Wavecom Announces Second Quarter 2008 Financial Results

ISSY-LES-MOULINEAUX, France--(Business Wire)--
Regulatory News:

Wavecom S.A. (Paris:AVM) (NASDAQ:WVCM) today announced financial
results for its second quarter 2008 ending June 30, 2008.

Ron Black, Wavecom Chief Executive Officer, commented: "Our
business continues to be confronted by an uncertain economy,
particularly in the US where some markets slowed considerably last
quarter. At the same time, while our volumes were strong, the
product-mix is transitioning from high-priced/low-margin to
low-priced/high-margin products that further impacted revenue
quarter-on-quarter. Despite these factors the quarter was profitable,
the gross margin as percent of sales improved and we generated cash
thanks to our attention to expense control."

As announced in a press release today, Wavecom's board of
directors met on July 22, 2008 to activate a share repurchase program.

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In millions of euros (Under US GAAP) Consolidated
Group Results
----------------------------------------------------------------------
Q2 Q1 Q2
2007 2008 2008
----------------------------------------------------------------------
Revenues 56.1 38.1 34.9
----------------------------------------------------------------------
Gross profit 24.4 19.6 18.3
----------------------------------------------------------------------
Operating expenses 19.6 22.7 18.9
----------------------------------------------------------------------
Operating income/(loss) 4.8 (3.1) (0.5)
----------------------------------------------------------------------
Net income/(loss) 5.0 (2.3) 0.6
----------------------------------------------------------------------
Additional information
----------------------------------------------------------------------
Operating income/(loss) 4.8 (3.1) (0.5)
----------------------------------------------------------------------
Stock based related expenses:
Research and development (0.1) (1.1) (0.5)
Sales and marketing (0.2) (1.8) -
General and administrative (0.4) (1.9) (0.2)
----------------------------------------------------------------------
Amortization expense related to acquisitions (0.8) (0.9) (1.0)
----------------------------------------------------------------------
Operating income before stock based compensation and
amortization expense related to acquisitions 6.3 2.6 1.2
----------------------------------------------------------------------
*T

Second Quarter 2008 Highlights:

All figures are unaudited and reported in accordance with U.S.
generally accepted accounting principles (U.S. GAAP), unless otherwise
noted. Condensed and consolidated financial tables are provided at the
end of this release.

Revenues: Revenues for the second quarter 2008 were EUR 34.9
million, declining 38% year-on-year (34% at constant currencies, i.e.
using the second quarter 2007 exchange rate for the U.S. dollar to the
euro), the continued weak U.S. dollar had a negative impact of
approximately EUR 2.3 million. Revenues declined 8% versus first
quarter 2008 or 7% at constant currencies. Services revenue accounted
for EUR 1.5 million with contribution mainly from Anyware
Technologies.

Performances in the regions were mixed: EMEA revenues were flat
compared to the previous quarter stopping declines that the region
experienced over the last several quarters as our sales efforts are
beginning to pay off. The Americas region revenues declined compared
to the first quarter 2008 as it continued to face challenges in a
difficult macro economic environment with certain sectors, like
alarms, having slowed down. Also in the second quarter, the region
experienced the end of a project from a large U.S. customer for which
new opportunities are being studied. Revenues from the APAC region
increased sequentially from the first quarter by 22% as a result of
the growing customer base and business activity in recent quarters.

In the second quarter 2008, the breakdown of product revenues by
region was as follows: EMEA 56%, Americas 21% and APAC 23%.

Revenues from the top ten customers represented 51% (7 of which
were indirect distributor accounts), down compared to the previous
quarter which was at 56%.

Backlog: The 12-month product backlog at June 30, 2008 was EUR
30.2 million compared to EUR 37.5 million at March 31, 2008. The
decline in backlog is largely coming from the EMEA region as one major
customer transitioned away from distribution while new direct orders
have not yet been placed. Backlog as of any given date may not be an
accurate indicator of sales for any future period.

Gross Margin: For the second quarter 2008 gross profit amounted to
EUR 18.3 million, representing 52.5% of sales compared to 51.5% in the
first quarter 2008 and 43.4% in the second quarter 2007. The gross
margin from products also increased incrementally to 54.7% of sales
compared to 52.8% the previous quarter and 46.0% in the second quarter
2007. The high level of gross margin is the result of a product mix
skewed to higher margin products during the quarter as well as a
favorable downward trend in component prices.

Operating Expenses: Total operating expenses for the second
quarter 2008 of EUR 18.9 million declined as compared to the previous
quarter of EUR 22.7 million and EUR 19.6 million in Q2 2007. Excluding
stock-based related expenses, operating expenses amounted to EUR 18.2
million versus EUR 17.9 million in first quarter 2008 and EUR 18.9
million a year ago. At June 30, 2008, headcount (salaried employees)
stood at 493 increasing from 485 at March 31, 2008.

Profit: Operating result for the second quarter 2008 was a loss of
EUR 0.5 million, improving from a loss of EUR 3.1 million in the
previous quarter. This improvement is mainly due to the fact that last
quarter the company decided to cancel a stock option plan which
resulted in a significant exceptional change in the first quarter
2008. In the second quarter 2007, Wavecom reported an operating profit
of EUR 4.8 million.

The Company reported a net profit of EUR 0.6 million for the
second quarter 2008, compared to a net loss of EUR 2.3 million
recorded in the previous quarter and a profit of EUR 5.0 million for
the same period the year before.

As shown in the above table (on page one), on a non-GAAP basis,
excluding stock-based related expenses and expenses related to our
acquisitions, the operating income was EUR 1.2 million for the second
quarter 2008, compared to EUR 2.6 million for the previous quarter and
EUR 6.3 million a year ago.

Balance sheet: Wavecom's cash and marketable securities position
increased quarter-on-quarter to EUR 130.8 million at June 30, 2008
from EUR 127.5 million at March 31, 2008. Net cash (cash and
marketable securities less convertible bonds) stood at EUR 50.3
million. Inventory decreased incrementally to EUR 4.3 million compared
with EUR 4.9 million the previous quarter. DSOs (Days Sales
Outstanding) improved to 59 days compared with 67 days the previous
quarter.

Chantal Bourgeat, Wavecom CFO, concluded, "Our financial results
reflect the overall uncertainties that our customers face in the
current economic environment, resulting in slower than anticipated
demand. If this environment continues, we expect the second half of
2008 to remain challenging. As such we will continue to focus on
operating efficiency and cost control. Over the last quarter we were
encouraged by the number of new design wins in each region that should
translate into revenues in the quarters to come. There is also
indication of increasing stability in automotive and metering, the two
segments we believe are likely to drive recovery, although the
timeframe is still unclear given the economy."

Business Highlights:

Collaboration with EDMI Limited (Singapore Exchange: EDMI) and
Wavecom. The two companies have worked together to help establish the
Advanced Metering Infrastructure (AMI) in Australia and New Zealand
markets.

Wavecom received four M2M Value Chain Enabler Awards, (M2M United)
recognizing the contribution of its technology to innovative M2M
solutions in water and wastewater, fleet management and location based
services.

World's first Cellular-Satellite hybrid module launched by
Wavecom. Wavecom announced a groundbreaking combination of cellular,
satellite and GPS technology (select models) on a single device: the
Wavecom Q52 Omni Wireless CPU(R).

Machine-to-Machine anti-jamming wireless security Plug-In
introduced by Wavecom. As wireless M2M (machine-to-machine) products
become more and more sophisticated, the data that they generate are
increasingly valuable to the enterprises using it. With the Open AT(R)
Security Plug-In, Wavecom launched a software solution which addresses
all these concerns.

Tattletale Portable Alarm Systems, Inc. announced it has chosen
Wavecom as the single source for cellular wireless technology to
enable their pioneering portable alarm systems designed to protect any
asset, anywhere in the U.S. or Canada.

Conference Call:

Today at 2:30 p.m. (Paris time) Wavecom management will host a
conference call in English reserved for financial professionals
commenting on its second quarter 2008 results. To access this call,
please use the following numbers: +33 (0)1 70 99 43 00 in France, +44
(0)20 7806 1966 in the U.K. and +1 718 354 1388 in the U.S. Visit the
Wavecom corporate website: www.wavecom.com investors section to listen
to the conference call commentary webcast (in English).

This call will be followed by a presentation to the financial
community in Paris by Wavecom management at 4:00 pm.

Conference call replay available until July 25 by dialing-in to
the following numbers: +33 (0)1 71 23 02 48 in France, +44 (0)20 7806
1970 in the UK and +1 718 354 1112 in the US with access code:
7060664#.

Wavecom will announce its third quarter 2008 results on October
22, 2008 at 7:00 a.m. Paris time.

About Wavecom

Wavecom is a worldwide leader in embedded industrial wireless
communication solutions for automotive, machine-to-machine and mobile
professional applications. Wavecom's solutions include the Open AT(R)
software platform encompassing the Wavecom Open AT(R) Operating
System, a wide range of Plug-Ins, the Open AT(R) Integrated
Development Environment (IDE) along with a market-leading range of
Wireless CPUs (Central Processing Units), and an expanding portfolio
of services. These complete embedded solutions enable makers of all
types of machines to develop a new breed of intelligent wireless
applications, without the need of external processors and other ASICs
(Application Specific Integrated Circuits) and components.

Founded in 1993 and headquartered in Paris, Wavecom has
subsidiaries in Hong Kong (PRC), Research Triangle Park, NC (USA), and
Farnborough (UK) and Munich (Germany). Wavecom is publicly traded on
Euronext Paris (Eurolist) in France and on the NASDAQ (WVCM) exchange
in the U.S.

This press release contains forward-looking statements that relate
to the Company's future business performance, operating expenses and
financial results and objectives. Such forward-looking statements are
based on the current expectations and assumptions of the Company's
management only and involve risk and uncertainties. Potential risks
and uncertainties include, without limitation, whether the Company
will be commercially successful in implementing its strategies,
whether there will be continued growth in the vertical markets and
demand for the Company's products, the Company's reliance on a single
contract manufacturer in China for all production requirements, an
unanticipated decrease in orders from one of the Company's principal
customers or customer cancellation or scale-down of a major project,
changes in foreign currency exchange rates, dependence on third
parties, new products or technological developments introduced by
competitors, customer and supplier concerns regarding the Company's
overall financial position, and risks associated with managing growth.
Unfavorable developments in connection with these and other risks and
uncertainties described in the Company's reports on file with the
Securities and Exchange Commission could cause the Company to fail to
achieve the anticipated or targeted performance or results. As a
consequence, the Company's actual performance and results may be
materially different from those expressed by the forward-looking
statements above.

Condensed financial tables follow

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WAVECOM S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for share and per share data)

Prepared in accordance with U.S. generally accepted accounting
principles.

Three months ended
June 30, March 31, June 30,
2007 2008 2008

---------- ---------- ----------
Euro Euro Euro
Revenues :
Product sales 55,776 36,907 33,401
Services revenue 334 1,196 1,499
---------- ---------- ----------
56,110 38,103 34,900
Cost of revenues :
Cost of goods sold 30,139 17,427 15,141
Cost of services 1,600 1,054 1,425
---------- ---------- ----------
31,739 18,481 16,566
---------- ---------- ----------
Gross profit 24,371 19,622 18,334
Operating expenses :
Research and development 8,179 9,724 9,319
Sales and marketing 5,740 7,198 5,810
General and administrative 5,700 5,823 3,733
---------- ---------- ----------
Total operating expenses 19,619 22,745 18,862
---------- ---------- ----------
Operating income (loss) 4,752 (3,123) (528)
---------- ---------- ----------
Interest income and other financial
income, net 420 825 870
Foreign exchange gain (loss), net (51) (44) 171
---------- ---------- ----------
Total financial income 369 781 1,041
---------- ---------- ----------
Income (loss) before income taxes 5,121 (2,342) 513
Income tax expense (benefit) 91 (7) (38)
---------- ---------- ----------
Net income (loss) 5,030 (2,335) 551
========== ========== ==========
Basic net income (loss) per share 0.33 (0.15) 0.04
========== ========== ==========
Diluted net income (loss) per share 0.30 (0.15) 0.04
========== ========== ==========
Number of shares used for computing :
- basic 15,447,796 15,254,603 15,259,641
- diluted 16,645,446 15,254,603 18,329,375
*T

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WAVECOM S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for share and per share data)

Prepared in accordance with U.S. generally accepted accounting
principles.

Six months ended
June 30, June 30,
2007 2008

---------- ----------
Euro Euro
Revenues :
Product sales 103,562 70,308
Services revenue 665 2,694
---------- ----------
104,227 73,002
Cost of revenues :
Cost of goods sold 56,152 32,568
Cost of services 3,158 2,478
---------- ----------
59,310 35,046
---------- ----------
Gross profit 44,917 37,956
Operating expenses :
Research and development 15,937 19,043
Sales and marketing 11,154 13,008
General and administrative 11,484 9,557
---------- ----------
Total operating expenses 38,575 41,608
---------- ----------
Operating income (loss) 6,342 (3,652)
---------- ----------
Interest income and other financial income, net 836 1,695
Foreign exchange gain (loss), net (98) 127
---------- ----------
Total financial income 738 1,822
---------- ----------
Income (loss) before income taxes 7,080 (1,830)
Income tax expense (benefit) 102 (45)
---------- ----------
Net income (loss) 6,978 (1,785)
========== ==========
Basic net income (loss) per share 0.45 (0.12)
========== ==========
Diluted net income (loss) per share 0.42 (0.12)
========== ==========
Number of shares used for computing :
- basic 15,424,475 15,257,142
- diluted 16,515,843 15,257,142
*T

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WAVECOM S.A.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except for share data)

Prepared in accordance with U.S. generally accepted accounting
principles.

At December At June
31, 30,
2007 2008
----------- --------
Euro Euro
ASSETS

Current assets :
Cash and cash equivalents 4,677 3,745
Marketable securities 134,610 127,065
Accounts receivable, net 29,467 23,050
Inventory 6,032 4,302
Value added tax recoverable 1,124 774
Prepaid expenses and other current assets 3,141 3,648
Deferred tax assets 4,514 4,514
----------- --------
Total current assets 183,565 167,098
Other assets :
Long-term investments 3,731 5,706
Other assets and Interest in associates 4,517 4,290
Research tax credit 2,049 2,758
Income tax receivable 13,083 13,083
Intangible and tangible assets, net 16,336 19,911
Goodwill 8,117 16,678
----------- --------
Total assets 231,398 229,524
=========== ========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities :
Accounts payable 27,612 23,386
Accrued compensation 8,584 5,879
Current portion of other accrued expenses 3,572 2,872
Current portion of convertible bonds 664 701
Current portion of capitalized lease
obligations 207 275
Deferred revenue and advances received from
customers 307 1,067
Deferred tax liabilities - 211
Other liabilities 3,652 5,942
----------- --------
Total current liabilities 44,598 40,333

Long-term liabilities :
Long-term portion of other accrued expenses 16,636 15,401
Long-term portion of convertible bonds 80,500 80,500
Long-term portion of capitalized lease
obligations 340 304
Other long-term liabilities 616 550
----------- --------
Total long-term liabilities 98,092 96,755

Shareholders' equity :
Shares, euro 1 nominal value, 15,811,381 shares
authorized, issued and outstanding at
June 30, 2008 (15,796,591 at December 31, 2007) 15,797 15,811
Additional paid-in capital 146,052 151,663
Treasury stock at cost (391,649 shares at June
30, 2008 and 544,322 at December 31, 2007) (8,823) (7,541)
Accumulated deficit (62,548) (65,614)
Accumulated other comprehensive income (loss) (1,770) (1,883)
----------- --------
Total shareholders' equity 88,708 92,436
----------- --------
Total liabilities and shareholders' equity 231,398 229,524
=========== ========
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WAVECOM S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Prepared in accordance with U.S. generally accepted accounting
principles.

Three months
ended June 30,
2007 2008

------- --------
Euro Euro
Cash flows from operating activities :
Net income (loss) 6,978 (1,785)
Adjustments to reconcile net income (loss) to net
cash provided (used) by
operating activities:
Amortization and impairment of intangible and
tangible assets 4,257 4,311
Amortization of debt issue costs - 280
Share-based compensation 1,348 5,541
Loss (gain) on sales and retirement of tangible
assets 4 (14)
Disposal of marketable securities, net - 7,592
Deferred tax - (95)
Net increase (decrease) in cash from working
capital items (9,579) 777
------- --------
Net cash provided by operating activities 3,008 16,607
------- --------
Cash flows from investing activities :
Disposal of long-term investments (17) (1,974)
Purchases of intangible and tangible assets (2,652) (4,284)
Acquisition of certain assets, net of cash
acquired - (10,750)
Proceeds from sale of intangible and tangible
assets - 57
------- --------
Net cash used by investing activities (2,669) (16,951)
------- --------
Cash flows from financing activities :
Principal payments on capital lease obligations (147) (151)
Proceeds from exercise of stock options and
founders' warrants 1,327 85
------- --------
Net cash provided (used) by financing
activities 1,180 (66)
Effect of exchange rate changes on cash and cash
equivalents (241) (522)
------- --------
Net increase (decrease) in cash and cash equivalents 1,278 (932)
Cash and cash equivalents, beginning of period 54,776 4,677
------- --------
Cash and cash equivalents, end of period 56,054 3,745
======= ========
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Wavecom
Lisa Ann Sanders, +33 (0)1 46 29 41 81
Director Communications and Investor Relations
lisaann.sanders@wavecom.com
or
US Investor Relations
Lovallo Communications Group, LLC
John D. Lovallo, +1 203 431 0587
President
johnlovalloirpr@sbcglobal.net

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