Wavecom reports fourth quarter and year-end 2001 results

Annual Revenues Rise 392%; Quarterly Sales Grow 241% Year-Over-Year. Quarterly Operating Income Increases 202% Sequentially; Annual Operating Income Reaches € 3.0 million.
Issy-les-Moulineaux, France-February 20, 2002
Wavecom S.A., (NASDAQ: WVCM; next Nouveau Marche: 7306), a leading developer of digital wireless standard modules (WISMO), today announced operating results for the fourth quarter and full-year ended December 31, 2001. All results are unaudited and reported in accordance with U.S. generally accepted accounting principles.

For the fourth quarter of 2001, Wavecom reported that total revenues rose 241% to €105.3 million compared with €30.9 million for the fourth quarter of 2000. Total revenues for the full year ended December 31, 2001 rose 392% to €322.7 million from €65.6 million in 2000.

The rise in Wavecom’s fourth quarter revenues was driven primarily by strong sales into the Chinese market, including a strong seasonal increase in sales preceding the Chinese New Year. Wavecom continued to significantly increase its manufacturing capacity in the fourth quarter, as product shipments rose to 1.4 million units from 1.1 million units in the third quarter. Total product shipments for the full year 2001 totaled 4.0 million units compared to 580,000 units in 2000.

“2001 was a milestone year for Wavecom, both operationally and strategically,” said Michel Alard, the Company’s chairman. “On the operational front, we achieved profitability after three loss years while we invested in the business, significantly increased our production capabilities, and experienced substantial revenue growth. Wavecom saw strong customer demand for its products throughout 2001 and signed several strategically important agreements. In the fourth quarter, we expanded our footprint in the Asian market by winning a contract with Soutec, a manufacturer of mobile phones in China, and we further established Wavecom’s presence in the U.S. market by equipping Handspring’s newly launched Treo line of communicators. These recent deals reflect Wavecom’s long-term strategic objective of developing and penetrating markets in key geographic regions around the world.”

Product gross margins in the fourth quarter were 22.7%, compared with 13.2% in the same quarter last year, and compared with 21.2% in the third quarter of 2001. The increase in gross margins in the fourth quarter reflected primarily lower component costs compared with prior periods, partly offset by declining average selling prices for WISMO modules and modems. In order to expand its presence in the market, the Company expects to continue to reduce average selling prices in the months ahead. However, Wavecom’s goal is for its ongoing improvements to existing products, its introduction of new more highly-integrated products, and its increased negotiating power given its higher volumes, to enable the Company to reduce costs in the first half of 2002 at a faster rate than reductions in selling prices.

For the fourth quarter of 2001, Wavecom reported operating income of €4.5 million versus an operating loss of €5.5 million last year, and compared to operating income of €1.5 million for the third quarter of 2001. Operating expenditures in the fourth quarter were €18.1 million compared with €9.3 million a year ago and €16.7 million in the third quarter of 2001. The rise in operating expenses was primarily due to higher R&D costs for work on new products (including the recently announced WISMO Quik Q2400) and evolving standards (in particular GPRS, 3G and CDMA). Wavecom also incurred increased spending for sales and marketing activities related to new product launches in the fourth quarter and increased headcount.

The Company reported fourth quarter net income of €6.2 million, or €0.42 per share (€0.40 on a diluted basis), compared to a net loss of €1.7 million, or €0.11 per share, for the same period last year. Sequentially, net income rose 46.9% in the fourth quarter from net income of €4.2 million, or €0.29 per share (€0.27 on a diluted basis), in the third quarter of 2001.

For the full year ended December 31, 2001, Wavecom reported operating income of €3.0 million compared to an operating loss of €19.8 million for 2000. Net income for the full year 2001 totaled €9.3 million, or €0.63 per share (€0.61 on a diluted basis), compared to a net loss of €14.5 million, or €1.03 per share, for 2000.

As of December 31, 2001, Wavecom had €132 million in cash, cash equivalents, and short-term investments. Product backlog at December 31, 2001 declined slightly to €129 million from €134 million at September 30, 2001, (increased compared to €103 million at December 31, 2000) due to accelerated deliveries of product to Asian customers by year-end in advance of the Chinese New Year. Overall, customer demand for Wavecom’s products remains strong.