Alvarion expands into Wi-Fi offload with purchase

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Alvarion expands into Wi-Fi offload with purchase

Pays $30m for metro Wi-Fi specialist Wavion as it seeks to come back from poor results with new revenue streams

By CAROLINE GABRIEL

Published: 3 November, 2011

READ MORE: M&A | Israel | Alvarion | Wi-Fi | WiMAX

As expected, Alvarion has announced the acquisition of metro Wi-Fi specialist Wavion, while reporting third quarter results which reflect its urgent need to make such moves to diversify its revenue streams.

The Israeli WiMAX equipment specialist continues to sign deals for its traditional products, most recently with WaveMax in rural Italy and Angola Communications Systems. But recent weeks have seen more setbacks than successes, including the loss of one of its largest ever contracts with the bankruptcy of US operator OpenRange. Like other WiMAX specialists, Alvarion has had to adapt to a market where the technology is selling mainly in vertical markets, or for fixed wireless, rather than major carrier deals. Alvarion was the largest of the broadband wireless pure-plays, and so has had a bigger transition to make to the reduced realities of WiMAX.

It is pushing into lateral markets such as in-building coverage - it has just unveiled its new BreezeCELL system, based on a DAS (distributed antenna system) technology called TrueActive, for this sector. This platform was acquired with Israeli DAS specialist developer Clariton Networks for $4m earlier this year.

And now it has bought Wavion, for about $30m in cash, to help apply its WiMAX expertise to the reviving market for metrozone Wi-Fi, which is being stimulated by carrier offload strategies. Wavion, also Israel-based, was an early pioneer of advanced beamforming techniques to help turn Wi-Fi from an indoor LAN technology to a carrier class outdoor system for metrozones. Much maligned after the failure of various municipal projects a few years ago, metro Wi-Fi - often expected to be a strong complement to WiMAX - faded from the spotlight until it re-emerged at the end of the last decade as a tool for offloading data from carriers' 3G networks. Companies like BelAir have seen their fortunes revive on the back of operators' enthusiasm for offload to unlicensed spectrum networks, and WiMAX has a clear role to play in backhauling such networks.

The confirmed deal is an extension of a previous letter of intent signed three months ago. Wavion is currently controlled by Elron Electronic Industries, the venture capital arm of Israel's IDB Holding, controlled by Nochi Dankner. It has raised $25.6m from investors since it was founded and its revenues for the past 12 months were approximately $16m. Excluding acquisition-related charges, Alvarion expects the purchase to be accretive to non-GAAP earnings from Q212.

Wavion's 802.11n/MIMO/beamforming platform targets applications such as offload, business connectivity, residential access, digital cities, video surveillance and internet access for schools and large venues.

The need to build new revenue streams in this way is clearly seen in the company's Q3 results, which delivered wider losses on lower revenue. Meanwhile, in forecasting "break even at best" in Q4, Alvarion disappointed analysts on both top and bottom line estimates. In Q3, revenue fell 13% year-on-year to $47m, and 15% compared to the second quarter, while the GAAP-based net loss was $7.5m, compared with net loss of $6.1m a year earlier. In Q211, Alvarion had managed a small net profit of $319,000. Most of the loss was down to a $7.1m charge related to the OpenRange bankruptcy. Without that factor, Alvarion would have made a net profit of $325,000.

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