October 7, 2010 / 8:58 PM / in 8 years

CORRECTED - UPDATE 2-DragonWave posts profit despite revenue slide

(Corrects headline and fourth paragraph to show company profit smaller than last year)

* Q2 EPS $0.03 vs forecast $0.02

* Revenue $27.2 mln vs $32.4 mln a year earlier

* Sees Q3 revenue of around $30 mln (Adds executive, analyst comments, details; in U.S. dollars unless noted)

TORONTO, Oct 7 (Reuters) - Telecom equipment maker DragonWave Inc DWI.TO DRWI.O eked out a quarterly profit on Thursday despite a fall-off in business from major customer Clearwire CLWR.O, as it looks ahead to booming interest in high-speed wireless networks.

The Ottawa-based company saw revenue dip sharply as telecom network provider Clearwire completed the first phase of its fourth-generation mobile broadband network in the United States and is now seeking funding for further expansion.

“We’re in a little bit of an air pocket,” Chief Executive Peter Allen told Reuters in an interview. “The good news is that while we’re in the air pocket we remain profitable.”

DragonWave posted a profit of $1.2 million, or 3 cents a share, on revenue of $27.2 million in its second quarter, ended Aug. 31. That compares to a profit of $5.7 million, or 19 cents a share, in the same period a year earlier, on revenue of $32.4 million.

Analysts had expected, on average, earnings of 2 cents a share, according to Thomson Reuters data, though several predicted a quarterly loss on the fall-off in revenue from Clearwire.

“They didn’t lose any money,” Todd Coupland of CIBC World Markets said. “In the interim they are managing the business pretty well.”

The company, which aids the movement of vast amounts of data through wireless networks, said it expects revenue in the current quarter of around $30 million, significantly above analyst forecasts of $22 million.

More important than decent results or guidance is what happens next, according to CIBC’s Coupland, who has a “sector perform” view of the stock and a $6 price target.

“Can Clearwire get the financing for phase two and what about other large customers? In both cases, answers are likely to get sorted out before year-end,” he said, mentioning the LightSquared wireless network service as a potential customer. [ID:nN07122990] [ID:nN07136316]

While three-quarters of the company’s revenue came from North America, DragonWave’s Allen said a repeat European customer also contributed more than 10 percent of the quarterly revenue and that fiscal 2012 would be “exciting”.

“Now to continue to grow we need to get the next Clearwire and the one after that,” he said. “I think we’re in a good position to do that.”

Shares in DragonWave closed 6 percent higher at C$6.79, on Thursday on the Toronto Stock Exchange, ahead of the earnings release.

$1=$1.02 Canadian Reporting by Alastair Sharp; editing by Peter Galloway

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