EduBourseActualitésWavecom Announces Second Quarter 2005 Results

Wavecom Announces Second Quarter 2005 Results

Second consecutive quarter of profit and increase in cash position

Issy-les-Moulineaux, France – July 26, 2005
Wavecom SA (NASDAQ: WVCM; Euronext Eurolist compartment C: AVM; ISIN: FR0000073066), a leader in pre-packaged wireless communications solutions for automotive, industrial (machine-to-machine) and mobile professional applications, today announced financial results for its second quarter ended June 30, 2005.

Ron Black, chief executive officer commented “We are pleased to report our second consecutive quarter of profitability, ahead of our previously-stated expectations,” he continued “we are also proud of the recent announcements, particularly the introduction of our newest operating system, and the customer wins over the past several months. The combination of our improved financial performance, new design wins, and new products indicates that we are building momentum. We continue to be optimistic about the long-term growth opportunities for Wavecom and the industrial wireless communication sector.”

Second Quarter 2005 Financial Highlights:

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

Revenues: Second quarter 2005 revenues were €30.7 million, which is a decline of 20% from the previous quarter. This decrease in revenue was related to one significant customer who continues to have technical difficulties unrelated to Wavecom, as well as no further revenue from software and technology licensing, which was a new revenue source last quarter and something that management explained would be irregular for some time. Revenues for vertical applications were €26.6 million, or 87% of total, while that from handsets was €4.1 million or 13%. Excluding the customer issue and licensing, revenues increased marginally quarter over quarter.

Sales by region were as follows: EMEA (Europe, Middle-east and Africa): 57%, APAC (Asia-Pacific): 32% and The Americas: 11%.

Backlog: Backlog as of June 30, 2005 stood at €30.8 million, compared to €29.9 million at the end of the previous quarter, and was made up of 77% vertical applications, compared to 78% at March 31, 2005. As noted previously by management, backlog is not necessarily predictive of revenue in the quarter as we have significantly reduced our manufacturing cycle time and can, therefore, deliver product much more quickly than in the past. As such, customers continue to place orders later in the quarter so that we now see more “turns” business, meaning orders are placed and fulfilled within the quarter.

Gross Margin: Total gross margin was 47% compared to 45% in the previous quarter. The gross margin once again exceeded our previously estimated range of 33% to 35%. This continued improvement in gross margin is the result of the Company refining its product management process, eliminating low-margin products from the portfolio, improving manufacturing yields on a specific product, and the sale of some previously-considered obsolete products.

Profit: Operating profit for the second quarter was €1.6 million compared to €1.8 million of operating profit in the first quarter. Net profit for the second quarter was €3.8 million, or €0.25 per share, up 23% as compared to €3.1 million, or €0.20 per share, in the first quarter 2005. Wavecom recorded a net foreign exchange gain of €2.0 million for the second quarter 2005 compared to €1.4 million in previous quarter.

Cash: Business news: Wavecom’s cash position was €57.4 million at June 30, 2005, increasing from €54.4 million at March 31, 2005. This increase was a result of continued excellent performance on inventory reduction and accounts receivable.

Introduction of operating system O.S. 6.55 with download-over-the-air capabilities for updating both the operating system and application software, as well as Bluetooth functionality;
Download over-the-air was successfully demonstrated by DTC fleet management in Thailand using Wavecom Open AT™ software;
Internet plug-in (TCP/IP) was made a standard feature on all Wavecom solutions;
Wavecom was chosen by Iskraemeco for their automatic electricity meter reading devices;
Chinese software developers at the Petroleum University of China chose Wavecom Open AT™ software for developing their solutions;
Guidepoint announced use of Wavecom solutions in its anti-theft device;
Delta Mobile was chosen as the first North American-based, Wavecom-certified design house.
Outlook: With the stable backlog, increasing “turns” business within the quarter, and new designs beginning to ramp at customers, we remain cautiously optimistic that revenue will grow in the second half. However, as the third quarter is traditionally slow in Europe, revenue this quarter will likely be flat to a modest increase, while we expect fourth quarter top-line growth to be stronger. We expect the gross margin for the second half of 2005 to exceed 35% of revenues, continuing to be above the model range of 33% to 35%. With virtually all restructuring-related expenses now accounted for, the steady-state total operating expenses should be on the order of €13.5 million to €14.0 million, although there may be periodic one-time expenses for product qualifications of up to €1 million.

Conference Call: Today at 3:00 p.m. Paris time, Wavecom management will host a conference call commenting on its second quarter 2005 results, followed by a presentation to the financial community in Paris at 5:30 pm. Visit the Wavecom corporate website: investors section to listen to the conference call commentary webcast (in English).

Wavecom will announce its third quarter 2005 results on October 27, 2005 at 7:00 a.m. Paris time to be followed in the afternoon by a conference call hosted by management commenting on the results.

Financial tables

About Wavecom

Wavecom is a leading provider of integrated technology solutions for wireless voice and data applications to the vertical markets of automotive, machine-to-machine, wireless local loop, mobile computing and wireless PDAs. Wavecom’s offering includes all the software and hardware elements that are necessary to develop truly innovative wireless devices, as well as the development tools and services needed to bring them to market quickly and easily.

Founded in 1993 and headquartered near Paris in Issy-les-Moulineaux, Wavecom has subsidiaries in Hong Kong (PRC), Seoul (South Korea), San Diego (USA) and Darmstadt (Germany). Wavecom is publicly traded on Euronext Paris, France and on the NASDAQ New York, U.S.

For further information, please contact one of our PR agencies.

This press release may contain forward-looking statements that relate to the Company’s plans, objectives, estimates and goals. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes” and “estimates,” and variations of such words and similar expressions identify such forward-looking statements. The Company’s business is subject to numerous risks and uncertainties, including probable variability in the Company’s quarterly operating results, manufacturing capacity constraints, dependence on a limited number of customers, variability in production yields, dependence on third parties, currency rate changes and risks associated with managing growth. These and other risks and uncertainties, which are described in more detail in the Company’s most recent filings with the Securities and Exchange Commission, could cause the Company’s actual results and developments to be materially different from those expressed or implied by any of these forward-looking statements.

Pierre Perrin-Monlouis
Pierre Perrin-Monlouis
Fondateur de Rente et Patrimoine (cabinet de gestion de patrimoine), Pierre Perrin-Monlouis est un analyste et trader pour compte propre. Il vous fait profiter de son expérience en trading grâce à ses analyses financières et décrypte pour vous les actualités des marchés. Son approche globale des marchés combine à la fois l'analyse technique et l'analyse fondamentale sur l'ensemble des marchés : crypto, forex, actions et matières premières.