Alvarion looks headed for another crash


CEO Hezi Lapid admits that the company has a strategic problem which requires surgery.

Exactly two years ago, communications equipment maker Alvarion Ltd. (Nasdaq: ALVR; TASE: ALVR) undertook one of its most difficult restructurings in years. The company fired almost 200 employees, a fifth of its workforce, and it admitted, "It is not clear when and how opportunities in the WiMAX market will materialize."

Alvarion president and CEO Eran Gorev, who left his post last month, said at the time, "We're a company that does not feel as if the crisis is behind us, but we're starting to see light at the end of the tunnel, and we hope that it is not an onrushing train."

Two years have passed, and it is clear that Gorev's hope has not materialized. Regrettably, it was a train, and the collision of that train with Alvarion sent the company reeling. Its losses grew, its market cap plummeted, its workforce dwindled, and its cash reserves were halved along with its income. More importantly, however, the company's core market in those days, WiMAX communications equipment, has all but vanished.

Two years have passed, and the point of light is Alvarion's new president and CEO Hezi Lapid, who admits that the company has a strategic problem which requires surgery. "We are exploring a variety of options for the carrier licensed business," he stated in the press release of the company's financial report for the first quarter of 2012, adding, "With a clear mandate from the board to improve execution and enhance shareholder value, we are also moving swiftly to make necessary adjustments in order to generate positive cash flow from operations."

The question is whether this is not another case of an onrushing train. On the agenda is the sale or termination of loss-making operations that no longer drive the company forward. Regrettably, such a decision will involve another restructuring, which will include dozens of more layoffs. But even if someone comes along who is willing to pay for the loss-making operations, it is probably too late. If Gorev had made such a sale two years ago, Alvarion might be a different place today.

Alvarion's market cap is $36 million, and its first quarter revenue fell 28% from the corresponding quarter to $33 million - in line with the company's reduced guidance. GAAP-based net loss was $6.9 million ($0.11 per share), half the loss posted in the corresponding quarter and non-GAAP net loss was $5.4 million ($0.09 per share), also in line with the guidance.

In the present circumstances, there is no magic solution to save Alvarion. A series of wrong strategic decisions over the years drove the company into a wall. Lapid may simply have to restart the company, to the extent that is possible at a public company, after closing all remaining veteran operations, and hope to leave the bad luck behind.

What is certain is that to continue to move forward with a company that lost its motivation long ago, while relying on profits of recently acquired metro Wi-Fi solutions developer Wavion Networks Inc. looks more like returning to running along the railroad tracks and less like a winning strategy.

Published by Globes [online], Israel business news - - on May 17, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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