,835 1.5 63,500 190,335 *
Dennis R. Roark................................. 528,775 3.1 132,200 396,575 1.9
David J. Hage................................... 535,511 3.1 133,900 401,611 1.9
Brad W. Godfrey (7)............................. 289,938 1.7 72,500 217,438 1.0
Donna Koep (8).................................. 154,849 * 38,700 116,149 *
All other selling stockholders.................. 237,609 1.4 59,400 178,209 *
</TABLE>

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

* Less than 1%.

(1) The address for each stockholder listed above is c/o the Company, 740 Calle
Plano, Camarillo, California 93012, except for the Voting Trust, whose
address is 111 Center Street, Little Rock, Arkansas 72201.

(2) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commisson and includes shares over which the
indicated beneficial owner exercises voting and/or investment power. Shares
of our common stock subject to options currently exercisable or exercisable
within 60 days are deemed outstanding for computing the percentage ownership
of the person holding the options but are not deemed outstanding for
computing the percentage ownership of any other person. This information is
based on 17,137,851 shares outstanding on July 30, 1999 and 21,137,851
shares outstanding after this offering.

(3) Assumes no exercise of the option that we have granted to the underwriters
to purchase an additional 975,000 shares.

42
<PAGE>
(4) Stephens Group, Inc. and certain of its shareholders, directors, officers
and related parties have contributed their shares to a voting trust pursuant
to which the trustee of the trust has sole voting power. The voting trust is
required to vote such shares "for" or "against" proposals submitted to our
stockholders in the same proportion as the votes cast "for" and "against"
such proposals by all other stockholders, excluding abstentions. Doug Martin
was previously a director of the company from September 1995 to April 1998.
Jon E.M. Jacoby is currently a director of the Company.

The following entities and individuals, who have contributed shares to
the voting trust, are selling stock in this offering:

<TABLE>
<CAPTION>
OWNERSHIP OWNERSHIP
OF COMMON STOCK NUMBER OF COMMON STOCK
PRIOR TO THE OFFERING OF AFTER THE OFFERING
-------------------------- SHARES --------------------------
NUMBER OF PERCENTAGE OFFERED NUMBER OF PERCENTAGE
SHARES OWNERSHIP HEREBY SHARES OWNERSHIP
----------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Stephens Group, Inc............................ 3,704,050 21.6% 860,400 2,843,650 13.5%
Jackson T. Stephens Trust One.................. 96,908 * 24,200 72,708 *
Bess C. Stephens Trust UID 1/4/85.............. 151,204 * 37,800 113,404 *
Warren & Harriet Stephens Children's Trust..... 120,679 * 20,700 99,979 *
Harriet Calhoun Stephens Trust UID 3/22/84..... 20,618 * 5,200 15,418 *
Elizabeth Ann Stephens Campbell Revocable
Trust........................................ 304,362 1.8% 76,100 228,262 1.1%
W. R. Stephens Jr. Revocable Trust............. 364,363 2.1% 91,100 273,263 1.3%
Jackson T. Stephens Grandchildrens Trust
AAAA......................................... 492,289 2.9% 123,100 369,189 1.7%
Pamela Diane Stephens Trust One UID 4/10/92.... 366,871 2.1% 91,700 275,171 1.3%
Warren Miles Amerine Stephens Trust UID
9/10/86...................................... 63,720 * 10,000 53,720 *
John Calhoun Stephens Trust UID 12/1/87........ 63,720 * 10,000 53,720 *
Laura Whitaker Stephens Trust UID 12/28/90..... 63,720 * 10,000 53,720 *
Coral Two Corporation.......................... 143,748 * 35,900 107,848 *
Coral Partners................................. 94,089 * 23,500 70,589 *
Jon E.M. Jacoby................................ 94,089 * 23,500 70,589 *
Jacoby Enterprises, Inc........................ 209,088 1.2% 52,300 156,788 *
J & J Partners................................. 52,272 * 13,100 39,172 *
Doug Martin.................................... 67,953 * 17,000 50,953 *
Rebecca Dickson................................ 20,000 * 5,000 15,000 *
Paula Ruffin................................... 20,000 * 5,000 15,000 *
Sarah Dickson.................................. 20,000 * 5,000 15,000 *
</TABLE>

(5) Includes 750 shares owned by Mr. Goldman's wife's mother. Mr. Goldman
disclaims beneficial ownership of these shares.

(6) Does not include 154,849 shares owned by Ms. Koep, who is married to Mr.
Schnopp, but does include 3,800 shares owned by a trust for the benefit of
Mr. Schnopp's children. Mr. Schnopp disclaims beneficial ownership of all of
these shares.

(7) Includes 1,750 shares owned by Mr. Godfrey's brother. Mr. Godfrey disclaims
beneficial ownership of these shares.

(8) Does not include 250,035 shares owned by Mr. Schnopp, who is married to Ms.
Koep. Ms. Koep is our Senior Vice President, Human Resources. Ms. Koep
disclaims beneficial ownership of these shares.

43
<PAGE>
UNDERWRITING

The underwriters named below, through their representatives, Stephens Inc.,
BancBoston Robertson Stephens Inc. and Thomas Weisel Partners LLC, have
severally agreed to purchase from us and the selling stockholders the following
respective number of shares of our common stock:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---------------------------------------------------------------------------------------------------- ------------
<S> <C>
Stephens Inc........................................................................................
BancBoston Robertson Stephens Inc...................................................................
Thomas Weisel Partners LLC..........................................................................

------------
Total...............................................................................................
------------
------------
</TABLE>

The underwriters propose to offer the shares of our common stock directly to
the public at the public offering price set forth on the cover page of this
prospectus, and to certain dealers at that 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
public offering of the shares, the underwriters may change the offering price
and other selling terms. The representatives of the underwriters have advised us
that the underwriters do not intend to confirm any shares to any accounts over
which they exercise discretionary authority.

The underwriting agreement makes the obligations of the underwriters subject
to conditions that we and the selling stockholders must satisfy, such as the
receipt of certificates, opinions and letters from us, the selling stockholders,
our counsel and our independent auditors. The underwriters are committed to
purchase all shares of common stock offered in this prospectus (other than those
covered by the over-allotment option described below) if any of those shares are
purchased.

The offering of the shares is made for delivery when, as and if accepted by
the underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.

OVER-ALLOTMENT OPTION. We have granted the underwriters an option,
exercisable within 30 days after the date of this prospectus, to purchase up to
975,000 additional shares of our common stock. To the extent that the
underwriters exercise this option, each underwriter is committed to purchase a
number of shares that reflects approximately the same percentage of total shares
that such underwriter purchased in the above table. We will be obligated to sell
shares to the underwriters to the extent the option is exercised. The
underwriters may exercise their option only to cover over-allotments made in
connection with the sale of common stock offered in this prospectus.

UNDERWRITING DISCOUNTS AND COMMISSIONS. The following table shows the per
share and total underwriting discounts and commissions that we and the selling
stockholders will pay to the underwriters. These amounts are shown assuming both
no exercise and full exercise of the underwriters' option to purchase 975,000
additional shares.

<TABLE>
<CAPTION>
PAID BY SELLING
PAID BY COMPANY STOCKHOLDERS
------------------------------------ -----------------
<S> <C> <C> <C>
NO EXERCISE FULL EXERCISE
----------------- -----------------
Per share................................................ $ $ $
----------------- ----------------- -----------------
Total.................................................... $ $ $
----------------- ----------------- -----------------
----------------- ----------------- -----------------
</TABLE>

44
<PAGE>
INDEMNITY. We and the selling stockholders have agreed to indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments the underwriters may be required
to make in respect thereof.

LOCK-UP AGREEMENTS. Our executive officers and directors and the selling
stockholders have agreed that they will not, without the underwriters' consent,
sell or otherwise dispose of any shares of our common stock during the 90-day
period following the effective date of the registration statement relating to
this prospectus. This prohibition on sales also applies to options and other
securities that may be exercised for or converted into our common stock. The
underwriters have the discretion, at any time and without notice, to release the
sale prohibitions in part or in whole.

PASSIVE MARKET MAKING. In general, the SEC's rules prohibit the
underwriters from making a market in our common stock during the "cooling off"
period immediately preceding the commencement of sales in the offering. The SEC
has, however, adopted exemptions from these rules that permit passive market
making. These exemptions allow an underwriter to continue to make a market
subject to the conditions, among others, that its bid not exceed the highest bid
by a market maker not connected with the offering and that its net purchases on
any one trading day not exceed prescribed limits. Certain of the underwriters
intend to rely on these exemptions to engage in passive market making in our
common stock during the cooling off period.

STABILIZATION. The underwriters may over-allot or effect transactions that
stabilize, maintain or otherwise affect the market price of our common stock at
levels above those which might otherwise prevail in the open market. This may be
done by entering stabilizing bids, effecting syndicate covering transactions or
imposing penalty bids. A stabilizing bid means placing a bid or making a
purchase for the purpose of pegging, fixing or maintaining the price of the
common stock. A syndicate covering transaction means placing a bid on behalf of
the underwriting syndicate or making a purchase to reduce a short position
created in connection with the offering. A penalty bid means an arrangement that
permits the underwriters to reclaim a selling concession from a syndicate member
in connection with the offering when shares of common stock sold by the
syndicate member are purchased in syndicate covering transactions. Such
transactions may be effected on the Nasdaq National Market, in the
over-the-counter market or otherwise. Such stabilizing, if commenced, may be
discontinued at any time.

QUALIFIED INDEPENDENT UNDERWRITER. Under Rule 2720 of the National
Association of Securities Dealers, Inc., or NASD, Stephens Group's ownership of
our common stock makes the Company an affiliate of Stephens Inc. Because of
this, the offering is being conducted in accordance with Rule 2720, which
provides that, among other things, when a NASD member participates in the
underwriting of an affiliate's equity securities, the initial public offering
price can be no higher than that recommended by a "qualified independent
underwriter" meeting certain standards. BancBoston Robertson Stephens Inc. has
served in the role of qualified independent underwriter for this offering and
has recommended a price in compliance with the requirements of Rule 2720.
BancBoston Robertson Stephens Inc. has performed due diligence investigations
and reviewed and participated in the preparation of the prospectus and the
related registration statement.

OTHER MATTERS. Stephens Inc., one of the representatives of the
underwriters, has previously provided financial advisory services to us,
including in connection with the Melcher and IPD acquisitions. We currently have
engaged Stephens Inc. to advise us concerning other potential acquisitions, and
Stephens Inc. may provide advisory or other investment banking services to us in
the future.

Thomas Weisel Partners LLC, one of the representative of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998, Thomas Weisel Partners LLC, has been named as a lead or co-manager on 49
filed public offerings of equity securities, of which 27 have been completed,
and has acted as a syndicate manager in an additional 20 public offerings of
equity securities. Thomas Weisel Partners LLC does not have any material
relationship with us or any of our officers, directors or controlling persons,
except its contractual relationship with us under the underwriting agreement.

45
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The following description summarizes the most important terms of our capital
stock. Because it is only a summary, it does not contain all of the information
that may be important to you. For a complete description, you should refer to
our Restated Certificate of Incorporation, or Certificate of Incorporation, and
Amended and Restated Bylaws, or Bylaws.

Our Certificate of Incorporation authorizes us to issue 60 million shares of
common stock and 30 million shares of preferred stock. We currently have
17,137,851 shares of common stock and no shares of preferred stock issued and
outstanding. No other classes of capital stock are authorized under our
Certificate of Incorporation. The issued and outstanding shares of common stock
are duly authorized, validly issued, fully paid and non-assessable.

COMMON STOCK

Each share of common stock is entitled to one vote on all matters submitted
to a vote of the stockholders. Holders of common stock may receive dividends
only when our Board of Directors declares them, but our credit agreement
prohibits us from paying dividends without obtaining prior approval. In certain
cases, common stockholders may not receive dividends until we have satisfied our
obligations to any preferred stockholders. If we liquidate, dissolve or wind-up
our business, either voluntarily or not, common stockholders will share equally
in the assets remaining after we pay our creditors and any preferred
stockholders. The common stock has no preemptive, conversion or other
subscription rights, and all outstanding shares are fully paid and
non-assessable.

PREFERRED STOCK

Our Board of Directors may issue shares of preferred stock at any time, in
one or more series, without stockholder approval. The Board of Directors will
determine the designation, relative rights, preferences and limitations of each
series of preferred stock. If we issue preferred stock, it could delay change in
control of the Company and make it harder to remove present management. Under
certain circumstances, preferred stock could also adversely affect the voting
power of common stockholders.

POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS

The Certificate of Incorporation has several provisions that may delay or
deter changes in control or management of the Company. The Certificate of
Incorporation establishes a classified Board and requires that any action
required or permitted to be taken by stockholders of the Company must be
effected at a duly called annual or special meeting of stockholders and may not
be effected by a consent in writing. In addition, the Certificate of
Incorporation and Bylaws require that stockholders give advance notice to the
Company's Secretary of any directorship nominations or other business to be
brought by stockholders at any stockholders' meeting. The Certificate of
Incorporation also requires the approval of 75% of the Company's voting stock to
amend certain provisions of the Certificate of Incorporation. These provisions
may have the effect of delaying changes in control or management of the Company,
deterring hostile takeovers or deferring or preventing a tender offer or
takeover attempt that a stockholder might consider to be in such stockholder's
best interest, including those attempts that might result in a premium over the
market price for the shares held by the stockholders.

CERTAIN PROVISIONS OF DELAWARE LAW

We are a Delaware corporation and are subject to Section 203 of the Delaware
General Corporations Law, or DGCL. In general, Section 203 prevents an
"interested stockholder" (defined generally as a person owning 15% or more of a
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined therein) with a Delaware corporation for three years
following the date such person became an interested stockholder, unless (i)
before such person became an interested

46
<PAGE>
stockholder, the Board of Directors of the corporation approved the transaction
in which the interested stockholder became an interested stockholder or approved
the business combination, (ii) upon consummation of the transaction that
resulted in the interested stockholder becoming an interested stockholder, the
interested stockholder owns at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding shares owned by
persons who are both officers and directors of the corporation and shares held
by certain employee stock ownership plans) or (iii) following the transaction in
which such person became an interested stockholder, the business combination is
approved by the Board of Directors of the corporation and authorized at a
meeting of stockholders by the affirmative vote of the holders of at least
two-thirds of the outstanding voting stock of the corporation not owned by the
interested stockholder.

LIMITATION OF LIABILITY AND INDEMNIFICATION AGREEMENTS

Our Certificate of Incorporation provides that to the fullest extent
permitted by the DGCL, our directors will not be liable to us or our
stockholders for monetary damages for breach of fiduciary duty as a director.
Under the DGCL, liability of a director may not be limited (i) for any breach of
the director's duty of loyalty to us or our stockholders, (ii) for acts or
omissions not in good faith or involving intentional misconduct or a knowing
violation of law, (iii) in respect of certain unlawful dividend payments or
stock redemptions or repurchases and (iv) for any transaction from which the
director derives an improper personal benefit. The effect of the provisions of
our Certificate of Incorporation is to eliminate the rights of the Company and
its stockholders (through stockholders' derivative suits on behalf of the
Company) to recover monetary damages against a director for breach of the
fiduciary duty of care as a director (including breaches resulting from
negligent or grossly negligent behavior), except in the situations described in
clauses (i) through (iv) above. This provision does not limit or eliminate the
rights of the Company or any stockholder to seek nonmonetary relief, such as an
injunction or rescission, in the event of a breach of a director's duty of care.
In addition, our Certificate of Incorporation provides that the Company shall
indemnify its directors, officers, employees and agents against losses incurred
by any such person because such person was acting in such capacity.

We have entered into indemnification agreements, with each of the directors,
executive officers and certain other officers of the Company pursuant to which
we have agreed to indemnify such director or officer from claims, liabilities,
damages, expenses, losses, costs, penalties or amounts paid in settlement
incurred by such director or officer in or arising out of his or her capacity as
a director, officer, employee and/or agent of the Company or any other
corporation of which such person is a director or officer at our request to the
maximum extent provided by applicable law. In addition, such director or officer
is entitled to an advance of expenses to the maximum extent authorized or
permitted by law.

To the extent that the Board of Directors or the stockholders of the Company
wish to limit or repeal our ability to provide indemnification as set forth in
the Certificate of Incorporation, such repeal or limitation may not be effective
as to directors and officers who are parties to the indemnification agreements,
because their rights to full protection would be contractually assured by the
indemnification agreements. It is anticipated that similar contracts may be
entered into, from time to time, with future directors of the Company.

TRANSFER AGENT OR REGISTRAR

The Transfer Agent and Registrar for our common stock is American Stock
Transfer & Trust Company.

47
<PAGE>
LEGAL MATTERS

O'Melveny & Myers LLP, Los Angeles, California, will pass upon the validity
of the common stock that we are offering. Wright, Lindsey & Jennings LLP, Little
Rock, Arkansas will pass upon certain legal matters for the underwriters.
Attorneys at O'Melveny & Myers LLP involved in this offering own 8,400 shares of
the Company's common stock.

EXPERTS

The financial statements and the related financial statement schedule
incorporated in this prospectus by reference from the Company's Annual Report on
Form 10-K for the year ended December 31, 1998 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and such financial statements have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms at 450 Fifth Street, N.W., in Washington, D.C.,
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. You may also obtain our SEC filings from the SEC's
Website at "http://www.sec.gov."

The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. Statements made in this prospectus as to the contents of
any contract, agreement or other document are not necessarily complete, and, in
each instance, we refer you to the copy of such document filed as an exhibit to
the registration statement or otherwise filed with the SEC. The information
incorporated by reference is considered to be part of this prospectus. When we
file information with the SEC in the future, that information will automatically
update and supersede this information. We incorporate by reference the documents
listed below and any future filings we will make with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities and Exchange Act of 1934:

1. Annual Report on Form 10-K for the fiscal year ended December 27, 1998;

2. Quarterly Reports on Form 10-Q for the quarters ended March 28, 1999 and
June 27, 1999;

3. Current Reports on Form 8-K and Form 8-K/A dated January 29, 1999; and

4. Current Reports on Form 8-K and Form 8-K/A dated August 31, 1998.

You may request a copy of these filings, at no cost, by writing or
telephoning our transfer agent at the following address:

American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10065
(212) 936-5100

48
<PAGE>
[Picture of Various Power-One Products]
<PAGE>
[LOGO]

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

PROSPECTUS

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

STEPHENS INC.
BANCBOSTON ROBERTSON STEPHENS
THOMAS WEISEL PARTNERS LLC
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, incurred by the Company in connection
with the sale and distribution of common stock being registered. All amounts are
estimates except the SEC registration fee and the NASD fee.

<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
-----------
<S> <C>
SEC registration fee........................................................................ $ 52,538
NASD fee.................................................................................... 19,398
Listing fee on NASDAQ....................................................................... 17,500
Printing and engraving expenses............................................................. *
Legal fees and expenses..................................................................... *
Accounting fees and expenses................................................................ *
Blue Sky qualification fees and expenses.................................................... *
Transfer Agent and Registrar fees........................................................... *
Miscellaneous fees and expenses............................................................. *
-----------
Total................................................................................... $ *
-----------
-----------
</TABLE>

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

* To be provided by Amendment.

The selling stockholders will bear the underwriting discounts and
commissions attributable to the shares sold by them in this offering, as well as
their pro rata portion of the SEC and NASD fees.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's Certificate of Incorporation provides that to the fullest
extent permitted by the DGCL, a director of the Company shall not be liable to
the Company or its stockholders for monetary damages for breach of fiduciary
duty as a director. Under the DGCL, liability of a director may not be limited
(i) for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases and (iv)
for any transaction from which the director derives an improper personal
benefit. The effect of the provisions of the Company's Certificate of
Incorporation is to eliminate the rights of the Company and its stockholders
(through stockholders' derivative suits on behalf of the Company) to recover
monetary damages against a director for breach of the fiduciary duty of care as
a director (including breaches resulting from negligent or grossly negligent
behavior), except in the situations described in clauses (i) through (iv) above.
This provision does not limit or eliminate the rights of the Company or any
stockholder to seek nonmonetary relief, such as an injunction or rescission, in
the event of a breach of a director's duty of care. In addition, the Company's
Certificate of Incorporation provides that the Company shall indemnify its
directors, officers, employees and agents against losses incurred by any such
person because such person was acting in such capacity.

The Company has entered into agreements (the "Indemnification Agreements")
with each of the directors and officers of the Company pursuant to which the
Company has agreed to indemnify such director or officer from claims,
liabilities, damages, expenses, losses, costs, penalties or amounts paid in
settlement incurred by such director or officer in or arising out of such
person's capacity as a director, officer, employee and/or agent of the Company
or any other corporation of which such person is a director or officer at the
request of the Company to the maximum extent provided by applicable law.

II-1
<PAGE>
In addition, such director or officer is entitled to an advance of expenses to
the maximum extent authorized or permitted by law.

To the extent that the Board of Directors or the stockholders of the Company
wish to limit or repeal the ability of the Company to provide indemnification as
set forth in the Company's Certificate of Incorporation, such repeal or
limitation may not be effective as to directors and officers who are parties to
the Indemnification Agreements, because their rights to full protection would be
contractually assured by the Indemnification Agreements. It is anticipated that
similar contracts may be entered into, from time to time, with future directors
of the Company.

The Form of Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Company and
its directors and officers for certain liabilities arising under the Securities
Act or otherwise.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement
5.1* Opinion of O'Melveny & Myers LLP
23.1 Independent Auditor's Consent
23.2* Consent of O'Melveny & Myers LLP (included in Exhibit 5.1)
24.1 Power of Attorney (see page S-1)
</TABLE>

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

* To be filed by Amendment

ITEM 17. UNDERTAKINGS

(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933 (the "Securities
Act") each filing of the Registrant's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
Registration Statement 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.

(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant 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 hereunder, the Registrant 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 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.

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon

II-2
<PAGE>
Rule 430A and contained in a form of Prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or Rule 497(h) under the Securities 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 Securities
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-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Camarillo, State of California on the 2nd day of
August, 1999.

<TABLE>
<S> <C> <C>
POWER-ONE, INC.

By: /s/ STEVEN J. GOLDMAN
-----------------------------------------
Steven J. Goldman
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Steven J. Goldman and Eddie K. Schnopp,
and each of them acting individually, as his attorney in fact and agent, each
with full power of substitution, for him in any and all capacities, to sign any
and all amendments to this Registration Statement (including post-effective
amendments), and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them or their substitutes, may lawfully
do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated

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

<C> <S> <C>
President, Chief Executive
/s/ STEVEN J. GOLDMAN Officer and Chairman
- ------------------------------ (Principal Executive August 2, 1999
Steven J. Goldman Officer)

Senior Vice President -
/s/ EDDIE K. SCHNOPP Finance, Chief Financial
- ------------------------------ Officer and Secretary August 2, 1999
Eddie K. Schnopp (Principal Financial and
Accounting Officer)

/s/ JON E.M. JACOBY
- ------------------------------ Director August 2, 1999
Jon E.M. Jacoby

/s/ HANSPETER BRANDLI
- ------------------------------ Director August 2, 1999
Hanspeter Brandli
</TABLE>

II-4
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement

5.1* Opinion of O'Melveny & Myers LLP

23.1 Independent Auditor's Consent

23.2* Consent of O'Melveny & Myers LLP (included in Exhibit 5.1)

24.1 Power of Attorney (see page S-1)
</TABLE>

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

*To be filed by Amendment

<PAGE>
EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in this Registration Statement of
Power-One, Inc. on Form S-3 of our report dated February 26, 1999, appearing in
the Annual Report on Form 10-K of Power-One, Inc. for the year ended December
31, 1998 and to the reference to us under the headings "Selected Consolidated
Financial and Operating Data" and "Experts" in the Prospectus, which is part of
this Registration Statement.

DELOITTE & TOUCHE LLP

Los Angeles, California
August 2, 1999