Alvarion Cuts Staff, Wages

Alvarion Technologies Ltd. (Nasdaq: ALVR) is cutting staff and salaries in an effort to break even as it struggles to cope with a shift in the wireless broadband market. (See Alvarion Lowers Employee Wages.)

The Israeli vendor is one of the main independent WiMax infrastructure vendors, but has seen its core market decimated as wireless broadband network operators shift away from WiMax and towards Long Term Evolution Time Division Duplex (LTE TDD) in the radio access network.

Having recorded declining revenues and further losses in 2011 and in the first quarter of 2012, the vendor now says it is reducing headcount by an unspecified number and implementing a company-wide cut in salaries. (See Alvarion Reports $6.9M Loss in Q1.)

The company declined to say how many staff it currently employs and how many of those staff are being affected by the headcount reduction.

At the end of 2011 the company had 542 staff, including 225 in R&D and 212 in sales and marketing. Of those 542 staff, 361 were based in Israel.

Alvarion, which appointed a new CEO in April, has been seeking to expand its business beyond WiMax ever since it recognized the threat LTE TDD posed to its core business. (See Alvarion Looks Beyond WiMax, Alvarion Hearts TD-LTE and Alvarion to Support TD-LTE.)

As a result, the company has been developing new products, such as the BreezeCompact small cell that supports LTE TDD. Most notably, though, Alvarion acquired Wavion in November 2011 to enter the increasingly hot service provider Wi-Fi equipment market. (See Alvarion to Buy Wavion for $30M, Alvarion Unveils Compact Base Station, Wi-Fi 'Wild West' Challenges Carriers, Mobile Ops Can Learn From Wi-Fi, Cisco Says and Should Wi-Fi Be a Free-for-All? )

Why this matters
To ensure its survival, Alvarion needs to align its costs with its revenues, so it doesn't continue to bleed cash, and generate a greater proportion of its sales from non-WiMax product lines.

Today's news shows the company is acting on the former, though details about the exact impact on its operating costs are yet to be revealed. When it announced its first-quarter results on May 16, Alvarion predicted it would break even (at an operating level) during the fourth quarter of this year.

In addition, there are signs that Alvarion is generating new sales from the Wavion acquisition. While its legacy WiMax lines still accounted for about half of its first-quarter revenues of US$33.3 million, the Wi-Fi solutions generated about 20 percent and that line of business is set to grow, with the company claiming to have landed some Tier 1 carrier deals in Asia/Pacific. It has also struck a distribution deal in the U.S. for its service provider Wi-Fi gear. (See Alvarion Takes Carrier Wi-Fi to US.)

But to keep its staff and investors motivated and its customers calm, the company needs to decide quickly what it intends to do with its legacy products. Alvarion indicated earlier in the year that it is exploring "a variety of options" for its WiMax business, which suggests it is seeking a buyer or looking at ways to wind down that business.

Some further clarity on its strategy and near-term actions, plus further signs of demand for its carrier Wi-Fi product line, are needed if Alvarion is to breathe some life back into its share price, which is currently languishing at $0.48, giving the vendor a market value of just $30 million.

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— Ray Le Maistre, International Managing Editor, Light Reading

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