WiMax Delays Drag Down Alvarion

Delays in WiMax projects worldwide hit hard at Alvarion Technologies Ltd. (Nasdaq: ALVR) in the first quarter as the vendor reported a net loss and revealed plans to slash its workforce by 20 percent. (See Alvarion Reports Q1.)

The WiMax vendor said that delays in several "business catalysts" -- such as broadband stimulus funding in the US and the broadband wireless spectrum auction in India -- were reflected in its quarterly results announced today.

Alvarion posted a first-quarter loss of $4.9 million, or $0.08 per share, on revenues of $51.9 million. The vendor's revenues fell significantly in the reporting period. Revenues were down 13.8 percent from $60.2 million, compared to the fourth quarter, and down 23.5 percent from $67.9 million compared with the same period last year.

The company's share price sank 18 percent to $3.04 in early afternoon trading on the Nasdaq .

Alvarion said it will reduce company expenses by $30 million on an annual basis and that most of these savings will come from cutting its workforce by 20 percent in the second quarter, which would be about 175 jobs. The vendor currently employs about 877 people.

New strategy to step up services
The job cuts and cost reduction measures are part of a broader strategic review that Alvarion recently initiated. One of the first conclusions of the review, according to Eran Gorev, president and CEO of Alvarion, who joined the company in December last year, is that the company will remain committed to WiMax.

"There is a market, a healthy market for WiMax," said Gorev, speaking on the results conference call today. "Not only is there a market, but it's large enough for a number of vendors, particularly a company of our size."

A big part of the company's strategic review, in addition to the immediate cost cutting actions, is the goal to add new revenue-generating capabilities -- namely, professional services.

Since Alvarion's WiMax equipment revenue recognition is directly affected by any kind of delay in operator deployments, government funding for broadband projects, or spectrum auction plans, the company wants to have a bigger share of revenue from the projects it gets involved in. And it wants to do that by offering professional services, although Gorev did not specify what those services might be.

"We know that operators and customers spend more dollars than just on Alvarion products and services," he said. "There is an opportunity to capture a larger share of the pie through additional services capabilities."

Gorev added that Alvarion may partner with other companies to add the professional services capabilities.

Alvarion provided no guidance for the second quarter because it cannot predict revenues from certain projects with accuracy, but the company noted that there could be another sequential decline in revenues.

"The overall business climate is improving," said Gorev. "Clearly, we do see opportunities. It may get worse before it gets better."

— Michelle Donegan, European Editor, Light Reading Mobile

Michelle Donegan 12/5/2012 | 4:37:15 PM
re: WiMax Delays Drag Down Alvarion

It seems curious that Alvarion is cutting its workforce while at the same time planning to add new service capabilities. Where will it get the resources for this strategy?

Perhaps the mention of partners is the key?

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