Alvarion returns to profit in Q2

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Alvarion returns to profit in Q2

Having stabilized its core WiMAX business, it will look for growth and profit improvements in vertical markets

By CAROLINE GABRIEL

Published: 26 July, 2011

READ MORE: Financial | Israel | Alvarion | WiMAX

There have been dark days for WiMAX players recently, but Alvarion has bounced back to profit in its second quarter and says it has "stabilized" its business. Its next step will be to try to emulate Samsung and use the WiMAX business as a springboard into new markets such as LTE or smart grid.

The Israeli firm, the largest of the traditional broadband wireless infrastructure suppliers, said its Q2 revenue was up 13% year-on-year to $55.4m and it posted a net income of $300,000 - modest, but reversing a loss of $10.6m a year earlier. Excluding charges, net income was $1.5m.

CEO Eran Gorev said in his statement: "We are pleased to report that we have met our target of returning to profitability in Q2. More importantly, we believe we have achieved a stable core business that will serve as a foundation upon which we can build through new growth oriented initiatives." He added that the current business - WiMAX and some legacy systems in proprietary BWA - was able to sustain a revenue run rate of about $200m a year with "the prospect of moderate margin improvement".

This improvement will come from refocusing the business, with only "selective" engagements with carriers, and greater concentration on enterprise and vertical markets. This mirrors the overall situation in WiMAX, which has largely given up on its dream of being a mainstream 4G option for established operators. A few, like UQ Communications in Japan, intend to stick with the platform, while others, notably Sprint, are considering eventual migration to LTE. But new sales for WiMAX will come from outside that community - in its traditional stronghold of rural fixed wireless access; in private networks for businesses or government agencies; and in vertical sectors like machine-to-machine, especially smart grid deployments, or public safety.

However, Gorev said Alvarion remained "committed to the carrier market, where we continue to see profitable WiMAX infrastructure opportunities using the selective approach we adopted earlier this year." But he added: "Having stabilized the core business, our current priority is to develop new growth engines to expand operating leverage and improve valuation."

The company expects revenues in the second half of 2011 to be similar to those in the first half at about $100m, with some weighting towards the fourth quarter. It expects the current third quarter to see break-even or a modest loss (excluding items), but a stronger Q4 should deliver a small profit for the second half as a whole.