Alvarion: Exploiting Wall Street's Apprehension

| About: Alvarion Ltd. (ALVR)

Let's take another look at Alvarion (Nasdaq: ALVR). What was known about the company when it was traded at the end of 2004 at a value of $1.048 billion? The facts were that it had an operating loss of $16 million and a net loss of $12 million on $127 million sales (it had financial profits that partially offset its underlying loss). The consensus estimate for 2006 expects Alvarion to post sales of $203 million and a loss of $620,000.

Looking at it from Main Street, the company has been making impressive progress. So why is it currently valued at $400 million "only?" Because they see things differently on Wall Street. Over there the pundits say that at the beginning of 2004, it looked as if WiMAX, a field in which Alvarion was the leading company, was “catching on” in Main Street, and the assumption was that if it indeed caught on, Alavrion would be heading north from every aspect. That was why, they claim, the company deserved the high valuation it had back then.

Two years have now passed and WiMAX has still not caught on as the council of sages on Wall Street had predicted. Note that all this has nothing to with Alvarion itself. I recall the then-CEO Zvi Slonimsky declaring that it would take a long time for WiMAX to succeed, and that this was the starting point on which Alvarion had built its strategic plans, which remain the same today.

Over the two years that have elapsed since then, there has been an increasing feeling, largely on Main Street, that WiMAX will indeed catch on, and proof of this can be seen in the moves of giants such as Intel (Nasdaq: INTC), Sprint Nextel (NYSE: S) and others who have been investing a fortune in the field.

Dozens, if not hundreds of new companies from the West Coast to the Far East have been entering this field, yet Alvarion has not been forced into a retreat; it has continued to grow and it is still one of the leaders. But now the gurus on Wall Street are saying, “Hey, Alvarion is not leading the field any more. It’s no longer the only star around. It is now facing cutthroat competition, not just from the big players, but also from an entire raft of Indian, Chinese and European companies too.”

This is why the analysts are now apprehensive, a reason that I feel should encourage long-term investors to exploit the weakness, and enter the stock gradually. CIBC is beginning to understand this, as are others. The fact is that the number of analysts who rate the stock “Buy” has risen to nine from six three months ago.

When I say that in Wall Street time is not on the side of small companies with potential, I refer to companies such as Alvarion. But as long as Alvarion maintains its technological lead and is gathering both experience and customers, I have no doubt that once WiMAX makes the breakthrough, Alvarion’s stock will be back on form in Wall Street. So people should have patience and faith in the company’s management, rather than in the commentators on Wall Street.

ALVR 1-yr chart:


Published originally by Globes [online], Israel business news -
© Copyright of Globes Publisher Itonut (1983) Ltd. 2006. Republished on Seeking Alpha with full permission.