1. In 2005-2006, Alvarion believed that its technology would conquer the next generation of wireless communications. The struggle between WiMAX, on which Alvarion focused, and alternative technology LTE, was at its height. The mobile WiMAX market was in its infancy, and Alvarion, which was perceived as a market leader, was thought to be a company on the brink of a big breakthrough. Rumors were rife about an impending acquisition by one of the telecommunications equipment giants. On the back of this optimism, Alvarion's share price rose, and at the end of 2007, the company had a market cap of over $900 million.
It eventually became clear that LTE had become the leading standard for the next generation for most wireless carriers, but Alvarion remained optimistic. WiMAX is suitable for connecting remote areas to broadband infrastructure, and many governments decided to invest in this in order to close gaps among the population and develop outlying areas. So, for example, Alvarion believed that a program of incentives introduced by the Obama administration would substantially boost its activity in the US, but that didn't happen either.
The dashed hopes of the past few years caused many investors to give up, and the share price plummeted 85%, wiping nearly $780 million off the company's market cap. Several investment banks that used to recommend Alvarion ceased to cover the company because of lack of interest. But even today, it turns out, there is optimism at Alvarion, and it is now focusing on the enterprise market, to which it is diverting resources, although it has not despaired of its main activity with telecommunications providers.
2. Alvarion's CEO for the past year has been Eran Gorev. Today, he describes himself as "cautiously optimistic" about the company’s position. Gorev genuinely believes that it will be possible to return to profitability in 2011, that there are interesting opportunities around the world in telecommunications, and that the enterprise market holds possibilities of growth for Alvarion. The question is whether investors weary of disappointment will believe it too. It could be that, in the light of the company's history, they will consider current measures to be too little, too late, and prefer to wait till they see success on the ground.
3. In the year since Gorev took charge, Alvarion has undergone change. The current wave of layoffs will reduce the workforce to just 550, compared with over 1,000 three years ago. The aim is to try to make Alvarion consistently profitable. In the past, even at its peak, Alvarion never managed to generate substantial profits over time.
Under Gorev's management, Alvarion has entered a new area, that has not so far become a main activity. This is telecommunications technology TD-LTE, a version of the wireless communications technology LTE, which competes with WiMAX. Another field that Gorev has identified as a new growth engine is the provision of complementary solutions for third and fourth generation telecommunications networks. Only yesterday, MobileAccess, an Israeli company in this field, was acquired for $200 million. Alvarion, itself the product of a merger between two companies (Floware and BreezeCOM) is certainly likely to buy companies or technologies that will pave its way into this field.
Published by Globes [online], Israel business news - www.globes-online.com - on February 2, 2011
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