Alvarion Q4 hit by Nortel deal collapse

Alvarion, an Israeli WiMAX kit maker, posted a net loss of $4.8m during Q4 2008 following a restructuring charge of $3.4m related to the collapse of its partnership with Nortel.

Without the restructuring charge and other related expenses, Alvarion would have posted a Q4 net income of $119,000. This compares to a net income of $3.1m (also excluding one-off items) during Q4 2007.

Alvarion’s top line has also suffered as a result of the Nortel deal collapse. Q4 sales fell by $4.2m, compared with Q3 2008, to $70.1m. The company attributes the sequential quarterly decline in revenues as a result of its inability to recognise $2.4m of revenues from the sale of products to Nortel during Q4 after the beleaguered Canadian supplier filed for bankruptcy protection on 14 January.

 Alvarion attributed its sequential quarterly decline in gross margin – falling from 47.3 per cent in Q3 2008 to 44.7 per cent during the following quarter – to the write-off of equipment costs related to Nortel sales during the quarter.

When looking at the full 2008 fiscal year, the sales picture brightens for Alvarion. Revenues were a record $281.3m, up 19 per cent over 2007, of which WiMAX accounted for $171m (the rest being made up primarily of Alvarion’s proprietary broadband wireless equipment). WiMAX shipments in 2008 increased 37 per cent over the previous year to a record $189.3m. The Israeli company forecasts revenue of $65-$73m during Q1 2009.

“In 2008, WiMAX continued to exhibit strong demand, despite concerns over a spreading global recession,” said Tzvika Friedman, president and CEO of Alvarion, in a prepared statement. “We are very pleased with our record level of WiMAX shipments and our book-to-bill ratio of well over 1 in Q4. We are further encouraged by the fact that we are entering 2009 with a backlog of business twice as large as we had a year ago. Our non-WiMAX business was stable in 2008 and we expect it to remain so in 2009.”

The financial repercussions of Nortel’s WiMAX exit still managed to turn black ink into red ink, however, on Alvarion’s bottom line. The company made a net loss of $5.5m during 2008 compared to a net gain of $12.5m during 2007.

As of 31 December 2008, the company had cash reserves of around $141m after using $5m to repurchase Alvarion shares during Q4 2008.