DragonWave posts third-quarter loss of $6.2 million, as business transition continues

Tom Pechloff
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Significant network expansions with key customers in India and North America will boost Ottawa-based DragonWave’s revenue in the coming months, CEO Peter Allen said in a conference call Wednesday.

DragonWave's Peter Allen. (Photo by Mark Holleron)

“I’m not going to get into guidance, but the key opportunities that I’ve talked about in North America and India would certainly add to our baseline revenues that we are experiencing to date significantly in second (calendar) quarter,” Mr. Allen told an analyst on the call.

DragonWave’s chief executive was commenting after the company posted a loss of $6.2 million in its fiscal third-quarter results released late Wednesday. The wireless networking equipment supplier’s losses, adjusted for restructuring costs, came in at six cents per share.

Third-quarter revenue of $21 million was down from $26.9 million in the previous quarter and $47.3 million in the same quarter last year.

CFO Patrick Houston said there were two customers that both contributed more than 10 per cent of the firm’s revenue.

One, of course, is Nokia, which still generated $8.4 million this quarter or 40 per cent of DragonWave’s revenue. But with Nokia’s recent acquisition of DragonWave competitor Alcatel-Lucent, its business relationship with DragonWave is changing, Mr. Allen said.

In December, DragonWave (TSX: DWI) announced it would continue to provide Nokia with products and support of “legacy” products, while saying the two firms might “address additional future specific customer requests” on a case-by-case basis.

That seems unlikely now, he said.

“During the quarter it became my judgment that it is no longer possible to operate inside an ecosystem of choice where the company doing the choosing was also a competitor.”

Mr. Allen said the company will continue to transition its business into marketing its new products directly to customers instead of through the Nokia channel. He said the transition has meant a loss of business in areas where Nokia is now supplying customers with the Alcatel-Lucent products instead.

“Our focus is to restore the choice of DragonWave products to those operators, a choice that we believe delivers differentiated value because of our unsurpassed capacity and spectral efficiency,” he said.

In another effort to generate revenue through its transition, DragonWave is looking at licensing the technology from some of its legacy products, Mr. Allen said.

“There is a considerable footprint in the market and we are keen to ensure that that footprint is supported well and that customers benefit from the support that they need,” he said. “We’re open to discussions about licensing in order to secure the dual situation where customers can get their network supported fully and we can strengthen DragonWave in this transition.”

In the final minutes of trading on Wednesday, the company’s shares hit nine cents on the Toronto Stock Exchange and remained in that area in mid-day trading on Thursday. A year ago, DragonWave shares were trading at $1.02.

- with files from the Canadian Press

Organizations: DragonWave

Geographic location: Ottawa

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