January 12, 2011 / 10:42 PM / 7 years ago

UPDATE 2-DragonWave misses profit as Clearwire weighs

* Q3 EPS nil vs analyst forecast loss $0.01/shr

* Revenue $27 mln vs $51.6 mln year ago, forecast $27 mln

* Sees Q4 revenue about $15 mln, well below expectations (Adds executive and analyst comment, details; in U.S. dollars unless noted)

By Alastair Sharp

TORONTO, Jan 12 (Reuters) - Telecom equipment maker DragonWave Inc DWI.TO DRWI.O failed to break even in its third quarter as it struggled to escape dependency on its largest customer, Clearwire Corp CLWR.O.

DragonWave, which makes radio transmitters used in cellular networks, is banking on booming demand for mobile data to make its high-capacity packet backhaul — which aids the movement of vast amounts of data through wireless networks — an ingredient in network upgrades worldwide.

It gets a large chunk of its income from Clearwire, which has scaled back as it seeks billions of dollars to complete a high-speed wireless network in the United States. [ID:nN08210881]

DragonWave said it expects revenue of around $15 million in the current quarter, sharply lower than analysts had expected.

“It looks like they are banking on nothing coming in from Clearwire in the fourth quarter,” said analyst Matthew Thornton from Avian Securities in Boston.

“It also doesn’t look like the rest of the business was doing that much for the February quarter. That’s more disappointing,” he added.

Ottawa-based DragonWave posted a net loss of $50,000, or nil per share, on revenue of C$27 million in its third quarter, ended Nov. 30.

That compares with a profit of $11.6 million, or 34 cents a share in the same period a year ago, on revenue of $51.6 million.

Analysts on average had expected DragonWave to lose 1 cent per share on revenue of C$27 million, according to Thomson Reuters I/B/E/S.

DragonWave had cut its revenue forecast for the third quarter to $27 million from a prior forecast of $30 million, in November, after Clearwire said it planned to limit costs as it sought more cash for expansion.

Investors see Clearwire, which is 54 percent owned by Sprint Nextel (S.N), as close to resolving the funding issue by either selling spectrum or attracting an equity investment. [ID:nN12199276]

DragonWave said it shipped its products to 31 new customers in the quarter, including eight courtesy of its $9.5 million purchase of Axerra Networks in October.

“Our leading-edge technology positions us well for important upcoming network builds supporting the growing demand for mobile broadband services,” DragonWave’s chief executive, Peter Allen, said in a statement.

“However, the visibility into these opportunities with both new and existing customers remains very limited at this time,” he added.

Shares in DragonWave dipped sharply after Clearwire tightened its belt but have since recovered somewhat. They closed 2.5 percent lower at C$8.57 on the Toronto Stock Exchange on Wednesday, roughly where they were just before Clearwire’s November warning. Its Nasdaq-listed shares were down 2.3 percent at $8.66.

The results were released after the close of trade. (Reporting by Alastair Sharp; editing by Rob Wilson)

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