WiMAX solutions developer Alvarion Ltd. (Nasdaq: ALVR; TASE: ALVR) has lost a joint development deal with telecommunications equipment firm Nortel Networks. Nortel Networks recently filed for bankruptcy.
Nortel notified Alvarion that it will repudiate the joint strategic WiMAX agreement entered into by the two companies in June 2008. The joint strategic WiMAX agreement covers, among other things, the resale by Nortel of the Alvarion platform of WiMAX access products and Nortel’s contribution of resources and funding to accelerate Alvarion’s development of its portfolio of WiMAX base stations.
As a result of the deal breakup, Alvarion will not be able to recognize approximately $2.4 million of revenues from the sale of products to Nortel during the fourth quarter of 2008. Accordingly, total revenues for the fourth quarter ended December 31, 2008, are expected to be approximately $70 million, at the low end of Alvarion's revenue guidance of $70 to $78 million.
Under the terms of the agreement, Nortel is obligated to pay Alvarion for certain research and development services beyond the fourth quarter of 2008. However, Alvarion deemed collection of those payments "uncertain and subject to Nortel’s creditor protection proceedings".
The exclusion of Nortel revenues in the fourth quarter is expected to reduce GAAP and non-GAAP earnings per share by about $0.04 per share for the quarter. Alvarion now expects a fourth quarter GAAP net loss of approximately $4.9 million, or approximately $0.08 per share, including a restructuring charge of approximately $3.4 million or $0.06 per share for the quarter, related to the cost reduction initiatives announced on December 8, 2008.
On a non-GAAP basis, net income for Q4 is expected to be approximately $0.1 million, or $0.00 per share. Alvarion's non-GAAP EPS guidance was between $0.00 and $0.07 per share.
Nortel said the move will help it narrow its focus, and that it will work closely with Alvarion to transition its mobile WiMAX customers and help ensure that ongoing support commitments are met. Nortel added that the move does not affect fixed WiMAX, LTE, 3G or 2G wireless solutions.
Alvarion president and CEO Tzvika Friedman said, “We are obviously disappointed in the direction this has taken; however, Alvarion’s industry position has never been stronger. In the fourth quarter, our WiMAX shipments, excluding Nortel, reached a record $54.4 million and WiMAX revenues were $42.3 million.
Friedman added that Alvarion's priority is to minimize the effect of Nortel’s decision on joint customers.
Alvarion shares are down 6% on the Tel Aviv Stock Exchange (TASE) this afternoon, after closing down 2.95% at $3.29 on Nasdaq on Friday, giving a market cap of $207.83 million.
Published by Globes [online], Israel business news - www.globes-online.com - on February 1, 2009
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