WiMax (Over) Hype: Alvarion Not Likely To Be A Target After All

Alvarion Ltd. (ALVR) has been making headlines and the stock has risen, but for the wrong reason. I may be wrong, but I do not believe that Cisco Systems Inc. (CSCO) is likely to acquire it in the near future. Its past record of acquisitions shows that it buys companies with unique technologies only if there is an immediate and tangible market for them.

With all due respect to the hype that WiMAX has been attracting recently, it is still not clear if it will catch on beyond the third world countries where Alvarion has chalked up a substantial number of small contract wins.

Experts and industry giants still disagree profoundly as to WiMAX's future. The debate has raged on, despite the fact that Intel Corporation (INTC) is continuing to move forward at full speed, at least one giant service provider - Sprint Nextel Corp (S) - is investing billions of dollars in the roll-out of a WiMAX network, and last week Nokia Corp. (NOK) became the latest convert to the camp of stalwarts championing the case for WiMAX.

Not everyone has been bowled over by the euphoria over the purported WiMAX revolution. Yesterday, for example, Goldman Sachs reiterated its "Sell" rating for Canadian telecommunications equipment giant Nortel Networks (NT) and also lowered its target price and estimates for the company.

The bank cited, among other things, a decision by the US's second largest telecommunications services provider Verizon Communications Inc. (VZ) to opt in the long-term for the 3GPP Long Term Evolution [LTE] standard, which is an upgrade to 3G technology, and considered a competitor to mobile WiMAX. Nortel, as is known, has staked all of its meager cash resources on WiMAX's success.

Verizon is a major customer of both Cisco and Nortel, and I find it hard to imagine that Cisco will enter WiMAX with Verizon declaring its decision to opt for the alternative technology. Of the big equipment providers, Ericsson (ERIC) is the one backing the rival LTE standard, so Verizon's decision will be excellent news for it. In any event, Alvarion's value, when I compare it with that of ECI Telecom Ltd., whose sale was closed on Sunday, still looks pretty steep to me. I cannot envisage the company getting a sizable premium over its current price, should Cisco decide to acquire it.

Aside from Ericsson, another company that has its doubts about WiMAX's success is handset processor gorilla Qualcomm Inc. (QCOM), which sees 3G rapidly developing, and capturing significant markets. The company's CEO Dr. Paul Jacobs preceded everyone else two years ago, when he declared that "WiMAX is dead." It has struggled to take off ever since, although it certainly does not look dead yet.

Tech stock guru George Gilder does not believe in WiMAX either, and said as much when he visited Tel Aviv earlier this year, and repeated it again on his forum last Sunday. Gilder thinks that it could catch on in the third world (where Alvarion operates), but not in developed countries, which he believes offer great prospects for Qualcomm's Evolution-Data Optimize (EVDO)-based 3G technology. He does not believe Sprint's declaration that it will roll out a nationwide WiMAX-based network within a year, and recalls that it took an entire decade to build the CDMA network. Gilder predicts that by the time WiMAX is up and running, EVDO will be a fait accompli.

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

Comments

[Dan Jacome:]

watch out!!!!

The author quotes QCOM CEO Paul Jacobs from 2 years ago saying "WiMAX is dead." So dead in fact that in January 2006 QCOM bought Flarion a company developing a variant of the OFDM technology on which WiMAX is based.

Hmmm...

We have a big bet on ALVR -- please refrain from trying to take the stock down with old info...the world has changed in 24 months and WiMAX is increasingly deployable.

We'll all see how solid ALVR is when they report the Q in November....

2007 Oct 08 05:17 PM

[MOSHE PIPIK:]

All the technicals indicate that ALVR is a Long.
Let the sales guys sell sell sell.
Who needs a takeover

2007 Oct 09 01:37 AM