Description

Alvarion (ALVR): If you believe like I do, that wireless is back, then ALVR is great way to play a wireless recovery with limited risk.

Alvarion is a provider of solutions based on point-to-multipoint (PMP), Broadband Wireless Access (BWA). This technology allows broadband providers to provide broadband services to areas where it would be otherwise too expensive to run a landline, this is the so called “last-mile.”

The company is cash and asset rich:

Cash + Receivables: 186 mil
Total Liabilities: 45mil
Net-Net: 141mil
Shares: 54.1mil
Net-Net/share: $2.61

In addition the balance sheet has an additional: $.75/share of hard fixed assets (Inventory ~66% PPE ~33%).

Operating results will improve going forward as a result of cost cutting which will bring fixed costs down by $1mil/quarter ($.02/share) in q4, and an improvement in revenues next year as management has made statements that business is picking up in North American and remaining strong in Asia and Europe.

The quarterly losses are improving. Q2 net loss was 5mil on 22.3 rev, and 3q loss was 4.8 mil on 21.6mil rev. In terms of cash, operations consumed only 3.4 mil in Q3, because of non-cash amortization of intangibles and lower capex than depreciation. They also used 1.8 mil to buyback stock. Management has said it can achieve break even on a gaap basis on 27 mil of revenue.

Sales are very diversified, with no customer accounting for a significant chunk of revenues. Sales break down in Q3:

35% NA, 30 Europe, Middle East, Africa, 10 Latin America, 25% Asia

A recently announced sales agreement to Beijing International Switch Corp (sub of Siemans) will help open new sales channels in Asia, and add to revenue in a meaningful way in the second half of ’03. And the company has recently reported that a few customers have issued follow-on orders in excess of their original sales agreements.

I believe the company can achieve break even results by the end of 2003. Moreover management has demonstrated its willingness and ability to cut costs and keep the business in line with demand. Their products have a unique nitch, helping to bring broadband to suburban market places. Internationally speaking, it works great in underdeveloped areas that don’t have the land line infrastructure in place. They’ve seen great success in China, and Russia.

Catalyst

Trading well below Cash, and Net-Net.
Stockbuyback
Global recovery in wireless and broadband