One of our best short-sale recommendations last year was doubting the hype about WiMax, a technology for wireless data use that could someday rival cellular networks.
We said last spring that for the two “pure plays” on WiMax, Alvarion (NASDAQ:ALVR) and Airspan (AIRN), the market just won’t take off fast enough, and, sure enough, the stocks fell 26% and 45%, respectively, from the end of March though Dec., though Airspan has bounced back quite a bit in the last few months.
Well, Friday, as a bullish research note on WiMax came over the transom from the folks at Pyramid Research, Canaccord Adams analyst Joanna Makris filed a note yesterday saying Airspan is being added to the firm’s “best ideas” list.
Pyramid says 80% of 100 wireless services operators they surveyed said they expect mobile WiMax technology will be offered in 2007 and 2008. (The report doesn’t say whether those same wireless operators think they, themselves, will use WiMax, so, the devil’s in the details.)
Part of Makris’s justification for her Airspan call is that both Sprint (NYSE:S) and Clearwire, the startup of cellular pioneer Craig McCaw, have said they’ll buy the technology, and the other reason is that larger wireless equipment vendors such as Ericsson (NASDAQ:ERIC) and Nortel (NT) may see a need to do more and more business with Airspan as a way to augment the WiMax expertise missing in their product portfolios (and might even consider the company acquisition bait, I would suppose):
In recent weeks we have seen announcements from various carriers regarding WiMAX deployments. We continue to view Airspan as extremely well positioned to capitalize on opportunities in both emerging international markets as well as second-source opportunities among tier-one network operators. Sprint Nextel has announced WiMAX spending of $1 billion in 2007 and up to $2 billion in 2008; Clearwire has raised $900 million in financing from Intel and Motorola dedicated exclusively for deploying a nationwide WiMAX network. Pipex Wireless (U.K.) is currently in trials with Airspan. Deutsche Breitband Dientse GmbH (NYSE:DBD) — an early-stage Airspan customer (announced last quarter) and Germany’s largest WiMAX operator– was one of three operators winning national 3.5 GHz licenses in recent auctions in Germany. DBD has stated that it has plans to spend up to €1B (US$1.3B) on WiMAX in an effort to compete with incumbent Deutsche Telecom for broadband subscribers. Axtel (Mexico), the largest fixed broadband wireless network currently in operation and an existing Airspan customer for legacy equipment, is evaluating several vendors for an upgrade to mobile WiMAX technology.
And then there’s Nortel:
Nortel, having lost the Sprint WiMAX contract to Motorola and Nokia, is under increasing pressure, in our opinion, to make an aggressive move into WiMAX (one of Nortel CEO Zafirovski’s publicly highlighted core growth areas). The company, currently reselling Airspan equipment, is in development with a WiMAX base station […] We believe the relationship with Nortel — which represented less than $1 million in quarterly sales in Q3:06 — represents a significant source of upside for Airspan in the next several months.
Makris says that although Airspan is up 30% in the last 5 weeks, the stock may go to $6 a share. Airspan investors are liking that news, with the shares up 4% Friday at $4.29.
AIRN 1-yr chart