Foolish Forecast: The View From Alvarion's Catbird Seat

Wireless broadband systems developer Alvarion (Nasdaq: ALVR  ) is downloading its third-quarter earnings to the market Wednesday morning. Here's a preview of what to expect.

What analysts say:

  • Buy, sell, or waffle? Of the 14 analysts following Alvarion, 11 rate the stock a buy, while three recommend holding. In our Motley Fool CAPS investor database, the stock gets a big thumbs-up: With 410 of our 70,000 users rating the stock, it earns five stars.
  • Revenue. On average, analysts expect Alvarion to report a 12% rise in revenue, to $60.2 million for the quarter.
  • Earnings. The average analyst expects the company to show $0.04 per share in income for the quarter.

What management says:
Most of Alvarion's revenue comes from sales of WiMAX solutions, a wireless broadband standard with heavy backing from companies such as Intel (Nasdaq: INTC  ) . Thanks to major WiMAX network deployment initiatives such as those from Sprint Nextel (NYSE: S  ) and Clearwire here in the U.S., Alvarion is seeing strong adoption of the technology platform around the world. This has translated into revenue growth. Tzvika Friedman, Alvarion's president and CEO, stated, "Based on our performance during the first half, and the positive outlook for the balance of the year, we are raising our target for revenue growth in 2007 to 25-30% over 2006, versus our previous target of 15-20%."

What management does:
While Alvarion is still working toward bottom-line profitability, the company has a large cash cushion of $122 million. This gives it plenty of working capital and time to continue improving its margins.

Margins

03/06

06/06

09/06

12/06

03/07

06/07

Gross

45.5%

50.4%

51.1%

55.7%

55.7%

55.5%

Operating

(11.6%)

(6.3%)

(4.5%)

0.6%

(0.2%)

(0.1%)

Net

(10.1%)

(22.1%)

(19.3%)

(22.4%)

(19.2%)

(4.3%)

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
The next-generation broadband market is really starting to spice up, especially with Cisco's (Nasdaq: CSCO  ) recent $330 million purchase of private WiMAX player Navini. While some companies, such as Qualcomm (Nasdaq: QCOM  ) , go out of their way to see that WiMAX doesn't displace current wireless broadband platforms, Alvarion also faces stiff competition from other massive equipment providers, such as Motorola (NYSE: MOT  ) and Nokia (NYSE: NOK  ) . But with Alvarion's relatively small $830 million market cap and almost pure-play focus on WiMAX equipment and systems, investors see it as a likely takeover target. If the company continues its march toward profitability and expands its customer base as it has in the past, investors will reap the benefits either way.

More Foolishness:


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