Wavecom Third Quarter 2008 Financial Results and Strategic Update

Regulatory News:

Wavecom S.A. (Paris:AVM) (NASDAQ:WVCM) today announced financial results for its third quarter 2008 ending September 30, 2008 and a strategic review of its business.

• Third Quarter 2008 Financial Results weakened by global economic slowdown
• Longer term, Wavecom´s core business promising
• Wavecom´s board considers Gemalto´s offer inadequate , as it "fails to deliver sufficient value to merit support"

Third quarter 2008 ending September 30, 2008 financial results summary:

• Wavecom posted sales of €28.9 million in the context of a global economic slowdown
• Product gross margin remains strong at 50.8%
• Backlog has increased from last quarter
• A cost reduction program is in place, leading to targeted future savings between €12–16 million per annum
• Net loss of €4 million.

Over the longer term however, Wavecom´s management remains confident, given the Company´s strong position in the very promising M2M market and the Company´s key strengths:

• A strong traditional product pipeline serving all key M2M industries
• A leading position with inSIM® (embedding SIM chips directly into modules) coupled with Anyware Technologies software, to provide high margin and recurring revenue potential

Gemalto´s offer fails to value this unique position of Wavecom and its prospects for growth, and is highly opportunistic given current stock market volatility. For Gemalto, Wavecom represents a strategic opportunity to maintain leadership in the telecom market

Michel Alard, Chairman of the board of directors of Wavecom commented: "Wavecom has significant future value and the Company´s board of directors is united in their determination to maximise value to all stakeholders."

1. Third Quarter 2008 Overview:

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.

• The Company´s third quarter financial results reflect the global economic slowdown that continues to decrease revenues particularly in two key vertical markets - automobiles and alarms. The overall macro automotive market has experienced a slowdown and, specific to Wavecom, as previously stated, two major contracts came to an end with final shipments delivered in Q3 2007 for the first project and in Q2 2008 for the second project. The demand for alarm systems, particularly in the U.S. has been negatively impacted by the sluggish real estate market.
• Other factors impacting the year–on–year decline include price erosion and unfavorable foreign exchange fluctuations as well as some difficulties in product transitions which have now been resolved.
• New products such as the Wireless Microprocessor® , Q2686 and Q2687 have begun to gain traction and customers are beginning to shift towards these products.
• The backlog (twelve–month rolling confirmed orders) of €32.0 million, as of September 30, 2008, increased from €30.2 million the previous quarter.
• Wavecom´s product gross margins remained strong at €14 million or 50.8% of product revenues which management believes is the highest rate in the industry.
• At an operating level, management has identified areas for expense reduction, targeting future per annum savings between €12 and €16 million taking into account the current difficult economic environment and the Company´s current reduced revenue level.

2. Wavecom´s positioning and long–term prospects

• As the telephone handset sector begins reaching maturity and consequently slows down, M2M (machine to machine communication) is a promising growth area.
• Wavecom is uniquely positioned in wireless M2M with its complement of wireless modules that function as wireless central processing units hosting a robust software platform including remote device management capabilities. It also has the internal expertise to build subsystems such as telematics boxes for cars and trucks or wirelessly–connected alarm panels.
• Among all of the unique attributes described above, inSIM® (embedded SIM) is a key element of future market growth. The current SIM card remains a point of weakness for M2M while the embedded SIM technology increases the ability to meet industrial application conditions. An embedded SIM also simplifies logistics and improves subscriber security.
• In addition to the strategic importance of inSIM®, the complete service platform that Wavecom´s subsidiary Anyware Technologies brings to the Company is equally critical. This technology allows for remote management and diagnostics of all machines equipped with wireless communication and is highly secure.
• As a result of the strategic attributes described above - Wavecom has built a strong and promising three–year pipeline of 289 current projects, 291 new designs and 280 additional promising new business opportunities.

3. Gemalto´s offer

On October 6, 2008 Gemalto announced a unsolicited offer for Wavecom. The Wavecom board of directors responded in a public announcement on October 9, 2008 that after due and careful consideration of Gemalto´s unsolicited offer to take control of Wavecom, it had reached the conclusion that Gemalto´s unsolicited offer is not in the best interests of Wavecom, its shareholders and employees.

Anthony Maher, independent director and Chairman of Wavecom´s M&A sub–committee summarized the position of the board, saying "While Wavecom is always interested in any transaction that benefits shareholders and other stakeholders, we have concluded that the proposed acquisition by Gemalto fails to deliver sufficient value to merit support."

The board will issue a more detailed opinion on Gemalto´s offer together with its formal response, in accordance with AMF (French Stock Market Authorities) and SEC (US Securities and Exchange Commission) regulations within the designated timeframe.

4. Conference Call:

A conference call, reserved for the financial community, will take place at 2:30 pm (Paris time) today (in English). To access this call, please use the following numbers: +33 (0)1 70 99 43 04 in France, +44 (0)20 7806 1968 in the U.K. and +1 718 354 1390 in the U.S. Visit the Wavecom corporate website: www.wavecom.com investors section to listen to the conference call commentary webcast (in English).

Conference call replay available until October 24 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: 3801714#.

Wavecom will announce its fourth quarter 2008 results on February 5, 2009 at 7:00 a.m. Paris time.

Wavecom - the wireless M2M experts

Wavecom is a leading provider of embedded wireless technology for M2M (machine–to–machine) communication. We provide a range of GSM/GPRS, CDMA, EDGE and 3G Wireless CPUs; programmable processors which also act as wireless modules or wireless modems. These are backed by a C and Lua–based cellular wireless software suite which includes a real–time operating system (RTOS), a software development environment based on Eclipse ^TM, and several Plug–Ins (GPS, TCP/IP, security, Bluetooth ^TM, Lua script and more). We also offer a wide range of professional and operated services. Our solutions are used for automotive telematics, smart metering, fleet management, GSM/GPS/satellite tracking, wireless alarms, wireless POS (point of sales), WLL (fixed voice), remote monitoring and many other M2M applications.

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

http://www.wavecom.com

This release contains 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, nascent vertical markets, a long sales cycle, the uncertain rate of development of the M2M market for wireless communications, success of the Company´s new services line, technological changes, vertical integration by other market participants, failure to protect the Company´s intellectual property, possible quality issues on our products, dependence on third parties, in particular its manufacturing partner and other third party suppliers, currency rate fluctuations and other risks associated with managing growth or associated with the Company´s global operations. These and other risks and uncertainties, which are described in more detail in the Company´s most recent filings with the U.S. 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.

Wavecom shareholders are urged to read Wavecom´s Note en réponse when it is filed with the Autorité des Marchés (the "AMF") and its Solicitation/Recommendation Statement on Schedule 14D–9 when it is filed with the U.S. Securities and Exchange Commission (the "SEC"), as they will contain important information. The Note en réponse and the Solicitation/Recommendation Statement and other public filings made from time to time by the Company are available without charge from, respectively, the AMF´s website at www.amf–france.org or the SEC´s website at www.sec.gov, and at www.wavecom.com.

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 31,		At Sept 30,
		2007		2008
		Euro		Euro
ASSETS
Current assets :
Cash and cash equivalents		4,677		3,359
Marketable securities		134,610		122,189
Accounts receivable, net		29,467		20,872
Inventory		6,032		5,458
Value added tax recoverable		1,124		684
Prepaid expenses and other current assets		3,141		2,221
Deferred tax assets		4,514		4,514
Total current assets		183,565		159,297
Other assets :
Long–term investments		3,731		5,968
Other assets and Interest in associates		4,517		4,138
Research tax credit		2,049		2,677
Income tax receivable		13,083		13,083
Intangible and tangible assets, net		16,336		18,617
Goodwill		8,117		16,721
Total assets		231,398		220,501
LIABILITIES AND SHAREHOLDERS´ EQUITY
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