This week, leading 4G WiMAX solution provider Alvarion released its first quarter 2010 financial results - reporting larger than expected declines in revenue and earnings, a new strategic plan and additional opportunities for the second half of 2010
First quarter results were impacted negatively by delays in the U.S. Broadband Stimulus Program, delays in spectrum auctions in India, and the soft overall global credit situation, according to Alvarion's President and CEO Eran Gorev.
The company posted Q1 2010 revenue of $51.9 million, down 13.8% from Q4 2009, off 23.5% from Q1 2009 and lower than Wall Street expectations of $55.7 million. A GAAP net loss of ($4.9) million was reported, considerably larger than the net loss of ($1.3) million in Q4 2009 and ($0.8) million in Q1 2009. The company ended the quarter with cash, cash equivalents and investments totaling $103 million.
While giving no specific guidance, the company said it may experience a further decline in revenue in the second quarter before seeing an improvement towards the second half of 2010. The company recognizes revenue with its customers based on reaching certain milestones and further delays in Q2 could adversely impact revenue in that quarter.
To offset the loss of revenue and align the organization, the company is taken action to reduce expenses by $30 million annually, mostly through a 20% head count reduction in the second quarter with plans to eliminate approximately 175 jobs. Savings from the cost reductions will be used to fund initiatives in other areas including an expansion of its professional services business.
"Q1 results were within the range of our guidance and, as expected, reflect continued delays in several business catalysts,” said Eran Gorev, President and CEO of Alvarion. "Meanwhile, we continued the expansion of our business with several existing customers and made important progress toward securing several major projects in Asia Pacific, EMEA and North America. The timing of actual orders is difficult to anticipate, but we hope to see some impact from these developments in 2010. We are using the delay in the business catalysts to strengthen our capabilities in order to capture a larger share of the projects once the vendor selection processes move forward."
Round one of the US Broadband Stimulus program was certainly a point of frustration for many service providers and broadband wireless access (BWA) vendors. More than a year after the American Recovery and Reinvestment was passed creating $7.2B in stimulus funds, little of the money until recently had been awarded and virtually none for last mile broadband or WiMAX related projects. This week, Alvarion WiMAX customer Digital Bridge announced that it had finally been awarded a $4.3 million grant from the National Telecommunications and Information Administration (NTIA) to deploy 4G WiMAX services to three counties in Idaho. WiMAX and last mile projects are expected to fare better in the second round of the program, with nearly $2.5 billion in funds managed by the Rural Utilities Service (RUS) expected to be awarded starting in June.
Further WiMAX opportunities should come in India, where auctions for 2.3 GHz BWA TDD spectrum is expected to begin in the coming weeks after the conclusion of the 3G auctions that are currently underway. Alvarion is competing with a number of vendors including Motorola, Samsung, Huawei, ZTE and others for the highly coveted Indian market.
Alvarion also announced that it had recently completed a review of its entire business and was implementing a two-phased strategic plan to improve its business. "First, we are transforming the organization, including our cost structure, into one that will best serve our near-term strategic business objectives," said Gorev. "These changes will allow us to more effectively focus on the right opportunities, deliver end-to-end network solutions including professional services, and, in turn, capture a larger proportion of the total project dollars than we have in the past."
Gorev continued. "The second stage of our plan will focus on positioning Alvarion for profitable growth in the increasingly complex multi-technology environment that will evolve over the next couple of years. We intend to complete the process and begin to implement the next phase of our plan during the second half of the year."
Alvarion noted that one of the conclusions from its business review was that there was a "healthy WiMAX market that was large enough to support several vendors." Furthermore, Alvarion's CEO commented that the company needs to "think and act big" and sees additional opportunities in pursuing larger deals where it can provide complete turn-key solutions. The company has recently completed several types of these larger projects with WiMAX service providers LINKEM S.p.A. in Italy and VMAX in Taiwan.