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DragonWave (Nasdaq: DRWI  ) lives and dies with Clearwire (Nasdaq: CLWR  ) , which in turn relies on Sprint Nextel (NYSE: S  ) for providing huge chunks of its business. When I told Sprint (and by extension, Clearwire) to put the pedal to the metal before telecom giants AT&T (NYSE: T  ) and Verizon (NYSE: VZ  ) erase the strongest selling point of Clearwire's 4G network, I bet DragonWave shareholders were nodding along in perfect agreement.

Clearwire traditionally stands for the vast majority of DragonWave's network equipment sales, so when that service provider slows down its capital expenditures, it's terrible news for DragonWave as well. The stock took a massive hit this spring when exactly that nightmare scenario was announced as a reality, and even a respectable growth spurt in the non-Clearwire portion isn't enough to outweigh that weakness. This is still a very cheap stock.

In the just-reported second quarter, DragonWave saw sales shrinking by 16% year over year or a heart-stopping 44% sequentially to $27.2 million. The year-ago period's $0.19 of earnings per share dwindled to $0.03 per share, and a 17% operating margin squished down to a mere 4%. Ouch.

If there was a bright spot for DragonWave in this report, it's international sales doubling to $6.9 million. The market took all of this as good news and gave DragonWave's shares a 4% overnight boost, because the bad Clearwire mojo has been priced in for a long time and things could have been a lot worse.

CEO Peter Allen remains optimistic: "We are still in the early stages of the growth potential for DragonWave mobile backhaul solutions in markets throughout the world." There's always the chance that Clearwire returns to new equipment orders, and high-speed back-end networking for wireless service providers sure sounds like a sweet business to be in at this juncture.

All in all, DragonWave can thank its lucky stars (or some smart fiscal restraint when times were good) for a terrifically strong balance sheet, which should see the company through to daylight next year. Clearwire needs to improve its 4G network before Verizon and others pass it in size, scope, and speed, and other networks should eventually turn to DragonWave for their infrastructure needs as well.

This stock has served me very well in CAPS, and this is still a good opportunity to build a position while DragonWave is priced for a disaster that isn't happening. Follow my all-star lead and give DragonWave a thumbs-up rating today. You'll thank me later.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Sprint Nextel is a Motley Fool Inside Value choice. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.

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