Alvarion to team with Lucent

The collaboration agreement could be the first in a series for wireless broadband access technology company Alavarion with communications equipment vendors.

Sources inform “Globes” that Israeli company Alvarion (Nasdaq: ALVR; TASE: ALVR) is expected to announce shortly a cooperation agreement with US wireless equipment giant Lucent Technologies (NYSE: LU). It can be assumed that this is the first in a series of cooperation agreements with communications equipment vendors that Alvarion is aiming at over the coming year. Alvarion’s share jumped 2.5% to $13.33 on Friday, reflecting a $687 million market cap. The First Albany Capital investment house recently reported that Alvarion was expected to announce a cooperation agreement with US landline communications giant AT&T (NYSE: T). The communications market, however, believes that a cooperation agreement was signed with Lucent, not AT&T, and with good reason. Alvarion supplies equipment for the broadband wireless networks of communications operators.

AT&T is a communications operator, while Alvarion and Lucent are communications equipment vendors. While it cannot be ruled out that Alvarion would cooperate with a communications operator, it would be a supplier-customer relationship.

Cooperation with an equipment supplier like Lucent, on the other hand, would enable Alvarion to expand its distribution channels to a variety of communications operators. It is reasonable to assume that such cooperation would be in the form of an original equipment manufacturer (OEM) agreement, under which Lucent would sell Alvarion’s wireless communications equipment as part of its general offer to an operator.

Lucent’s two outstanding advantages for Alvarion are its tight grip on the US and Chinese communications markets, and its strength in wireless communications equipment. Alvarion has been trying for several years to expand its presence in the US and Chinese communications markets, but its progress in these markets appears to be slow.

Given Lucent’s large share of these two markets, cooperating with it will be very useful to Alvarion in expanding its business there. Lucent is also very strong in the wireless market, particularly in China, and cooperation with the US company in this field will also be of great help to Alvarion.

Alvarion recently told analysts in a conference call that entering the wireless equipment market was one of its strategic goals for the coming year. Since the existing communications equipment giants control this market, the main way of entering it is through OEM agreements with them.

It can therefore be assumed that Alvarion is currently negotiating with other equipment vendors. In other words, it cannot be ruled out that over the company year, Alvarion will announce additional cooperation agreements with communications equipment vendors, particularly those selling wireless equipment.

Furthermore, Alvarion wishes to enter two markets simultaneously: wireless equipment for lightly populated regions, and wireless equipment for densely populated regions (i.e., Alvarion is interested in expanding its presence in the communications market for densely populated regions through integration into a communications network supplied by equipment giants). Among other things, Alvarion’s great interest in the wireless market is due to the fact that use of WiMAX is expected to be mostly in mobile communications.

Alvarion’s first measure towards entering the wireless market for lightly population regions was the acquisition of InterWAVE Communications International, which provides compact and mobile wireless stations designed for lightly populated remote rural areas, remote facilities, ships, etc.

It is reasonable to assume that the agreement with Lucent is the first stage in entering the wireless market for densely populated areas. Furthermore, given the fact that Alvarion has a large share of the market for stationary wireless communications in lightly populated regions, cooperating with Lucent could greatly help both companies to penetrate this market.

Alvarion declined to respond to the report.

Published by Globes [online], Israel business news - www.globes.co.il - on January 9, 2005

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