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`www.sec.gov/Archives/edgar/data/1085763/000091205702025731/a20821 78220-f. htm
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`20-F 1 a2082178z20-f.htm 20-F
`
`QuickLink -- Click here to rapidly navigate through this document
`
`SECURITIES AND EXCHANGE COMMISSION
`
`WASHINGTON, D.C. 20549
`
`FORM 20-F
`
`ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
`SECURITIES EXCHANGE ACT OF 1934
`
`For the fiscal year ended December 31, 2001
`
`Commission file number:
`
`WAVECOM S.A.
`
`(Exact name of Registrant as specified in its charter)
`
`France
`
`(Jurisdiction of Incorporation or Organization)
`
`12 boulevard Garibaldi
`
`92442 Issy-Les-Moulineaux Cedex,
`France
`Tel. 011 33 1 46 29 08 00
`
`(Address of Principal Executive Offices)
`
`Securities registered or to be registered pursuant to Section 12(g) of the Act:
`
`Title ofeach class
`
`Name of each exchange on which registered
`
`Shares, nominal value €1.00 each*
`American Depositary Shares, evidenced by
`American Depositary Receipts, each representing one Share.
`
`Nasdaq National Market
`
`*The Shares are not traded on the Nasdaq National Market but are registered only in connection with the registration of
`American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission.
`
`Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
`
`None
`
`The number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period
`covered by the annual report.
`
`Shares
`American Depositary Shares
`
`14,810,614
`1,039,183
`
`Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) ofthe
`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.
`
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`Yes IZI No El
`
`Indicate by check mark which financial statement item the Registrant has elected to follow.
`
`Item 17 El Item 18 I21
`
`TABLE OF CONTENTS
`
`PART I
`
`Item 1:
`Item 2:
`Item 3:
`Item 4:
`Item 5:
`Item 6:
`Item 7:
`Item 8:
`
`Item 9:
`Item 10:
`Item 1 1:
`
`Identity of Directors, Senior Management and Advisors
`Offer Statistics and Expected Timetable
`Key Information
`Information on the Company
`Operating and Financial Review and Prospects
`Directors, Senior Management and Employees
`Maj or Shareholders and Related Party Transactions
`Financial Information
`
`The Offer and Listing
`Additional Information
`Market Risk
`
`Item 12:
`
`Description of Securities Other Than Equity Securities
`
`PART II
`
`Item 13:
`Item 14:
`Item 18:
`Item 19:
`
`Defaults, Dividend Arrearages and Delinquencies
`Use of Proceeds
`Financial Statements
`Exhibits
`
`PRESENTATION OF INFORMATION
`
`Unless the context otherwise indicates, references to "Wavecom," "we" or us include Wavecom S.A. and its subsidiaries.
`References to "U.S. dollars" or "$" contained herein are to the lawful currency of the United States, and references to "euro" or "€"
`are to are to the currency of the European Monetary Union.
`
`FORWARD LOOKING STATEMENTS
`
`This annual report contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of
`1995. These forward looking statements are not guarantees of Wavecom's future operational or financial performance and are
`subject to risks and uncertainties. Actual operational and financial results may differ materially from Wavecom's expectations
`contained in the forward looking statements as a result of various factors. Factors that may cause such differences include, but are
`not limited to, factors discussed in "Item 3—Key Information—Risk Factors" and "Item 5—Operating and Financial Review and
`Prospects."
`
`Item 1. Identity of Directors, Senior Management and Advisers
`
`Not applicable.
`
`PART I
`
`Item 2. Offer Statistics and Expected Timetable
`
`Not applicable.
`
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`Item 3. Key Information
`
`Selected Financial Data
`
`The following selected financial data for the five years ended December 31, 2001 are derived fi'om consolidated financial
`statements of Wavecom, which have been prepared in accordance with U.S. GAAP and have been audited by Ernst & Young Audit,
`independent auditors. The data should be read in conjunction with "Operating and Financial Review and Prospects," the
`consolidated financial statements, related notes and other financial information included in this annual report. We derived the
`amounts shown below from our consolidated financial statements, which for the years ended December 31, 1997 and 1998 we have
`translated into euro using the exchange rate fixed for French fiancs and euro on January 1, 1999. Note 1 to these consolidated
`financial statements explains how the amounts were translated.
`
`1997
`
`1998
`
`1999
`
`2000
`
`2001
`
`2001
`
`Years ended December 31,
`
`(in thousands, except share and per share amounts)
`
`10,478
`7,198
`979
`
`18,655
`
`9,023
`
`3,808
`
`12,831
`
`5,824
`
`3,222
`
`1,291
`
`12,796
`5,780
`998
`
`19,574
`
`10,562
`
`3,741
`
`14,303
`
`5,271
`
`7,851
`
`2,088
`
`34,563 €
`1,853
`144
`
`63,055 €
`2,518
`—
`
`317,571 $
`5,093
`—
`
`282,670
`4,533
`—
`
`36,560
`
`26,236
`
`2,148
`
`28,384
`
`8,176
`
`11,913
`
`3,412
`
`65,573
`
`51,457
`
`4,522
`
`55,979
`
`9,594
`
`16,133
`
`5,836
`
`322,664
`
`287,203
`
`254,658
`
`4,718
`
`226,671
`
`4,199
`
`259,376
`
`230,870
`
`63,288
`
`32,634
`
`12,416
`
`56,333
`
`29,048
`
`11,051
`
`Consolidated statements of operations data:
`Revenues:
`Product sales
`
`Technology development and other services
`
`License fees and royalties
`
`Total revenues
`
`Cost of revenues:
`Cost of goods sold
`Cost of services
`
`Total cost of revenues
`
`Gross profit
`Operating expenses:
`Research and development
`
`Sales and marketing
`General and administrative
`
`Amortimtion of goodwill
`
`Deferred compensation amortization
`
`Provision for loss—ICO Development contract
`
`Total operating expenses
`
`Operating income (loss)
`Interest and other financial income (expense), net
`Provision for loss on long-tenn investment
`Beneficial conversion feature of convertible debt
`
`Income (loss) before minority interests and income
`taxes
`Minority interest
`
`Income (loss) before income taxes
`Income tax expense (benefit)
`
`Net income (loss)
`
`Basic net income (loss) per share(l)
`Diluted net income (loss) per share(l)
`Cash dividends declared per share(2)
`
`Number of shares used in computing basic net
`income (loss) per share
`
`852
`—
`
`—
`
`—
`
`5,365
`
`459
`(40)
`—
`—
`
`419
`—
`
`419
`136
`
`1,962
`—
`
`126
`
`—
`
`12,027
`
`(6,756)
`(364)
`—
`—
`
`(7,120)
`—
`
`(7,120)
`(813)
`
`3,070
`—
`
`1,608
`
`2,607
`
`5,598
`47
`
`1,758
`
`—
`
`13,297
`278
`
`1,711
`
`—
`
`11,836
`247
`
`1,523
`
`—
`
`22,610
`
`29,372
`
`60,336
`
`53,705
`
`(14,434)
`(207)
`—
`(1,072)
`
`(15,713)
`—
`
`(15,713)
`(736)
`
`(19,778)
`3,734
`—
`—
`
`2,952
`3,969
`(716)
`—
`
`
`2,628
`3,532
`(637)
`—
`
`
`(16,044)
`6
`
`6,205
`804
`
`
`5,523
`(716)
`
`
`(16,038)
`(1,534)
`
`7,009
`(2,299)
`
`
`6,239
`(2,046)
`
`
`8,285
`9,308 $
`(14,504) €
`(14,977) €
`(6,307)
`283
`
`
`0.03
`0.03
`G
`0.0046
`0.0051(3) $
`
`$
`
`(0.63)
`(0.63)
`0.015
`0.016(4)
`
`(1.26) €
`(1.26) €
`—
`
`(1.03) €
`(1.03) €
`—
`
`0.63 $
`0.61 $
`—
`
`0.56
`054
`—
`
`§
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`
`10,000,000
`
`10,000,000
`
`11,922,770
`
`14,081,178
`
`14,726,647
`14,726,647
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`Number of shares used in computing diluted net
`income (loss) per share
`
`15,359,226
`15,359,226
`14,081,178
`11,922,770
`10,000,000
`10,000,000
`
`
`Consolidated balance sheet data:
`Total current assets
`Total assets
`Total current liabilities
`Total long-tenn liabilities
`Total shareholders’ equity (deficit)
`
`1997
`
`1998
`
`1999
`
`2000
`
`2001
`
`2001
`
`Decemb er 3 1,
`
`9,981
`12,604
`9,538
`583
`2,483
`
`11,322
`15,843
`18,274
`1,414
`(3,845)
`
`34,957 €
`41,462
`15,927
`879
`24,656
`
`138,323 €
`158,298
`48,957
`166
`108,010
`
`227,028 $
`259,947
`137,064
`638
`121,884
`
`202,078
`231,379
`122,001
`568
`108,489
`
`(1)
`
`(4)
`
`Net income (loss) per share amounts are computed using the weighted average number of shares outstanding. It excludes options and warrants, and reflects only the
`avxctugl ordinary sltiatres outstanding...
`‘d d
`h
`,
`th f
`1
`fut
`Trgns aii(c)>ne1x gcU.(§.p3¥»1l§;¥ igsat t $11533 osf(§0.[910r2
`bag
`rcislefiigrioonllifiying rate for French fiancs of $0. 17 = FF1.00 on June 30, 1997, the date on which
`'
`'
`1
`adglliars is at the rate of $0.92 = €1.00, based on the noon buying rate for French francs of $0. 16 = FF1.00 on June 30, 1998, the date on which
`the dividend was declared.
`
`Exchange Rate Data
`
`For your convenience, this annual report contains translations of euro amounts into U.S. dollars at the rate of $0.8901 = €1.00,
`the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal
`Reserve Bank ofNew York on December 31,2001. The noon buying rate on June 21, 2002 was $0.9705 = €1.00. Since January 1,
`1999 our functional currency has been euro. Fluctuations in the exchange rate between the euro and the dollar will affect the dollar
`amounts received by owners of ADSs on conversion of dividends, if any, paid in euro on the shares and may affect the dollar price
`of the ADSs on the Nasdaq National Market.
`
`The following table shows the noon buying rates for the number of U.S. dollars per euro for the period since January 1, 1999.
`The average is computed using the noon buying rate on the last business day of each month during the period indicated.
`
`Month
`
`2002
`
`June (through June 21)
`
`May
`
`April
`March
`
`February
`
`January
`2001
`December
`
`Year ended December 31,
`
`2001
`2000
`1999
`
`High
`
`Low
`
`0.9705
`
`0.9373
`
`0.9028
`0,8836
`
`0.8778
`
`0.9031
`
`0.9390
`
`0.9022
`
`0.8750
`0.8652
`
`0.8613
`
`0.8594
`
`0.9044
`
`0.8773
`
`Average
`
`$
`
`0.8952
`0.9234
`1.0667
`
`Since the euro did not exist prior to January 1, 1999, we cannot present exchange rates between the euro and the U.S. dollar for
`the periods prior to that date shown in our consolidated financial statements and in the other financial information discussed in this
`prospectus. Our functional currency during those periods was the French franc. In order that you may ascertain how the trends in
`our financial results might have appeared had they been expressed in U.S. dollars, the table below shows the average noon buying
`rates for the French fianc per $1.00 for 1998 and 1997, computed using the noon buying rate on the last business day of each
`month during the period indicated.
`
`Year ended December 31,
`
`199 8
`1997
`
`Average
`
`FF 5.90
`5 .85
`
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`Risk Factors
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`www.sec.gov/Archives/edgar/datal1085763/000091205702025731/a2082178220-f.htm
`
`In addition to the other information contained in this annual report, thefollowing riskfactors should be carefully considered
`in evaluating us and our business.
`
`Possible effects of a continued downturn in the global handset market
`
`To date our growth has not been directly tied to trends in the global handset market, but rather to growth of the particular
`markets served by our customers (primarily in China) and the success of our customers in their markets. Although we do not expect
`the global market for handsets to experience growth in 2002, and expect that the market may even decline slightly, we believe that
`our customers are likely to increase their existing shares of local markets in Asia and we expect to add new customers. If the markets
`in which our customers sell their products should experience a downturn, or if our customers are unable to profit from growth in
`their local markets or are unable to increase their market share, or if we are unable to win new customers, our revenues may not
`continue to grow and may even decline.
`
`Lack of growth in the markets for new wireless applications could hurt our business
`
`Our prospects depend upon continued development and growth of markets for wireless communications products. Although
`we anticipate that the market for mobile telephones will continue to grow in the future, we believe that a significant potential for
`growth in the demand for our products will be in new wireless applications. These include:
`
`°
`
`'
`
`°
`
`hand-held portable devices, such as personal digital assistants and computer notebooks;
`
`automatic vehicle location systems, which provide vehicle tracking and navigation capabilities; and
`
`devices which require the measurement and transmission of data, such as vending machines, utility meter and
`security systems.
`
`The markets for these types ofproducts are still in their fonnative stages. We may not be successful if these and other potential
`markets for our products do not develop.
`
`The loss of key customers could decrease our revenues
`
`Our performance depends on relatively large orders from a small number of customers. The following table sets forth revenues
`from our largest customers for the past three years:
`
`1999
`
`2000
`
`2001
`
`Percentage of total revenues represented by the five
`largest customers
`Percentage of total revenues represented by the ten
`largest customers
`
`49.4%*
`
`45.8%**
`
`80.4%***
`
`66.2%
`
`68.4%
`
`88.1%
`
`*
`
`In 1999, sales to Mitsubishi represented 33.3% of total revenue.
`
`In 2000, sales to Sewon Telecom represented 14.7% of total revenue.
`
`**
`
`* **
`
`In 2001, sales to Sewon Telecom represented 35.4% of total revenue; sales to Amtal International Ltd., agent for TCL
`Mobile Communication (HK) Company Ltd., represented 32.9% of total revenue.
`
`Our customers may reduce volumes ordered on relatively short notice, although we had no significant reductions in 2001. We
`believe that a small number of manufacturers will dominate the market for mobile telephones and other wireless applications. As a
`result, we expect to continue to depend on large orders from a small number of customers. If our existing customers reduce their
`orders for our products or if we lose existing customers or fail to attract new customers, our business will suffer.
`
`We must keep pace with technological change and develop new products to remain competitive
`
`The wireless communication markets in which we sell our products are changing very quickly. New types ofproducts and new
`versions ofexisting products come to market regularly. Manufactgrers who purchase our WISMO modules and wireless modems for
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`use in their mobile telephones and other applications compete with other manufacturers and, to be competitive, must offer products
`that satisfy consumer demand for smaller, less expensive products with more features. To meet our customers‘ needs, we must
`continuously update and enhance our products so that they meet the latest standards and include up-to-date features. To develop
`these enhancements, new designs and technologies we must spend significant amounts on research and development. We may lose
`market share if our competitors, most of which are larger and have greater resources than we do, are more successful or faster than
`we are in updating and improving products and technology.
`
`We incurred losses in 1999, 2000 and the first quarter of 2001, and may incur losses again in the future
`
`We incurred net losses in each quarter of 1999 and 2000, and in the first quarter of 2001. For the year ended December 31,
`1999 we had an operating loss of €l4.4 million and negative cash flow from operating activities of€l 1.7 million. For the year
`ended December 31, 2000, we had an operating loss of€198 million and negative cash flows from operations of€8.6 million. For
`the year ended December 31, 2001 we had operating income of€30 million and positive cash flow from operations of
`€50.0 million. We believe that we may experience negative cash flow during one or more quarters in 2002 as a result of our current
`plans for increased spending on research and development projects, particularly related to new products scheduled to be introduced
`in 2002, and the ongoing ramp-up of production, including the addition of lines ofproduction at Solectron and/or a new
`subcontractor, tentatively scheduled for rnid-year 2002. Based on our current plans, we believe that our currently available capital
`resources will be adequate to satisfy our cash requirements at least through 2003. If our research and development or manufacturing
`plans change, or if we do not achieve profits or if our profits are significantly lower than anticipated, we may need additional
`fiinding to remain in business.
`
`Declining sales prices of mobile telephones and other wireless products could hurt our revenues
`
`The prices of mobile telephones have tended to decrease steadily over time. We believe that the prices of other wireless
`communications products will also decrease over time. As a result, prices for our WISMO modules and wireless modern products
`have declined and are likely to continue to decline. More importantly, in order for us to address a larger market, and in order for our
`customers to introduce attractively priced products, we believe we must continue to reduce our selling prices. We will be unable to
`maintain profitability unless we can offset these price decreases with increases in unit volume or reductions in per unit costs.
`
`We depend on a limited number of suppliers and subcontractors who could be diflicult or expensive to replace
`
`We rely on third parties to manufacture components of our products and to assemble all of our products and to test some of our
`products. Philips, Toshiba, Intel, Sony and RF Micro Devices currently manufacture key components of our products. We also
`currently use two subcontractors, Solectron and Thales Microelectronic, to assemble and test our products. Using third parties to
`manufacture components of our products and to assemble and test our products reduces our control over product delivery
`schedules, quality assurance, manufacturing yields and costs. The third parties who manufacture, assemble and test our products
`also have other customers and may not have sufficient capacity to meet all of our manufacturing, assembly and testing needs
`during periods of excess demand.
`
`We expect that each of our individual products or product families may be assembled by a sole-source subcontractor until at
`least rnid-year 2002. We could suffer a significant delay in meeting our customers‘ orders for products if one of our suppliers or
`subcontractors cannot meet our requirements. Although we are currently planning to add production capacity at new
`subcontractors, it could take a long time to establish a strategic relationship with the new manufacturer. Any of these problems
`could significantly harrn our business.
`
`A financial crisis or political upheaval in Asia, particularly in China, could hurt our revenues
`
`In 1999, sales to Asian customers represented 5.9% of revenues. Sales to Mitsubishi's U.K. subsidiary, whose products were
`intended for end users in Asian markets, represented an additional 33.3% of our revenues in 1999. In 2000 and 2001, sales to Asian
`customers represented 33.9% and 83.6%, respectively, ofrevenues reflecting shipments pursuant to large contracts with customers
`in China, Taiwan and Korea. We expect that, for the foreseeable future, a significant portion of our revenues will be generated from
`Asian customers, and in particular from customers based in China or serving the Chinese market. A new financial crisis in Asia,
`particularly in China, could substantially reduce our revenues from Asian customers or customers selling to end users in Asia. In
`addition, political upheaval in China or a change in the political climate making China a less favorable environment for foreign
`businesses, could substantially reduce our revenues.
`
`Because some of our key components come from a single source, or require long lead times, we could experience unexpected
`interruptions which could cause our operating results to suffer
`
`We believe that a number ofour suppliers are sole sources fogkey components. These key components are C01’n1B/lI€§(1<1/1I‘ld
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`difficult to manufacture and require long lead times. In September 2000, the unavailability of a sole-source combined flash memory
`and RAM component resulted in a two-week interruption ofproduction. We work with our suppliers on a twelve-month rolling
`forecast basis and we currently believe that we have secured adequate supply based on our production forecasts for the next twelve
`months. In the event of a reduction or interruption of supply, or a degradation in quality, a number of months could be required
`before we could begin receiving adequate supplies from other suppliers. Supply interruptions could delay product shipments,
`causing our revenues and operating results to decline.
`
`If we do not effectively manage our growth, it could affect our ability to pursue business opportunities and expand our business
`
`Growth in our business has placed and will continue to place a significant strain on our management systems and resources.
`We will need to continue to improve our operational and financial systems and managerial controls and procedures and expand,
`train and manage our workforce. We will have to maintain close coordination among our technical, accounting, marketing, sales
`and research and development departments. If we fail to effectively manage our growth and address the above concerns, it could
`affect our ability to pursue business opportunities and expand our business.
`
`Our costs may increase or we may have to redesign our products if they infringe other companies’ intellectual property rights
`
`Other companies have patents, copyrights, trade secrets and other intellectual property rights covering technology used in the
`wireless communications industry. Currently, we have licenses to use only some of these rights. If any of our products were found
`to infiinge on protected technology, we could be required to redesign them, to obtain licenses for this technology or to pay
`royalties or damages to its owner. The resulting costs would hann our business. If we were unable to obtain these licenses or to
`redesign infiinging products, we could be prohibited from marketing them. As explained under "Business—Intellectual Property,"
`however, owners of some of this protected technology must provide us with a license on fair, reasonable and non-discriminatory
`terms.
`
`Our business could be hurt by the unauthorized use of our technology
`
`We rely on a combination of patents, copyrights, trade secrets, trademarks and proprietary information to maintain and
`enhance our competitive position. We might, however, have difficulty taking effective legal action against a competitor who
`copied important parts of the technology we use in our products and processes. If we were unable to prevent a competitor from
`using our designs and techniques to produce competing products, our business would be adversely affected.
`
`We may not be able to sell our products under the Wavecom name in North America or Japan
`
`We have not registered the Wavecom name in North America or Japan. Several other companies, some of which are in
`businesses similar to our own, use the word Wavecom or a similar word as either a trade name or as a brand name for their products.
`This could cause confusion in the marketplace and ham our sales. If one of these other companies were to take effective legal
`action to prohibit us from continuing to use the name Wavecom in North America or Japan, we could be forced to use a different
`name and, as a result, it would be more difficult for customers to identify us and our sales might suffer.
`
`We need to attract and retain key personnel who are skilled in our business and technology to remain competitive
`
`Our success depends on the skills of some of our key employees, including two of Wavecom's founders, Michel Alard, who is
`currently Chainnan of the Board and Chief Executive Officer (Président Directeur Général), and Aram Hékimian, who is currently
`the Deputy Chief Executive Officer (Directeur Général Délégué). If either of these individuals were to leave Wavecom, the loss of
`their key management and technical skills could hann the development and implementation of our long-tenn strategy, customer
`relationships, operations and growth.
`
`It is important to our success that we retain our highly skilled product development, sales and marketing employees and
`continue to attract, train and retain additional skilled employees. We rely to a large extent on independent contractors who work
`for consulting finns. In the future, it may become more difficult to recruit and retain the employees and independent contractors
`that we would need to continue to grow. Any failure to attract, hire or retain personnel could delay our research and development
`projects or reduce the sales of our products.
`
`Our quarterly revenues fluctuate significantly and may affect the price of our shares and ADSs
`
`Our revenues and operating results fluctuate significantly from quarter to quarter. The many factors that could cause our
`quarterly results to fluctuate include:
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`any delay in our introduction of new products or product enhancements;
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`the size and timing of customer orders and our product shipments;
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`any delay in shipments caused by component shortages or other manufacturing problems;
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`the loss of a major customer;
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`a reduction in the selling price of our products;
`
`the impact of seasonal variations in demand linked to the timing of holiday buying seasons, such as the Chinese
`New Year; and
`
`customer responses to announcements of new products and product enhancements by our competitors.
`
`Due to these and other factors, our results of operations could fluctuate substantially in the future and quarterly comparisons
`may not be reliable indicators of future performance. In addition, because many of our expenses for personnel, facilities and
`equipment are relatively fixed in nature, if revenues fail to meet our expectations we may not be able to reduce expenses
`accordingly. As a result, we could experience less than expected net income or we could experience net losses. These quarterly
`fluctuations may have a negative effect on the price of our shares and ADSs. It is possible that in some fi1t11I'C quarter our results of
`operations will be below the expectations ofpublic market analysts and investors, in which case the price of our shares and ADSs
`could fall.
`
`Our U.S. shareholders could suffer adverse tax consequences if we are characterized as a passive foreign investment company
`
`If, for any taxable year, our passive income or our assets that produce passive income exceed levels provided by law, we may
`be characterized as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. This characterization
`could result in adverse U.S. tax consequences to our shareholders who are subject to U.S. taxation. U.S. persons should consult with
`their own U.S. tax advisors with respect to the U.S. tax consequences of investing in our shares or our ADSs. See "Item l0—
`Additional Inforrnation—Taxation—United States Taxation—Passive Foreign Investment Company".
`
`Events anticipated in forward-looking statements in this annual report may not occur
`
`This annual report contains forward-looking statements that involve risks and uncertainties. These forward-looking statements
`are usually accompanied by words such as "believe," "anticipate," "plan," "expect" and similar expressions. Our actual results may
`differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including the risks
`faced by us described above and elsewhere in this annual report.
`
`Item 4. Information on the Company
`
`Business Overview
`
`Wavecom develops, markets and sells a line of digital wireless standard modules, known as WISMO modules, for use in mobile
`telephones and other wireless applications based on the Global System for Mobile Communications ("GSM") and GPRS standards.
`We are in the process of developing WISMO modules based on UMTS (commonly known as "third generation" or "3G"
`technology). Following our acquisition of Iconn Wireless, a San Diego-based Code Division Multiple Access ("CDMA")
`technology company, in December 2001, we have also begun the development of a CDMA module. When we are able to offer
`WISMO modules in GSM, GPRS, CDMA and UMTS versions, we believe we should be able to address nearly all the world's
`principal wireless markets.
`
`WISMO modules are compact devices that include substantially all of the hardware, software and other technology needed to
`enable wireless communications. WISMO modules offer a quick and simple way to integrate digital wireless communications in
`mobile telephones, wireless modems and a wide range of other applications requiring wireless communications in our target
`markets: automotive, telemetry, multimedia and telephony. Examples of these applications include automotive navigation and
`information systems, personal digital assistants with wireless communication fllIlCti01’lS and devices enabling communication
`between vending machines or utility meters and central control centers. In order to help our customers, we provide them with the
`services and expertise required to integrate WISMO modules into their mobile telephones and other wireless applications. We also
`sell wireless stand-alone and integrated modems that incorporate WISMO modules.
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`Our products incorporate digital wireless technology that we have developed since 1993, when Wavecom was founded. Our
`product development calls for highly specialized technical know-how and experience in digital and radio frequency circuit design
`and microchip architecture, the design of real-time software and, most importantly, the optimal integration of these technologies.
`Between 1993 and 1996, we focused mainly on providing engineering services for our clients‘ customized digital wireless
`products. Building on engineering expertise developed during this period, we commercially introduced the first version of the
`WISMO module in January 1997. We were the first company to commercialize GSM technology in the form of a standard module
`and believe that our current WISMO Quik and WISMO Pac modules, are among the smallest wireless standard modules available.
`
`In March 2000 we began mass production of two dual-band versions of our WISMO Quik 2300 module (fonnerly known as the
`WISMO2C module). In the fourth quarter of 200 l , we commenced mass production of our WISMO Pac 3100 (formerly known as
`WISMO3) module in two dual-band versions. The WISMO Pac module is more compact than the WISMO Quik module and uses
`new packaging technology, known as Chip-Pac® technology, which allows our customers to solder the WISMO Pac module onto
`the printed circuit board of the mobile telephone or other wireless application in a much more efficient manner than the manual
`connection process necessary for the WISMO Quik module. Both the WISMO Quik and WISMO Pac modules are now designed to
`operate on both GSM and GPRS networks.
`
`We expect to commence production of a number of new WISMO modules during 2002. In the second quarter, we plan to
`launch the thinner, lighter-weight WISMOQuik 2400 module. In the fourth quarter, we expect to introduce a quad-band version of
`the WISMO Quik module that will operate on all four GSM/GPRS frequencies (900MHz and 1800MHz for the European and Asian
`markets and l900MHz and 850MHz for the U.S. GSM and GPRS markets). Our objective is to put a CDMA version of the WISMO
`Quik module into mass production by the end of 2002.
`
`Background of the wireless communications industry
`
`The wireless communications industry has grown rapidly over the past decade as wireless communications produ