Wavecom reports fourth quarter and year-end results

Annual Revenues Rise 87%; Product Sales Increase 170%
Issy-les-Moulineaux, France-February 21, 2000

Wavecom S.A., (NASDAQ:WVCM; Nouveau Marché: WAVECOM), a leading developer of digital Wireless Standard Modules (WISMO™), today announced operating results for the fourth quarter and full year ended December 31, 1999. All results are unaudited and reported in accordance with U.S. generally accepted accounting principles.

For the fourth quarter of 1999, Wavecom reported total revenues of €6.6 million, versus €6.3 million in the year-ago period. Product sales grew 55.9% quarter-over-quarter from €3.9 million in 1998 to €6.1 million in 1999, primarily from increased sales into applications other than Telephony. Product sales through direct channels represented 65.8% of total product sales. Direct product sales by target market as a percentage of total product sales were: Telephony, 15.2%; Automotive, 12.2%; Telemetry, 28.4%; and Multimedia, 10%. Product sales through indirect channels for the quarter represented 34.2% of total product revenues. There were no mobile telephone sales in the fourth quarter as the Mitsubishi contract was completed on schedule in Q399, with deliveries under new mobile telephone contracts expected to begin at the end of this year's second quarter. Product gross margin improved to 25.5% in the fourth quarter of 1999 from 22.2% in the same period of 1998.

"Wavecom's first year as a public company was marked by a number of accomplishments," said Michel Alard, the Company's chairman. "We achieved several important milestones, which include the successful transition from a services-based to a products-based business model, securing strategically important contracts for mobile telephones and other targeted applications, and penetrating new geographic markets with vast growth potential. We have redefined our target industry sectors to enable Wavecom to be more responsive to customers' needs and react quickly to dynamic market demands. Our product pipeline is building and we continue to adapt existing products for new digital wireless standards" he added.

Service revenues declined from €2.2 million in Q498 to €0.5 million in Q499 reflecting the completion of Wavecom's shift in strategy from services to products. The cost of providing services decreased from €2.0 million in 1998's fourth quarter to €0.6 million in Q499.

For the fourth quarter of 1999, the Company had an operating loss of €4.8 million, versus €2.6 million for the comparable 1998 period. The quarterly operating loss includes higher research and development expenses related to developing the second generation of wireless modems, the dual-band versions of the WISMO2 module, the WISMO3 module, and the GPRS versions of WISMO modules.

Wavecom reported a fourth quarter 1999 net loss of €4.0 million, or €0.30 per basic and diluted share, compared to a net loss of €1.8 million, or €0.18 per basic and diluted share, for the 1998 period.

For the year ended December 31, 1999, total revenues rose 86.7% to €36.6 million from €19.6 million in 1998. Product revenues, which accounted for almost 95% of total revenues in 1999, increased 170% to €34.6 million from €12.8 million a year earlier. Annual product sales through direct channels represented 73% of total product sales. Direct product sales by target market as a percentage of total annual product sales were: Telephony, 43.2%; Automotive, 8.7%; Telemetry, 16.7%; and Multimedia, 4.4%. Annual product sales through indirect channels represented 27% of total product revenues. Mobile telephone sales under the Mitsubishi contract represented 35.2% of annual product revenues. Gross margins on product sales in 1999 improved to 24.1% from 17.5% in 1998 as higher production volumes on mature products reduced unit costs.

Service revenues declined from €5.8 million in 1998 to €1.9 million in 1999. The cost of providing these services decreased from €3.7 million in 1998 to €2.1 million in 1999, which included losses related to the ICO Global Communications contract recorded in the second quarter of 1999.

For the full year 1999, the Company reported an operating loss of €14.4 million versus €6.8 million in the previous year. The 1999 operating loss included a €2.6 million loss provision related to Wavecom's contracts with ICO, which filed for bankruptcy last August.

Wavecom's net loss for 1999 was €15.0 million, or €1.26 per basic and diluted share, compared to a net loss of €6.3 million, or €0.63 per basic and diluted share, for 1998. The 1999 net loss includes non-cash charges totaling €2.7 million related to amortization of deferred stock option expense and for the beneficial conversion feature of convertible debt, compared to €0.1 million in 1998. Excluding these non-cash items, Wavecom's net loss for the full year 1999 was €12.3 million, or €1.03 per basic and diluted share.