Powerwave Technologies (Nasdaq: PWAV) just missed its third consecutive earnings estimate. In the second quarter, the maker of wireless infrastructure equipment reported non-GAAP earnings of $0.05 per share -- a penny short of the Wall Street consensus, if you care about such minutiae.

Sales rose by 18% year-over-year to $171 million, so there's no lack of demand for Powerwave's equipment. Management promises to work on improving profitability in coming quarters, but not all of those efforts make sense on first sight.

For example, one cost-savings idea puts more equipment on boats rather than air freight. Yes, that's a cheaper shipping option and will shave dollars off the expenses, but also has the negative effects of slowing down deliveries and having more inventory in circulation and not quite installed yet.

The slow shipping is bad for cash-conversion cycles and might not sound good to the customers on the other side of those slow shipments. And the cash-conversion cycle did indeed slow down a bit, though not dramatically so.

Management says that the second half of the year isn't easy to forecast given the dramatic changes that are happening to its telecom customers.

On the one hand, everyone is installing 4G networks, so they need new antennas and supporting equipment. That's great for Powerwave. On the other hand, Clearwire (Nasdaq: CLWR) is wavering on its commitment to WiMax technologies, AT&T (NYSE: T) is trying to buy rival T-Mobile USA, and nobody knows what the competitive landscape will look like in 2012.

Is this uncertain environment really the right time to push through cost-cutting programs that could backfire in more ways than one? I'm not so sure. We'll see how Powerwave's cost structure, cash conversion, and cash flows work out over the next few quarters. In this quarter, the new shipping policy helped Powerwave burn $10.7 million of operating cash rather than creating any, thanks to the larger inventories moving around the world.

For all its flaws, Powerwave is one of the most-watched networking companies in our watchlist system. Though a far cry from category leader and fellow infrastructure play Calix (NYSE: CALX), Powerwave's following holds its own against giant Motorola Solutions (NYSE: MSI) and is way ahead of networking pacesetter Cisco Systems (Nasdaq: CSCO). Creating a basket of watchlist stocks from this complicated sector can help you make more sense of what's happening to Powerwave: