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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

OR

Commission File Number 000-21507

POWERWAVE TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

1801 E. St. Andrew Place, Santa Ana, CA 92705

(Address of principal executive offices, zip code)

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

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par Value $.0001

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the Registrant is an accelerated filer as defined in Rule 12b-2 of the Securities Exchange Act of 1934. Yes x No ¨

As of June 30, 2002, the aggregate market value of the voting stock of the Registrant held by non-affiliates of the Registrant was $591,567,300 computed using the closing price of $9.16 per share of Common Stock on June 28, 2002, the last trading day of the second quarter, as reported by Nasdaq, based on the assumption that directors and officers and more than 10% stockholders are affiliates. As of February 13, 2003 the number of outstanding shares of Common Stock, par value $.0001 per share, of the Registrant was 65,968,329.

DOCUMENTS INCORPORATED BY REFERENCE

Information required by Part III is incorporated by reference to portions of the Registrant’s Proxy Statement for the fiscal 2002 Annual Meeting of Stockholders which will be filed with the Securities and Exchange Commission within 120 days after the close of the 2002 fiscal year.

POWERWAVE TECHNOLOGIES, INC.

INDEX

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CAUTIONARY STATEMENT RELATED TO FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K includes certain forward-looking statements as defined within Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, relating to revenue, revenue composition, demand and pricing trends, future expense levels, trends in average selling prices and gross margins, the transfer of certain manufacturing operations to contract manufacturers, the timing of and demand for 3G products and the level of expected capital and research and development expenditures. Such forward-looking statements are based on the beliefs of, estimates made by, and information currently available to Powerwave’s management and are subject to certain risks, uncertainties and assumptions. Any statements contained herein (including without limitation statements to the effect that the Company or management “estimates,” “expects,” “anticipates,” “plans,” “believes,” “projects,” “continues,” “may,” “will,” “could,” or “would” or statements concerning “potential” or “opportunity” or variations thereof or comparable terminology or the negative thereof) that are not statements of historical fact should be construed as forward-looking statements. The actual results of Powerwave Technologies, Inc. may vary materially from those expected or anticipated in these forward-looking statements. The realization of such forward-looking statements may be impacted by certain important unanticipated factors including those discussed in “Additional Factors That May Affect Our Future Results” under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” at pages 12-38. Because of these and other factors that may affect Powerwave’s operating results, past performance should not be considered as an indicator of future performance and investors should not use historical results to anticipate results or trends in future periods. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Readers should carefully review the risk factors described in this and other documents that Powerwave files from time to time with the Securities and Exchange Commission (“SEC”), including subsequent Current Reports on Form 8-K, Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.

HOW TO OBTAIN POWERWAVE SEC FILINGS

All reports filed by the Company with the SEC are available free of charge via EDGAR through the SEC website at www.sec.gov. In addition, the public may read and copy materials filed by the Company with the SEC at the SEC’s public reference room located at 450 Fifth St., N.W., Washington, D.C., 20549. The Company also provides copies of its Forms 8-K, 10-K, 10-Q, Proxy and Annual Report at no charge to investors upon request and makes electronic copies of such reports available through its website at www.powerwave.com/investor.html as soon as reasonably practicable after filing such material with the SEC.

PART I

ITEM 1.    BUSINESS

General

Powerwave Technologies, Inc. (“Powerwave” or the “Company” or “our” or “we”) was incorporated in Delaware in January 1985 under the name Milcom International, Inc. We changed our name to Powerwave Technologies, Inc. in June 1996. Powerwave designs, manufactures and markets ultra-linear radio frequency (“RF”) power amplifiers for use in the wireless communications market. RF power amplifiers, which are key components of wireless communications networks, increase the signal strength of wireless transmissions from the base station to the handset while reducing interference, or “noise.” Less noise enables wireless service providers to deliver clearer call connections and reduces the number of interrupted or dropped calls.

Powerwave manufactures both single and multi-carrier RF power amplifiers for a variety of frequency ranges and transmission protocols. Single carrier RF power amplifiers (“SCPA”) typically amplify a specific radio channel. Multi-carrier RF power amplifiers (“MCPA”) are capable of amplifying several radio channels at one time by integrating the functions of several SCPA units and cavity filters within a single MCPA unit. Powerwave’s products are currently being utilized in wireless networks operating in the 800-1000 megahertz (MHz), 1800-2000 MHz and over 2000 MHz frequency ranges. Our products support a wide range of transmission protocols including analog protocols such as AMPS and TACS and digital protocols such as CDMA, TDMA, and GSM. We also have

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developed and introduced RF power amplifiers for third generation (“3G”) transmission protocols such as UMTS, W-CDMA and cdma2000.

We believe that our future success depends upon continued growth in demand for wireless services as well as our ability to broaden our customer base. For the fiscal year ended December 29, 2002 (“fiscal 2002”), our largest customer was Nortel Networks Corporation and related entities (“Nortel”), which accounted for approximately 49% of our net sales. Our next two largest customers (in alphabetical order) for fiscal 2002, Cingular Wireless, and Nokia Telecommunications Inc. (“Nokia”), each accounted for 10% or more of our net sales. The loss of any one of these customers, or a significant loss, reduction or rescheduling of orders from any of our customers would have a material adverse effect on our business, results of operations and financial condition. See “Additional Factors That May Affect Future Results—We rely upon a few customers for a significant amount of our revenues…; — Our success is tied to the growth of the wireless services market; and —There are many risks associated with international operations…” under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

A limited number of large original equipment manufacturers (“OEMs”) account for a majority of RF power amplifier purchasers in the wireless equipment market, and our future success is dependent upon our ability to establish and maintain relationships with these types of customers. While we regularly attempt to expand our customer base, we cannot give any assurance that a major customer will not reduce, delay or eliminate its purchases from us. We have previously experienced significant reductions in demand from customers, such as the significant reductions in demand from Nortel during fiscal 2001 as compared to fiscal 2000. That reduction in demand, coupled with the industry-wide reduction in demand during fiscal 2001, had an adverse effect on our business and results of operations. During the second half of fiscal 2002, we experienced significant reductions in demand in connection with what we believe to be a renewed industry-wide reduction in demand that had an adverse impact on our business and results of operations in the third and fourth quarters of fiscal 2002. Any future reductions in demand by any of our major customers would have a material adverse effect on our business, results of operations and financial condition. See “Additional Factors That May Affect Future Results— “We rely upon a few customers for a significant amount of our revenues…” under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We have experienced, and expect to continue to experience, declining average sales prices for both our multi-carrier and single carrier amplifier products. Consolidation among wireless service providers has enabled such companies to place increased pricing pressure on wireless infrastructure manufacturers, which in turn has resulted in downward pricing pressure on our products. In addition, ongoing competitive pressures in the RF power amplifier market have put pressure on us to continually reduce the sales price of our products. Consequently, we believe that our gross margins will decline over time and that in order to maintain or improve our gross margins, we must achieve manufacturing cost reductions and develop new products that incorporate advanced features that may generate higher gross margins. See “Additional Factors That May Affect Future Results—We rely upon a few customers for a significant amount of our revenues…; —Our success is tied to the growth of the wireless services market…; —Our average sales prices have declined…; and —There are many risks associated with international operations…” under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Significant Business Developments in Fiscal 2002

On July 26, 2002, Powerwave announced a strategic alliance with Filtronic plc to jointly develop and supply integrated RF power amplifier and RF conditioning unit solutions for the 3G wireless infrastructure base station market. The goal of this alliance is to combine the RF amplifier design resources of Powerwave with the RF conditioning expertise of Filtronic plc in order to offer OEM customers a single source for high performance integrated RF products for 3G wireless networks.

During the fourth quarter of fiscal 2002, we announced that we had started to utilize one of Celestica Corporation’s (“Celestica”) mainland China facilities for outsourced production of complete single carrier RF amplifier products for delivery to the Chinese market. This marked the first time that Powerwave has utilized a contract manufacturer for a complete product build of one of its RF amplifier products.

Industry Segments and Geographic Information

Powerwave currently operates in one industry segment: the design, manufacture and marketing of RF power amplifiers for use in wireless communication networks. We currently market our products through our own internal sales force as well as independent sales representatives and resellers. For the purposes of Statement of Financial Accounting Standards No. 131, Disclosures About Segments of an Enterprise and Related Information, we have

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provided a breakdown of our sales in Note 18 of the “Notes to Consolidated Financial Statements” under Item 8, “Financial Statements and Supplementary Data.” Utilizing the management approach, we have broken down our sales based upon the RF frequency in which the product is utilized, i.e. 800-1000 MHz commonly referred to as “Cellular”, 1800-2000 MHz, commonly referred to as “PCS” and over 2000 MHz, which includes third generation (“3G”) frequency bands. A summary of our sales by geographic region is incorporated herein by reference to Note 18 of the “Notes to Consolidated Financial Statements” under Item 8, “Financial Statements and Supplementary Data.”

Business Strategy

Powerwave’s strategy is to become the leading supplier of advanced RF power amplifier solutions to the wireless communications industry and includes the following key elements:

Our focus on RF power amplifier technology and the experience we have gained through the implementation of our products in both analog and digital wireless networks throughout the world has enabled us to develop substantial expertise in both multi-carrier and single carrier RF power amplifier technology. We intend to continue to research and develop new methods to improve RF power amplifier performance, including efforts to support future generation transmission standards. We believe that both our existing products and new products under development will enable us to continue to expand our customer base by offering a broad range of products at attractive price points to meet the diverse requirements of wireless OEMs and network operators. We also intend to leverage our product lines in an attempt to expand our relationships with our existing customers and to add new customers. Powerwave has developed the ability to manufacture both multi-carrier and single carrier RF power amplifiers in a standard, repeatable manner, which allows for increased production levels. We believe that we are able to respond quickly and cost-effectively to new transmission protocols and design specifications by obtaining components from numerous leading technology companies. We also believe that our focus on the manufacturability of our RF power amplifier designs should help us to increase our manufacturing productivity while reducing our product costs. We believe that this ability to offer a broad range of products represents a competitive advantage over other third-party manufacturers of RF power amplifiers.

If we are unsuccessful in designing new products, improving existing products or reducing the costs of our products, our inability to meet these objectives would have a negative effect on our gross profit margins, business, results of operations and financial condition. In addition, if our outstanding customer orders were to be significantly reduced, the resulting loss of purchasing volume would also adversely affect our cost competitive advantage, which would negatively affect our gross profit margins, business, results of operations and financial condition. See “Additional Factors That May Affect Future Results— Our average sales prices have declined…; and —We may fail to develop products that are sufficiently manufacturable” under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Markets

Powerwave provides RF power amplifiers that are generally located in wireless base stations and work to increase the signal strength of outgoing transmissions. Our single carrier and multi-carrier RF power amplifiers work in base stations with a variety of other sophisticated electronic equipment, including receivers, radios and oscillators.

Wireless networks typically utilize a number of base stations with high power antennas to serve a geographical region. Each region is broken down into a number of smaller geographical areas, or “cells.” Each cell has its own base station that uses wireless technology to receive and transmit calls via base stations and the wireline public switched telephone network. Cellular networks typically operate within the 800 and 900 MHz bandwidths of the radio spectrum and utilize either analog or digital protocols. PCS networks operate in a substantially similar manner as cellular networks, except that PCS networks typically operate at 1800 and 1900 MHz bandwidths and utilize only digital transmission protocols. Third generation networks typically operate in the over 2000 MHz range

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utilizing only digital transmissions. Transmissions at the higher frequencies utilized by PCS and 3G networks have shorter transmission waves as compared to cellular frequency transmissions, which tends to limit the distances transmissions can travel without significant degradation. Lower frequency signals penetrate into buildings and other obstacles better than higher frequency signals. Therefore, wireless networks operating at high frequency ranges may require smaller operating cells and more base stations than existing cellular networks to cover the same total geographic area.

In analog cellular networks, each base station is allocated a certain number of frequency channels, each of which can carry only one call at a time. Originally, cellular base stations in analog networks used single carrier RF power amplifiers for each frequency channel allocated to the cell. With the use of MCPA technology, transmission signals can be amplified simultaneously through a single multi-carrier RF power amplifier that allows for the simultaneous amplification of all channels within a base station. Multi-carrier RF power amplifiers require significantly higher linearity than do single carrier designs, but do not require separate, high-maintenance, tunable cavity filters. By eliminating the need for cavity filters for each channel, multi-carrier RF power amplifiers reduce overall deployment and maintenance costs associated with base stations. Many service providers still require additional capacity to serve the increased flow of transmissions through their networks. This has led many service providers to move from analog networks to digital networks.

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

Products

Powerwave offers both single and multi-carrier RF power amplifiers for use in cellular networks, including ultra-linear multi-carrier RF power amplifiers for CDMA, cdma2000, TDMA and GSM digital cellular systems as well as analog systems utilizing AMPS and TACS protocols. We also offer both single and multi-carrier RF power amplifiers for use in PCS networks that operate in the international DCS-1800 frequency (1800 MHz) and the United States PCS band at 1900 MHz and multi-carrier RF power amplifiers for UMTS networks (3G) operating at 2100 MHz. Typical system applications include CDMA, cdma 2000, W-CDMA, TDMA, and GSM protocols with output power ranging from 5 to 180 Watts (W).

Our ultra-linear multi-carrier RF power amplifiers generally utilize feedforward technology, and typically employ pre-distortion techniques. Our multi-carrier designs also utilize an actively switched output combiner (3 or 4 way), which allows any number of RF power amplifiers to be “hot-swapped”, or interchanged, without a significant loss of power. This design also allows for true cold standby switching of a standby RF power amplifier, thereby providing network operators with a backup redundancy solution for even greater reliability. These RF power amplifiers are designed to typically be installed in racks of three or four RF power amplifiers. Smart combiner paralleling units allow for both higher power as well as system redundancy, which is the ability of the system to remain operational in the event of the failure of one or more of the paralleled RF power amplifiers.

We offer various versions of our multi-carrier RF power amplifiers providing from 25W to 180W of average power with maximum distortion of up to -65dBc or better. Up to four units can be combined in parallel utilizing our fully redundant smart combiner racks for various effective average power ratings.

We also offer single carrier RF power amplifiers for GSM, CDMA and TDMA operating systems. Products are available in a wide range of RF output levels. These products are available in versions ranging from complete stand-alone units to highly integrated RF power amplifiers for tower-top applications.

Our multi-carrier RF power amplifiers range in price from approximately $2,000 to over $11,000 per RF power amplifier, based upon the specification requirements. Our single carrier RF power amplifiers range in price from approximately $500 to $3,000 per RF power amplifier, depending upon product type and specifications. We also sell rack systems, cabinets and combiners for multiple RF power amplifiers, ranging in price from approximately $400 to over $100,000, depending upon specifications.

Customers

We sell our products to customers worldwide, including a variety of wireless OEMs, such as LM Ericsson Telephone Company (“Ericsson”), LG Information & Communications, Ltd. (“LGIC”), Lucent Technologies, Inc. (“Lucent”), Motorola Corporation (“Motorola”), Nokia, Nortel and Samsung Electronics Co. Ltd. (“Samsung”). We

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also sell our products to operators of wireless networks, such as ALLTEL Corporation, AT&T Wireless Services (“AT&T Wireless”), Cingular Wireless and Verizon Wireless.

For the fiscal year ended December 29, 2002, our largest customer, Nortel, accounted for approximately 49% of our net sales. Our next two largest customers (in alphabetical order) for fiscal 2002, Cingular Wireless and Nokia, each accounted for 10% or more of our net sales. The loss of any one of these customers, or a significant loss, reduction or rescheduling of orders from any of our customers, would have a material adverse effect on our business, results of operations and financial condition. See “Additional Factors That May Affect Future Results—We rely upon a few customers for a significant amount of our revenues…; —Our success is tied to the growth of the wireless services market…; and —There are many risks associated with international operations…” under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Marketing and Distribution, International Sales

We sell our products through a highly technical direct sales force and through independent sales representatives. Direct sales personnel are assigned to geographic territories and, in addition to sales responsibilities, manage networks of independent sales representatives. We utilize a network of independent sales representatives selected for their familiarity with our potential customers and their knowledge of the wireless infrastructure equipment market. Both our direct sales personnel and independent sales representatives generate product sales, provide product and customer service, and provide customer feedback for product development. In addition, our sales personnel and independent sales representatives receive support from our marketing, product support and customer service departments.

Our marketing efforts are focused on establishing and developing long-term relationships with potential customers. Sales cycles for certain of our products, particularly our base station RF power amplifiers, are lengthy, typically ranging from six to eighteen months. Our customers typically conduct significant technical evaluations of our products before making purchase commitments. In addition, as is customary in the industry, sales are made through standard purchase orders that can be subject to cancellation, postponement or other types of delays. While certain customers provide us with estimated forecasts of their future requirements, they are not typically bound by such forecasts.

International sales (excluding North American sales) of our products amounted to approximately 33%, 41%, and 21% of net sales for the years ended December 29, 2002, December 30, 2001, December 31, 2000, respectively. Foreign sales of some of our products may be subject to national security and export regulations and may require us to obtain a permit or license. In recent years, we have not experienced any significant difficulties in obtaining required permits or licenses. International sales also subject us to risks related to political upheaval and economic downturns in foreign countries and regions, such as the economic downturn in the South Korean and Asian markets in fiscal 1998 and the Brazilian market during 1999. Since our foreign customers typically pay for our products with U.S. Dollars, a strengthening of the U.S. Dollar as compared to a foreign customer’s local currency effectively increases the cost of our products for that customer, thereby making our products less attractive to such customers. See “Additional Factors That May Affect Future Results—There are many risks associated with international operations…” under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Service and Warranty

We offer warranties of various lengths which differ by customer and product type and typically cover defects in materials and workmanship. We perform warranty obligations and other maintenance services for our products at our facilities in Southern California and we currently utilize our South Korean sales representative to provide service and support for the Asian region.

Product Development

We invest significant resources in the research and development of new methods to improve amplifier performance, including reduced noise and increased power in the RF amplification process. We also invest significant resources in the development of new amplifier products to support new transmission protocols, including EDGE and third generation protocols such as W-CDMA and cdma2000. Our development efforts also seek to reduce the cost and increase the manufacturing efficiency of both new and existing products. In an effort to strengthen our research and development skills, we acquired Toracomm Limited in December 2001. This acquisition added a total of 23 employees, 19 of which were engineers. Our total research and development staff consisted of 228 people as of December 29, 2002. Expenditures for research and development amounted to approximately $33.1 million in 2002, $34.8 million in 2001, and $41.1 million in 2000. See “Additional Factors

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That May Affect Future Results—The wireless communications infrastructure equipment industry is extremely competitive; and —If we are unable to hire and retain highly qualified technical and management personnel…” under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Competition

The wireless communications infrastructure equipment industry is extremely competitive and is characterized by rapid technological change, new product development, rapid product obsolescence, evolving industry standards and significant price erosion over the life of a product. Our products compete on the basis of the following key characteristics: performance, functionality, reliability, pricing, quality, designs that can be efficiently manufactured in large volumes, time-to-market delivery capabilities and compliance with industry standards. While we believe that we compete favorably with respect to the foregoing characteristics, there can be no assurance that we will be able to continue to do so.

Our current competitors include Allen Telecom, Inc., Andrew Corporation, Fujitsu Limited, Hitachi Kokusai Electric Inc., Japan Radio Co., Ltd., Mitsubishi Electric Corporation and Remec, Inc. We also compete with a number of other foreign and privately held companies throughout the world, the subsidiaries of certain multinational corporations and, more importantly, the captive amplifier design and manufacturing operations within certain leading wireless infrastructure OEMs such as Ericsson, Motorola, Nokia, Nortel and Samsung. Some competitors have significantly greater financial, technical, manufacturing, sales, marketing and other resources than Powerwave and have achieved greater name recognition for their existing products and technologies than we have. We cannot guarantee that we will be able to successfully increase our market penetration or our overall share of the RF amplifier marketplace. Our results of operations could be adversely impacted if we are unable to effectively increase our share of the RF amplifier marketplace.

Powerwave’s success depends in large part upon the rate at which wireless infrastructure OEMs incorporate our products into their systems. We believe that a substantial portion of the present worldwide production of RF power amplifiers is captive within the internal manufacturing operations of a small number of leading wireless infrastructure manufacturers such as Ericsson, Motorola, Nokia and Samsung. In addition, most large wireless infrastructure OEMs maintain internal amplifier design capabilities that may compete with our products and our own designs. Some of these OEMs regularly evaluate whether to design and/or manufacture their own RF power amplifiers rather than purchase them from third-party vendors such as Powerwave. During 2000, Ericsson purchased Microwave Power Devices, Inc., one of our competitors. Any potential reduction in business from our OEM customers could have a negative impact on our business, financial condition and results of operations. In addition, various companies could also directly compete with Powerwave by selling their RF power amplifiers and /or their designs to other manufacturers and operators, including our customers. In the third quarter of 2001, Lucent announced that they had sold their internal power amplifier group to a new private entity called Celiant Corporation. During the second quarter of 2002, Andrew Corporation, a competitor, acquired Celiant Corporation. We cannot predict the ultimate impact that these or similar transactions will have on our business. If we are not successful in increasing the use of our products by the leading wireless infrastructure OEMs, there will be a material adverse effect on our business, financial condition and results of operations. See “Additional Factors That May Affect Future Results—Many wireless infrastructure manufacturers have internal RF production capabilities; and —The wireless communications infrastructure equipment industry is extremely competitive” under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We have experienced significant price competition and we expect price competition in the sale of RF power amplifiers to increase. No assurance can be given that our competitors will not develop new technologies or enhancements to existing products or introduce new products that will offer superior price or performance features. We expect our competitors to offer new and existing products at prices necessary to gain or retain market share. Certain of our competitors have substantial financial resources which may enable them to withstand sustained price competition or a market downturn better than us. There can be no assurance that we will be able to compete successfully in the pricing of our products, or otherwise, in the future. See “Additional Factors That May Affect Future Results—Our average sales prices have declined…” under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Backlog

Our six-month backlog of orders was approximately $46.4 million on December 29, 2002 compared to approximately $134.1 million on December 30, 2001. We include in our reported backlog only the accepted product purchase orders with respect to which a delivery schedule has been specified for product shipment within six months. The significant reduction in our reported six-month backlog at December 29, 2002 reflects reductions in demand forecasts by several large OEMs as well as delays in receiving new purchase orders from our largest

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customer. Previously, we had received annual blanket purchase orders from such customer covering an entire year. Effective for 2003, the majority of this customer’s operating units have begun to place separate purchase orders for monthly demand expectations, thereby reducing our reported six-month backlog number at any specific point in time.

Product orders in our backlog are frequently subject to changes in delivery schedules or to cancellation at the option of the purchaser without significant penalty. While we regularly review our backlog of orders to ensure that it adequately reflects product orders expected to be shipped within a six-month period, we cannot make any guarantee that such orders will actually be shipped or that such orders will not be cancelled in the future. We make regular adjustments to our backlog as customer delivery schedules change and in response to changes in our production schedule. Accordingly, we stress that backlog as of any particular date should not be considered a reliable indicator of sales for any future period and our revenues in any given period may depend substantially on orders booked in that period.

Manufacturing and Suppliers

Our manufacturing process involves the assembly of numerous individual components and precise fine-tuning by production technicians. The parts and materials used by us consist primarily of printed circuit boards, specialized subassemblies, fabricated housings, relays, and small electric circuit components, such as integrated circuits, semiconductors, resistors and capacitors. The majority of our subassemblies and all printed circuit boards are made by third party contractors to our specifications and are generally delivered to us for final assembly, testing, and tuning in the completed product.

Our manufacturing, production and design operations are ISO 9001 and TL-9000 certified. Numerous customers and potential customers throughout the world, particularly in Europe, require that their suppliers be ISO certified. In addition, many such customers require that their suppliers purchase components only from subcontractors that are ISO certified.

We currently procure, and expect to continue to procure, certain components from single source manufacturers due to unique component designs, as well as certain quality and performance requirements. In addition, in order to take advantage of volume pricing discounts, we purchase certain customized components from single sources. We have experienced, and may in the future experience, shortages of single-source components. In such event, we may have to make adjustments to both product designs and production schedules which could result in delays in production and delivery of products. Such delays could have an adverse effect on our operating results and financial condition. See “Additional Factors That May Affect Future Results—We depend on single sources for key components...” under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

In the third quarter of fiscal 2002, we began utilizing Celestica as a contract manufacturer and supplier for our manufacturing operations, sourcing materials from one of Celestica’s facilities in mainland China. This facility is ISO 9001 and TL-9000 certified. During the fourth quarter of fiscal 2002, we began to transfer certain power amplifier manufacturing lines to the Celestica facility in mainland China with the intention of transferring complete production build responsibilities to Celestica for certain product lines. We currently anticipate that we will continue this process during fiscal year 2003. While we utilize several contract manufacturers for various aspects of our production process, Celestica is currently the only contract manufacturer we use for complete product builds. We anticipate that we may bring up an additional external contract manufacturer for complete product builds during fiscal 2003. We utilize contract manufacturing to decrease our manufacturing overhead and material costs, to increase flexibility to respond to fluctuations in product demand and to leverage the strengths of the contract manufacturer’s focus on high volume, high quality manufacturing. Our products receive extensive quality inspections and testing at our contract manufacturer locations. However, we maintain ultimate responsibility for qualification of components, assembly processes and test procedures. See “Additional Factors That May Affect Future Results—Our reliance on offshore contract manufacturers to produce some of our products could adversely impact our business...” under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Intellectual Property

We rely upon trade secrets and patents to protect our intellectual property. We execute confidentiality and non-disclosure agreements with our employees and suppliers and limit access to and distribution of our proprietary information. We have an on-going program to identify and file applications for both U.S. and international patents for various aspects of our technology. We have been granted a total of 24 U.S. patents and 2 foreign patents, and we have filed applications for over 25 additional U.S. patents and over 50 additional foreign patents. All of these

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efforts, along with the knowledge and experience of our management and technical personnel, strengthen our ability to market our existing products and to develop new products. The departure of any of our management and technical personnel, the breach of their confidentiality and non-disclosure obligations to us, or the failure to achieve our intellectual property objectives may have a material adverse effect on our business, financial condition and results of operations.

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

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

The inability to protect our intellectual property and proprietary technology could have a material adverse effect on our business, financial condition and results of operations. As the number of patents, copyrights and other intellectual property rights in our industry increases, and as the coverage of these rights and the functionality of the products in the market further overlap, we believe that we, along with other companies in our industry, may face more frequent infringement claims. Such litigation or claims of infringement could result in substantial costs and diversion of resources and could have a material adverse effect on our business, results of operations and financial condition. A third party claiming infringement may also be able to obtain an injunction or other equitable relief, which could effectively block our ability or our customers’ ability to distribute, sell or import allegedly infringing products. If it appears necessary or desirable, we may seek licenses from third parties covering intellectual property that we are allegedly infringing. No assurance can be given, however, that any such licenses could be obtained on terms acceptable to us, if at all. The failure to obtain the necessary licenses or other rights could have a material adverse effect on our business, financial condition and results of operations.

Employees

As of December 29, 2002, Powerwave had 1,008 full and part-time employees, including 610 in manufacturing, 63 in quality, 228 in research and development, 31 in sales and marketing and 76 in general and administration. None of our employees are represented by a union. We believe that employee relations are good.

Contract Personnel

Powerwave also utilizes contract personnel hired from third party agencies. As of December 29, 2002, Powerwave was utilizing approximately 210 contract personnel, primarily in our manufacturing operations.

ITEM 2.    PROPERTIES

We own our Southern California headquarters and manufacturing facility which is located in Santa Ana, California. This facility has approximately 360,000 square feet, of which 275,000 are available to us. The remaining 85,000 square feet is being sublet to an unrelated third party. We also lease an additional 115,000 square foot warehouse facility in Santa Ana, California. The lease on this warehouse facility has an expiration date of March 2007.

We lease approximately 31,500 square feet in El Dorado Hills, California under two leases, expiring in January 2005 and August 2007, for our Northern California research and development staff. Our European research and development staff occupy approximately 8,100 square feet in Bristol, United Kingdom under three leases expiring in October 2006, October 2009 and September 2010.

Powerwave also leases four office suites for our regional sales and support staff. These leases cover approximately 7,000 square feet and expire from 2003 through 2006.

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We believe that our headquarters and manufacturing facility, as well as our remaining leased facilities, provide adequate space for our operations.

ITEM 3.    LEGAL PROCEDINGS

We are subject to various legal proceedings and threatened legal proceedings from time to time as part of our business. Powerwave is not currently party to any legal proceedings nor aware of any threatened legal proceedings, the adverse outcome of which, individually or in the aggregate, we believe would have a material adverse effect on our business, financial condition and results of operations. However, any potential litigation, regardless of its merits, could result in substantial costs to us and divert management’s attention from our operations. Such diversions could have an adverse impact on our business, results of operations and financial condition.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth quarter of 2002.

PART II

ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Powerwave’s Common Stock is quoted on the Nasdaq National Market System under the symbol PWAV. Set forth below are the high and low sales prices as reported by Nasdaq for Powerwave’s Common Stock for the periods indicated.

There were approximately 110 stockholders of record as of February 13, 2003. We believe there are approximately 24,000 stockholders of Powerwave’s Common Stock held in street name. We have not paid any dividends to date and do not anticipate paying any dividends on our Common Stock in the foreseeable future. We anticipate that all future earnings will be retained to finance future growth.

All stock option plans under which our Common Stock is reserved for issuance have previously been approved by our shareholders. The following table provides summary information as of December 29, 2002 for all of our stock option plans:

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ITEM 6.    SELECTED FINANCIAL DATA

The following selected consolidated financial data has been derived from Powerwave’s consolidated statements of operations for the fiscal years ended December 29, 2002, December 30, 2001, and December 31, 2000, and consolidated balance sheets as of December 29, 2002 and December 30, 2001, which are included herein, and have been audited by Deloitte & Touche LLP, independent auditors. Powerwave’s consolidated statements of operations for the fiscal years ended January 2, 2000 and January 3, 1999 and consolidated balance sheets as of December 31, 2000, January 2, 2000 and January 3, 1999, which are not included herein, have also been audited by Deloitte & Touche LLP, independent auditors. The information set forth below is not necessarily indicative of the expectations of results for future operations and should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Annual Report on Form 10-K.