November 8, 2010 / 3:43 PM / 8 years ago

UPDATE 2-DragonWave cuts Q3 revenue forecast, shares fall

* Says cost cuts at Clearwire to delay some Q3 revenue

* Expects Q3 rev of $27 mln vs forecast of $30 mln

* Shares fall 9 percent (Adds details, analyst comments; in U.S. dollars unless noted)

By Bhaswati Mukhopadhyay

TORONTO, Nov 8 (Reuters) - Telecom equipment maker DragonWave Inc DWI.TO lowered its third-quarter revenue forecast on Monday, citing cost cuts at its largest customer, Clearwire Corp CLWR.O. Its shares fell 9 percent.

Ottawa-based DragonWave had been drawing more than 80 percent of its revenue from Clearwire and has been helping the company roll out a fourth-generation WiMax-based network in the United States.

However, there have been concerns about DragonWave facing a gaping hole in its revenue stream as the 4G WiMax-based network rollout for Clearwire nears completion and there is still no clarity on new funding for the next phase of the rollout.

“With continued delay of a funding announcement by Clearwire, we believe business from the operator could decline even further,” analyst Sera Kim of GMP Securities said in a note.

Last week, Clearwire announced plans to cut its workforce by 15 percent and costs by $200 million to $400 million by mid-2011 as it looks to secure funding to expand its high-speed wireless network. [ID:nN04236203]

Kim said a financing decision could take longer than expected, otherwise “we believe Clearwire would not be implementing such disruptive cost reduction measures.”

DragonWave, whose products aid the movement of large amounts of data through wireless networks, expects some of its previously anticipated third-quarter revenue will now be delayed.

It now expects quarterly revenue of $27 million, down from its prior forecast of $30 million.

“The tail from the Clearwire business is less predictable than they (DragonWave) had thought and ultimately it will be a question whether or not Clearwire will build up the rest of the country,” analyst Ilya Grozovsky of Morgan Joseph said.

Grozovsky, who has a “hold” rating on DragonWave stock, said the ultimate success of the company depends on non-Clearwire business.

DragonWave has recently added customers in Canada, Greece and Saudi Arabia and is banking on a wave of telecom company upgrades, especially in Eastern Europe, the Middle East and Latin America. [ID:nN06125104]

DragonWave shares were down 66 Canadian cents at C$7.06 Monday afternoon on the Toronto Stock Exchange. They have lost nearly 36 percent of their value so far this year.

$1=$1.00 Canadian Reporting by Bhaswati Mukhopadhyay; editing by Rob Wilson

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below