The wireless market is hot, with companies like Apple
Despite an impressive 38% increase in revenue to $200.7 million, Powerwave still posted a net loss of $28.6 million, or $0.22 per share. Then again, the company also incurred restructuring charges, as well as the amortization of intangible assets. But even if you exclude such things, Powerwave still suffered a loss of $10.2 million, or $0.08 per share.
Since late last year, Powerwave has been restructuring its operations. A key initiative is the consolidation of its three manufacturing facilities in China to one facility in Suzhou. The goal is to boost gross margins to the mid-20% level.
But in light of dynamic industry changes, this isn't going to be easy. Consider the actions of Powerwave's major customers. In April, Nokia
There was also the megamerger last year that created Alcatel-Lucent
With all this consolidation, Nokia/Siemens and Alcatel-Lucent should experience more pricing power. These companies are also looking at ways to bring some manufacturing functions in-house, which could put even more pressure on Powerwave.
If Powerwave's customers do gain pricing power, it could cause the company considerable problems. Because Powerwave has a concentrated customer base, I would suggest caution. I don't see any catalysts ahead to get the stock price back on track.
For more Foolishness: