Seeking Alpha
Profile| Send Message|
( followers)  
Alvarion Ltd. (NASD:ALVR), the broadband system provider, has watched its rapid growth slow to a shuffle recently. The company clearly operates in a growing market making wireless broadband solutions and products for cellular networks and telecom carriers, cellular operators, service providers and regional carriers, and private network operators worldwide (Yahoo!Finance).

According to the company, it has 2 million units deployed in 130 countries. The company has also built a WiMAX platform which it calls BreezeMAX.

Alvarion's growth rates were very impressive until recently. Revenue in 2002 was $88.8 million. In 2003, it rose to $127.2 million and then to $201.5 million in 2004. Revenue then dropped to $195.7 million in 2005. The company's 2005 operating loss was $16.2 million compared to a loss of $3 million in 2004.

The company's Q4 05 figures were even worse. Revenue dropped from $55.9 million in Q4 04 to $46.5 million in the last quarter of 2005. The operating loss improved slightly to $5.6 from $7.9 million. However, the 2004 period was burdened by an $11 million write-off for "in process R&D". After its Q4 earnings report, Alvarion settled a lawsuit with a customer of interWave, a company Alvarion had acquired. This reduced general and administrative costs for the Q4 period and the full year by $987,000, thereby slightly improving the bottom line.

The company offered Q1 06 revenue guidance of between $46 and $51 million. Obviously, at the lower end of this, the company would show no sequential growth. The company's CEO made a comment that seems somewhat at odds with this:

We were particularly gratified by the continued strong performance of our BreezeMAX product, which increased to about $10 million in revenue in Q4. Our fundamental business, primarily wireless DSL solutions, is performing well during the transition to WiMAX and should continue to be the main engine for growth in 2006. We have strengthened our position with some of the carriers we refer to as "innovative challengers" because they are early adopters of new technology, and we expect the overall upward trend to continue.

If sequential growth remains fairly flat, that "overall upward trend" may be hard to find.

The growth in Alvarion's share price has also disappeared. After trading around $15 in late 2004, the shares have traded in a range of $7.26 and $11.08 over the last 52 weeks. The stock is currently at $8.04.

Based on overall market trends, the company's business should be growing at an impressive rate, but it is not. The upcoming Q1 earnings and guidance for future quarters could well determine how the stock does for the rest of 2006.

ALVR 1-yr Chart



Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

Source: Alvarion's Disappearing Growth (ALVR)