It's a Nasdaq-listed company engaging in WiMAX technology and it has an R&D center in Israel. If the first name that occurred to you was Alvarion Ltd. (Nasdaq: ALVR; TASE: ALVR), you would, of course, not be wrong, but there is another company that meets the same criteria - Alvarion's US competitor Airspan Networks Inc. (Nasdaq: AIRN).
Airspan, which develops wireless communication systems and focuses primarily on WiMAX, has had an R&D center in Israel for five years, ever since it acquired the Israel division of Marconi. The company's CTO, Paul Senior was in Israel last week to visit the center, which now employs 100 people (out of the company's total workforce of 300), and told "Globes" about the plans to expand it. "We have three R&D centers, in the UK, Finland, and Israel," he says. "That's how we've attained diverse capabilities. Israel is very good in wireless technologies, and there's a development culture here and engineers that are very good at the technical level, alongside tremendous creativity. For us this is an excellent place for R&D. We're working on the most exciting field in telecommunications today. Our goal is to build a world-class R&D center in Israel."
Globes: If so, you've opened another front in the competition with Alvarion - this time over employees.
Senior: "There's competition in the high-tech world generally. We want to attract the best employees."
Airspan has a market cap on Nasdaq of $106 million, and it is in second place after Alvarion with a 26% share of the WiMAX market. Senior prefers to talk about Airspan rather than the competition with Alvarion, but adds, "It's our biggest competitor today. It's a very good company, and I imagine it would say the same about us. We usually both reach the final bidding stages in tenders."
So how is it that Alvarion still has the largest market share, with far higher revenue? Senior offers a slightly different calculation. "We're a smaller company. It has 1,000 employees and we have 300, its revenue for 2006 was $200 million and ours was $128 million. So our revenue per employee is much higher."
Turning point at Cisco
Competition in the WiMAX market was given a boost recently following the acquisition by Cisco Systems Inc. (Nasdaq: CSCO) of Navini Networks for $330 million. "This is very positive move," says Senior. "Cisco was not WiMAX-friendly until two years ago, and it has come a long way, from a negative attitude to spending $330 million. Cisco, in effect, sat on the fence until it felt the industry had reached a turning point. This will add to the competition so from that perspective it's not so good for us, but we're hoping for a large market in which we can succeed. Airspan does not want to be a big fish in a small pond, but a mid-sized fish in a big sea."
Has Cisco made you an acquisition offer as well? Is an Airspan acquisition on the cards at all?
"We have a very interesting technology. Our business model is not focused on an acquisition option. Should someone take an interest in us, we're a public company and there's a proper mechanism. The industry is hot and we could well be attractive, but it's not on the agenda."
And is Airspan interested in expanding through acquisitions of its own? You raised $32 million in the third quarter.
"We have a long history of acquisitions, one of which was the Israeli center. I have nothing to report right now, but we certainly want to have the strongest possible portfolio, and we're interested in adding more capabilities to our products."
Airspan has installed 130 WiMAX base stations so far. "We're really pleased with the way WiMAX has developed," says Senior. "As market veterans, we've seen its ups and downs. WiMAX was not considered the world's greatest success in the past, but things have changed. There's a standard, the volume has grown, and the price has fallen, so providers find it easier to make a profit, and WiMAX is now seen as an industry on the verge of massive growth."
Airspan's partners
Airspan has collaborations with several companies, and it sells products through Nortel Networks (NYSE; TSX: NT), Ericsson (Nasdaq; SAX: ERIC), and Fujitsu (Tokyo: 6702). "The strategic collaboration with Fujitsu is the most important of all," says Senior. "It's not just technology sales but also joint R&D. With Nortel and Ericsson, we focus on providers and build networks together. Vodafone, for example, rolled out our technology through Ericsson."
Senior notes that, as a rule, Airspan only targets Tier 1 telecommunications providers together with its partners.
Do the developing countries represent a growth engine for you?
"We're confident that WiMAX will be a success in developing countries, after the providers there see the success in developed countries in Europe, and the US, and Japan, for example. Mobile WiMAX is beginning in developed countries, and once it is successful, we'll also see it India, China, and in Africa. There'll always be pioneers - telecommunications providers in the developing countries which will turn to WiMAX, but the mass market will happen after we see cases of success in the developed countries."
One example of an extensive WiMAX roll-out in a developed country is that of Opel Networks Pty Ltd. in Australia. The project, worth $1 billion, has now reached the equipment provider selection stage. The roll-out is designed to connect people in remote regions to broadband networks. "We have identified an opportunity in Australia," says Senior. "I don't want to go into details, but it's quite an interesting and significant project, and the Australian government has a very good program."
Another big roll-out now underway is that of Sprint Nextel Corp (NYSE: S), the third largest cellular provider in the US. The company recently announced that talks with Clearwire Corp. (Nasdaq: CLWR) on a joint roll-out by the two of WiMAX across the US had broken down, and in response, WiMAX stocks, including Airspan, fell. Senior remains unperturbed. "The cancellation notice was over-estimated," he says. "The companies couldn't reach a final agreement, and one must not forget that Sprint currently has no CEO (the previous one was fired, S.H.), so reaching an agreement is difficult."
Your share is currently traded at around $1.80. Is this the price it deserves?
"The market is always right, but we think the share is underpriced. WiMAX is a hot field, and we saw a monumental shift in that direction in 2007. While the breakdown in our revenue in 2006 was 30% from WiMAX and 70% from legacy systems, today it is the reverse - 70% of our revenue comes from WiMAX."
A competitive edge, made in Israel
"This is our advantage over the competitors," says Senior, presenting what he describes as "the next generation in mobile WiMAX," which was developed at the R&D center in Israel. It is a USB drive with a SIM card inside that connects to a laptop. "Different countries have different WiMAX frequencies. With this technology, you can travel throughout the world, and connect to any network, regardless of supplier or frequency," he adds.
Senior points out that at present, none of Airspan's competitors has this technology. "We've now reached the interoperability testing stage," he says. "We're testing the product with various companies' base stations, and we hope to have it out on the market as early as the first quarter of 2008."
Published by Globes [online], Israel business news - www.globes.co.il - on November 28, 2007
© Copyright of Globes Publisher Itonut (1983) Ltd. 2007