Stone Fox Capital's  Instablog

As hinted at yesterday including on my instablog, Alvarion (ALVR) officially announced a deal that will exceed $100M over 5 years. Now the deal is with Open Range instead of Clearwire which is a company I've never heard of so I was skeptical at first. After reading up on them and understanding that a large part of the funds is coming from the Rural Broadband portion of the stimulus plan, I'm a lot more comfortable like the market that this is a solid deal. Not to mention that ALVR has a history of being conservative.

Oddly I was planning on doing a writeup about the $7M Nigerian deal that they announced a few weeks back. That deal was important to me because of the growing importance of Africa and specifically Nigeria. It also had the potential to ba a $20M deal down the road. This deal though trumps that in a large way. It also gives ALVR some exposure to the US market which always seems what the stock market wants. Odd, considering that the emerging market story has been huge for most stocks, but it never seemed to help ALVR. People were always more focused on them not participating in either the Sprint or Clearwire deals.

Globes reports that the deal could actually approach $150M. An amount that would easily make this the largest deal by far in their history. From looking at Open Range's website it appears that they have over $350M in funding so that amount is clearly possible. It would also provide ALVR more 'recurring' revenue that always concerns analysts wanting predictability.

• Alvarion said the deal is worth $100 million over five years. However, market sources estimate it may reach as high as $150 million. It is the largest contract in Alvarion's history.

Analysts have already rushed out to raise estimates.

• Alvarion ests and tgt raised to $6.20 at Morgan Joseph following rural broadband contract (4.17 +0.56) -Update : Morgan Joseph raises their FY09 EPS estimates to $0.01 from $(0.03) (consensus $0.01), as well as their FY10 EPS ests to $0.40 from $0.25 (consensus $0.20) and tgt to $6.20 from $4.70 following news that the co received a contract for over $100 mln over five years from a U.S. broadband operator for a Rural Utilities Service funded deployment across 17 states and 546 rural communities. The firm believes this contract may be the first of several contracts in which ALVR competes related to the $7.2 b bln U.S. stimulus package for rural broadband given the company's "Buy American" status for two of its BreezeMax base stations.

• Oscar Gruss raised their tgt to $6 from $4, and views ALVR's $100 mln win as a major cornerstone for the company. Firm believes The Rural Utilities Service project, one of the largest WiMAX deployments to date, endorses ALVR's rank among the top three brands in the industry. Open Range plans to deliver broadband into 546 rural communities in 17 states, reaching up to 6 mln people. Firm anticipates initial shipments in Q3, and a stronger build-up in q4. Thus firm expects a direct bearing of $20 mln in revenues for 2010, with a minor markup in OpEx. Firm expects the revs distribution to be broadly maintained at $20 mln sales per annum, over the remaining 4 years. Firm continues to view the stock as a compelling long term risk/reward opportunity.

ALVR is up roughly 35% in the last 2 days, but at just over $4 the stock is incredibly cheap even without this deal. Not sure I'd rush in today as it'll likely pull back some depending on the overall market. Luckily Stone Fox Capital has already positioned clients in this stock and we'll likely hold those stocks for much higher prices. This could be the first of many rural US contracts.