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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 2003

For the transition period from              to             .

Commission File Number 000-27843

Somera Communications, Inc.

(Exact name of registrant as specified in its charter)

5383 Hollister Avenue, Santa Barbara, CA 93111

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (805) 681-3322

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

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 par value per share

(Title of Class)

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, 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.    Yes  ¨    No  x

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

The aggregate market value of the voting stock held by non-affiliates of the Registrant (based on the closing sale price of the Common Stock as reported on the NASDAQ National Market as of June 27, 2003) was approximately $74,136,625. The number of outstanding shares of the Registrant’s Common Stock as of the close of business on February 19, 2004 was 49,937,921.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive Proxy Statement for the 2004 Annual Meeting of Stockholders are incorporated by reference in Part III of this Form 10-K to the extent stated herein.

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SOMERA COMMUNICATIONS, INC.

INDEX

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PART I

This Annual Report on Form 10-K contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. These statements, other than statements of historical facts included in this Annual Report on Form 10-K, regarding our strategy, future operations, financial position, estimated revenues or losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Annual Report on Form 10-K, the words “may,” “will,” “should,” “plan,” “anticipate,” “believe,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking statements speak only as of the date of this Annual Report on Form 10-K. You should not place undue reliance on these forward-looking statements.

Although we believe that our plans, intentions, and expectations reflected in or suggested by the forward-looking statements we make in this Annual Report on Form 10-K are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. We disclose important factors in “Risks Factors” and elsewhere in this Annual Report that could cause our actual results to differ materially from the forward-looking statements in this Form 10-K. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. We undertake no duty to update any of the forward-looking statements after the date of this report to conform these statements to actual results or to changes in our expectations.

ITEM 1. BUSINESS

We provide telecommunications operators with a broad range of infrastructure equipment and related services to meet their specific and changing equipment needs. We offer our customers a unique combination of new and re-used equipment from a variety of manufacturers, allowing them to make multi-vendor purchasing decisions from a single cost-effective source. Although we purchase some equipment directly from manufacturers, much of the equipment we sell is procured on the secondary market from telecommunications operators and other sources. To further support our core strategy of buying and selling equipment, we also provide related services that help us identify opportunities for equipment sales or give us access to purchase equipment that an operator no longer needs.

Industry Background and Trends

During the period of rapid growth in the telecommunications industry from 1996-2001, network operators purchased trillions of dollars of new equipment. A great deal of that investment was never deployed or fully utilized. While historically operators may have retained and depreciated these idle assets, sold them back to the original equipment manufacturer for significantly less than the purchase price, or scrapped the equipment, financial factors increasingly require operators to recapture a greater portion of their original investment. However, often the excess equipment that an operator already owns does not meet current and future hardware requirements. Yet this same equipment may have a significant useful life in another operator’s network. As such, telecommunications operators are increasingly utilizing third party assistance to regain a portion of their initial investment on the secondary market and/or to purchase previously owned, or “re-used”, equipment to satisfy their network hardware requirements at a lower cost.

Factors fueling this include:

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Participants in the secondary market, such as Somera, are better equipped to address these trends than the operators themselves. Our business model is designed to support the buying and selling of re-used equipment and to serve as an outlet for operators’ excess inventories. Although original equipment manufacturers (“OEM”) are typically the primary source for new equipment sales, they do not support multi-vendor product lines. In addition, while some manufacturers offer limited trade-in programs for equipment, they generally only cover equipment they manufactured and offer relatively low return on the investments. Telecommunications distributors are typically focused on product fulfillment of defined new equipment product lines. This high-volume, low margin, transaction-oriented model offers a broad selection but is not equipped to provide creative, customized solutions or to support the complexities of re-sell/re-marketing equipment disposition programs.

As recovery in the telecommunications industry becomes more evident, it is unlikely that the need for cost-effective, re-used equipment will abate. Operators are likely to remain focused on improvements and maintenance of key financial metrics in addition to competitive network deployment strategies. They will continue to seek creative and cost-effective ways to build, expand and maintain their networks through a combination of new and re-used equipment and services.

The Somera Strategy

Somera provides wireless and wireline telecommunications operators around the world with a broad range of infrastructure-class equipment and related services designed to meet their specific and changing network requirements. Our new and re-used equipment solutions support operators need to deploy their networks efficiently and at a lower cost. An element of this may include the purchase of excess or under-utilized equipment assets either on a consignment, buy, or exchange basis. We also provide value-added equipment-related services to supplement or replace resources to execute programs and projects that our customers traditionally managed themselves. In order to scale our business model and meet the needs of operators around the world, Somera continues to pursue opportunities for international growth. This gives us access to equipment based on different standards and technologies and increases our ability to serve foreign markets.

Somera’s business strategy supports the critical elements to lead the secondary market in the Americas, Europe, Middle East, and Africa (“EMEA”), and Asia Pacific regions. Our core competencies provide a distinct competitive advantage that makes Somera a low risk, high return investment solution to our customers. Our ability to execute on this objective is grounded in three key areas:

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Equipment Supply

We provide new and re-used telecommunications wireless, wireline, and data equipment manufactured by a variety of OEMs. We offer operators with multiple categories of telecommunications infrastructure equipment to address their specific and changing equipment requirements primarily for network maintenance and incremental network expansions. We support analog, T1/E1, T3/E3, SONET, SDH, TDMA, CDMA, and GSM for voice communications and WAN, LAN, international access servers, and various other data products for data communications. In 2003, we had a database of over 16,127 different items, from over 350 different manufacturers. These items are either immediately available in our physical inventory or readily available from one of our supply sources, including telecom operators, resellers, and manufacturers. We offer to our customers the same terms and conditions of the original manufacturer’s warranty on all new equipment. On re-used equipment, we offer our own warranty which guarantees that the equipment will perform up to the manufacturer’s original specifications.

The new equipment we offer consists of telecommunications equipment primarily purchased directly from the OEMs or distributors. The re-used equipment we offer consists primarily of equipment removed from the existing networks of telecommunications operators, many of whom are also our customers, and equipment purchased from resellers. Our sources for re-used equipment are typically the original owners of such equipment and either the operator, another third party, or a Somera trained professional removes the equipment from the network on behalf of the operator.

The equipment we sell is grouped into several general product categories.

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As part of the equipment supply offering, we support customers’ access to critical maintenance spares to minimize network downtime and potential revenue loss. Under this program, we stock new and re-used equipment and co-locate the inventory at the customers’ facilities or in locations in close geographic proximity to the customers’ network operations for immediate access.

Substantially all of our equipment sourcing activities are made on the basis of purchase orders rather than long-term agreements. Although we seek as part of our equipment resource planning to establish strategic contract relationships with operators, we anticipate that our operating results for any given period will continue to be dependent, to a significant extent, on purchase order based transactions.

Equipment Valuation and Disposition Support

We help our customers determine the market value of excess and under-utilized equipment assets. The financial potential from these assets may provide a source of capital to offset the expense of other equipment and services purchases. The metrics for valuation are based on the data that we capture in our proprietary global database known as COMPASS. The database consists of product information and its respective market value, the installed technology base within our customers’ networks, plans for network build-out and de-installation, and demand and supply of equipment on the secondary market. The data domiciled within our database and applied to the valuation and marketability process is captured primarily through our sales and purchase transactions and interactions with customers. The data is interpreted by our internal sales, product line marketing, and supply groups.

We help our customers place equipment and maximize the value of excess and under-utilized equipment while minimizing their expense and management attention to the process. We offer four types of equipment placement programs. After collaborative investigation with the customer, we execute one, or a combination, based on the type of equipment the customer wants to dispose of, the current market demand for the equipment, the viability and condition of the equipment, and the customer’s network deployment strategy. Our four types of equipment placement programs are as follows: Consignment, Asset Exchange, Direct Purchase, and Equipment Disposal.

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Equipment Services

Resource allocation continues to be a critical concern among telecom operators in the execution of their network deployment strategy. Projects and programs that operators once managed themselves are being outsourced to enable the customer to focus on core business and network strategies. Providing select, focused services can be a catalyst to equipment sales, in addition to giving Somera access to equipment supply that an operator may no longer need.

We provide the following services in connection with our equipment supply:

Equipment Deployment Services

Equipment Maintenance Services

We execute our services strategy through a combination of internal expertise and outsourced services. Services are performed by us either at the customer’s site or at our facility near Dallas. Services performed for the Europe, Middle East, and Africa (“EMEA”) region are managed out of Amsterdam, The Netherlands.

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Sales and Marketing

Our sales organization is located primarily at our corporate headquarters in Santa Barbara, California and is augmented by satellite offices in California, Illinois, Georgia, New Jersey, and Texas. Operations for the EMEA region and Asia Pacific (AP) are headquartered in Amsterdam, The Netherlands with agent or sales offices in countries throughout the world including the United Kingdom, Russia, Spain, Sweden, Brazil and Hong Kong.

As of December 31, 2003, we employed approximately 140 sales, services, and procurement professionals. We generate sales leads primarily through direct sales contact, telemarketing, customer referrals and various tactical marketing programs.

In the United States, the sales force is organized by wireless and wireline market groups. The sales force operates on a named account basis rather than by geography, which allows us to maintain a consistent, single point of contact approach. Within wireless, teams are organized by segment including rural regional wireless operators and national wireless operators covering cellular and Personal Communications Service companies. The sales approach to build market share is grounded in relationship-based selling to support legacy network structures, incremental network build-outs, and capacity upgrades. Within wireline, teams are organized by segment including Regional Bell Operating Companies (“RBOCs”), Emerging Carriers covering Incumbent Local Exchange Carriers (“ILECs”), long distance carriers (“IXCs”), and competitive local exchange carriers (“CLECs”). The wireline group is a highly fragmented and competitive segment where price is the primary purchasing driver or budgets have been locked up with OEM programs. The sales approach to build market share is grounded in aggressively sourcing products from operators looking to offload their excess and under-utilized equipment assets.

For operators in other countries, we approach the business on a geographic basis, rather than a defined account basis, due to language, cultural, and country specific considerations.

A key feature of our selling effort is the relationships we build at various levels in our customer’s organizations. This structure allows us to establish multiple contacts with each customer across their management, engineering, and purchasing operations. An account team is comprised of equipment sales, services sales, logistic, and customer service responsibilities. This level of integration enables us to respond more rapidly to customer requirements and provides consistent high quality service, which builds long-term relationships with our customers. Sales teams are further supported by supply and product line managers responsible for sourcing and buying equipment and monitoring the product categories to identify emerging trends that might impact our customers.

Each team member has access to, and is supported by, our proprietary global database, COMPASS. This real time proprietary information system allows each team to:

Substantially all of our sales are made on the basis of purchase orders rather than long-term agreements. As a result, we may commit resources to the procurement of products without having received advance purchase

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commitments from customers. However, we have established rigorous checks and balances to ensure appropriate inventory management and controls are in place. Although an element of our strategy seeks to establish strategic contractual relationships with operators, we anticipate that operating results for any given period will continue to be dependent, to a significant extent, on purchase orders. These purchase orders often can be modified, delayed or canceled by our customers without penalty. We recognize revenue, net of estimated provision for sales returns and warranty obligations, when we ship equipment to our customers, provided that there are no significant post-delivery obligations. Additionally, as telecommunications equipment supplier competition increases, we may need to lower our selling prices or pay more for the equipment we procure. We may also procure product where market demand may subsequently decline before the inventory is depleted, thereby resulting in a lower return. Consequently, our gross margin may decrease over time.

As we attempt to expand our sales, marketing, and procurement efforts into international markets, we face a number of challenges, including:

Any of these factors could potentially harm our future international operations.

Our marketing efforts are focused on building and differentiating our brand. Activities to support this strategy include public relations, the Internet, industry trade shows, professional sales presentations and brochures, and customer events. We believe the size and scope of our operations in our highly fragmented industry gives us both a unique advantage and opportunity to further build and enhance our brand recognition.

Customers

We sell to every major segment of the telecommunications sector. In North America, we sell equipment to ILECs, RBOCs, IXCs, and to wireless operators including cellular, PCS, paging and SMRs, and CLECs. Outside of North America, we work primarily with large wireless operators in Latin America, EMEA, and Asia Pacific. We have over 1,000 customers worldwide with the majority located in the United States. In 2003, no customer accounted for more than 10% of our net revenue. In 2002 and 2001, Verizon Communications accounted for 13.4% and 16.1%, respectively, of our net revenue, with no other customer accounting for more than 10% of our net revenue. Sales to customers outside of the United States accounted for 22.0% of our net revenue in 2003, 14.9% of our net revenue in 2002, and 9.7% of our net revenue in 2001. Customers from whom we recognized at least $5.0 million in net revenue in 2003 include leading operators such as AT&T Wireless, Verizon Communications, Cingular, Lucent Technologies, Triton PCS, and Centennial Wireless.

Competition

The market for our equipment and services offerings is highly competitive. Constrained capital budgets, limited telecommunications infrastructure equipment on the market, and continued pressures to improve balance sheet metrics among operators and manufacturers will continue to drive competition in our industry for the foreseeable future. Increased competition may result in price reductions, lower gross margins, and loss of our market share in the future.

As we expand our services strategy, we are likely to face a new set of competitors. Many of these competitors are smaller with a strong local base or technology specialty and a lower fixed cost structure which may impede our ability to profitably compete. These factors could give these competitors a substantial competitive advantage.

Increased competition in the secondary equipment market from telecommunications distributors and other secondary market dealers for re-used telecommunications equipment could also heighten demand for the limited

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supply of re-used equipment. This is more evident in the wireline telecommunications market segment. This could lead to increased equipment costs and a reduction in the availability of this equipment. Any increase in these prices could impact our ability to maintain our gross margins. Any reduction in the availability of this equipment could prevent us from meeting customer demand.

Also, on the new equipment front, it has become common for manufacturers to aggressively discount current generation products or extend terms to reduce inventories or meet quarterly financial expectations. This can dramatically lower prices for new equipment, which, in turn, puts downward pricing pressure on re-used equipment. Additionally, small and mid-size manufacturers may be more aggressive in taking over the sales and service of larger telecommunications operators that had been previously managed by us in order to improve specific account financial performance. Many of these competitors have longer operating histories, significantly greater resources and name recognition. These competitors are also likely to enjoy substantial competitive advantages over us, including the following:

There can be no assurance that we will have the resources to compete successfully in the future or that competitive pressures will not harm our business.

Employees

As of December 31, 2003, we had 248 full-time employees. We consider our relations with our employees to be satisfactory. We have never had a work stoppage, and none of our employees are represented by a collective bargaining agreement. We believe that our future success will depend in part on our ability to attract, integrate, retain, and motivate highly qualified personnel, and upon the continued service of our senior management and key sales personnel. Demand for qualified personnel in the telecommunications equipment industry and our primary geographic locations is competitive. We may not be successful in attracting, integrating, retaining, and motivating a sufficient number of qualified employees to conduct our business in the future.

Where You Can Find More Information

Our principal executive offices are located at 5383 Hollister Avenue, Santa Barbara, California 93111, and our telephone number at this address is (805) 681-3322. You may request a copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to these reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, at no cost, by writing or telephoning us at our address above (Attention: Investor Relations). Our SEC filings are also available to the public from the SEC’s web site at http://www.sec.gov. Our Internet address is http://www.somera.com. The information on our web site is not incorporated by reference into this report.

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EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information regarding the Company’s current executive officers as of February 27, 2004.

C. Stephen Cordial assumed the position as Acting President and Chief Executive Officer in addition to his role as Chief Financial Officer in October 2003 and has served as Vice President, Chief Financial Officer since joining Somera Communications in August 2002. Prior to joining Somera, Mr. Cordial served as Chief Financial Officer at Nexsi Systems Corporation, a provider of broadband network infrastructure solutions, from January 2001 to April 2002. Before that, he was Chief Financial Officer at iReady Corp from November 1999 to December 2000. At En Pointe Technologies, he served as Chief Financial Officer from April 1998 to May 1999. At Xylan (which was acquired by Alcatel), Mr. Cordial serviced as Vice President of Finance and Chief Financial Officer from September 1995 to April 1998. Mr. Cordial has also held executive positions with other technology industry leaders including PMC-Sierra and Texas Instruments. Mr. Cordial holds a bachelors degree from Stanford University, and a MBA from the University of Santa Clara.

Glenn O’Brien has served as our Vice President, Sales and Marketing, the Americas since October 2003, and served as the Vice President - Core Sales from June 2003 until October 2003. Before joining Somera, Mr. O’Brien worked for 18 years at Tellabs Operations, Inc., a global telecommunications network equipment provider from 1984 to September 2002. He held numerous positions including Vice President of Marketing Management from January 2002 until September 2002, Vice President North American Sales January 2001 until December 2001, and Director of Global Broadband Access from July 1998 until December 2000. Mr. O’Brien also received start-up company experience with LICOM, another network equipment provider in 1988. Mr. O’Brien holds a bachelors degree from the University of California at Santa Barbara and has completed graduate course work at Pepperdine University and executive education at Columbia University.

Ron Patterson has served as the Managing Director and Vice President, Europe, Middle East, and Africa and Asia Pacific since October 2002. Prior to joining Somera, Mr. Patterson held a number of senior management positions with Nortel Networks in Europe over a period of 24 years. He held numerous positions there including Senior Vice President responsible for all operations throughout Europe, the Middle East, and Africa and Senior Vice President of Sales. He was also a Director of the Nortel Networks UK Pension Trust for 10 years prior to his leaving Nortel. Mr. Patterson was a senior engineer and manager with The Plessey Company in the UK from February 1967 to July 1978. He started his career in British Telecom and was trained as an engineer holding qualifications in Higher National Certificate in Telecommunications.

Jeremy D. Rossen assumed the position as Vice President, General Counsel and Secretary in December 2003. Prior to that, Mr. Rossen served as Director, Corporate Development upon joining Somera in September 2000. Before joining Somera, Mr. Rossen was Senior Corporate Counsel for RealNames Corporation, an Internet company, from September 1999 to September 2000. From August 1996 to September 1999, Mr. Rossen served as a corporate and securities associate at Wilson Sonsini Goodrich and Rosati, a law firm specializing in serving the technology and growth business sector. Mr. Rossen holds a bachelors degree and a JD from the University of Pennsylvania.

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ITEM 2. PROPERTIES

Our principal executive and corporate offices, located in Santa Barbara, California, occupy approximately 32,000 square feet under several lease agreements that expire from February 2004 to May 2006. Additionally, we occupy three (Stanhope, New Jersey, Chicago, Illinois, Lake Forest, California) office sites in the United States under lease agreements, totaling approximately 15,000 square feet.

At December 31, 2003, we operated one distribution facility in the United States, occupying approximately 259,000 square feet near Dallas, Texas, under a lease agreement that expires in March 2010. In July 2003, we consolidated our smaller distribution and repair facilities into the larger facility near Dallas, Texas. During 2003, we were successful in exiting one of our smaller distribution centers and our repair facility. At December 31, 2003, we have one vacant distribution center in Atlanta, Georgia totaling approximately 45,000 square feet. The lease expires in 2006 and the remaining lease payments are accrued from charges taken in the fourth quarter of 2002.

We lease additional properties outside the United States. Our European headquarters and distribution center, located in Amsterdam, The Netherlands, occupies approximately 14,000 square feet under a lease agreement that expires in October 2005. We have six other sales offices in the United Kingdom, Russia, Spain, Sweden, Brazil, and Hong Kong. We believe that our facilities are adequate for our current operations and that additional space can be obtained as needed.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we may be involved in legal proceedings and litigation arising in the ordinary course of business. As of the date hereof, we are not a party to or aware of any litigation or other legal proceeding that could materially harm our business.

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

No matters were submitted to a vote of holders of Common Stock during the quarter ended December 31, 2003.

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PART II

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

Our common stock has been traded on the NASDAQ National Market under the symbol “SMRA” since our initial public offering on November 12, 1999. The following table sets forth, for the periods indicated, the high and low closing sale prices for our common stock as reported by the Nasdaq National Market:

On February 19, 2004, the last reported sale price for our common stock on the Nasdaq National Market was $2.64 per share. As of February 19, 2004, there were approximately 145 holders of record. Because many of such shares are held in street name by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.

While we do not plan to pay dividends, any future determination to pay dividends will be at the discretion of the board of directors and will depend upon our financial condition, operating results, capital requirements, and other factors the board of directors deems relevant. We currently plan to retain cash from earnings for use in the operation of our business and to fund future growth.

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ITEM 6. SELECTED FINANCIAL DATA

You should read the following selected financial data together with our financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this Annual Report on Form 10-K. Historical results are not necessarily indicative of the results to be expected in the future.