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Nortel gives up on WiMAX business
Posted: 30-Jan-2009 [Source: Alvarion]

[Nortel notified Alvarion about its decision to repudiate their joint strategic WiMAX agreement.]

Tel Aviv, Israel -- Alvarion® Ltd., the world’s leading provider of WiMAX™ and wireless broadband solutions, today announced that it has been notified by Nortel Networks Ltd. of its decision to repudiate the joint strategic WiMAX agreement entered into by the two companies in June 2008. Alvarion is analyzing the details of actions it will take to mitigate the impact on its business, and expects to provide more information about these actions during its fourth quarter 2008 financial results conference call on Wednesday, February 4, 2009.

The joint strategic WiMAX agreement covers, among other things, the resale by Nortel of the Alvarion platform of WiMAX access products and Nortel’s contribution of resources and funding to accelerate Alvarion’s development of its portfolio of WiMAX base stations. Under the terms of the agreement, Nortel is obligated to pay Alvarion for certain research and development services beyond Q4; however, collection of these payments is uncertain and subject to Nortel’s creditor protection proceedings.

As a result of the foregoing, Alvarion will not be able to recognize approximately $2.4 million of revenues from the sale of products to Nortel during the fourth quarter of 2008. Accordingly, total revenues for the fourth quarter ended December 31, 2008, are expected to be approximately $70 million, at the low end of the Company’s revenue guidance of $70 to $78 million, as presented in its Q3 financial results press release on November 3, 2008.

The exclusion of Nortel revenues in Q4 is expected to cause a negative impact on GAAP and non-GAAP EPS of approximately $0.04 per share for the quarter. Alvarion now expects a Q4 GAAP net loss of approximately ($4.9) million, or approximately ($0.08) per share, including a restructuring charge of approximately $3.4 million or $0.06 per share for the quarter, related to the cost reduction initiatives announced on December 8, 2008. On a non-GAAP basis, net income for Q4 is expected to be approximately $0.1 million, or $0.00 per share. The Company’s GAAP EPS guidance of a loss between ($0.04) and a net profit of $0.03 per share, as contained in its November 3, 2008 press release, did not include the restructuring charge. The company’s non-GAAP EPS guidance was between $0.00 and $0.07 per share. GAAP and non-GAAP EPS guidance was based on approximately 64.5 million estimated weighted average diluted shares outstanding.

Tzvika Friedman, President and CEO of Alvarion, said, “We are obviously disappointed in the direction this has taken; however, Alvarion’s industry position has never been stronger. In Q4, our WiMAX shipments, excluding Nortel, reached a record $54.4 million and WiMAX revenues were $42.3 million. Our book-to-bill remained well above 1, and we ended the year with over $140 million in cash on our balance sheet.

“During 2008, we won numerous major WiMAX deals, both directly and with various partners,” continued Mr. Friedman. “We have proven time and again that we can win against all types of competitors, large and small, and we have demonstrated our ability to implement turnkey projects with complete end-to-end solutions. On the February 4th call, we will provide more information about our strategy to mitigate the impact of the Nortel situation on our operating expenses in 2009. Meanwhile, our priority is to minimize the effect of Nortel’s decision on our joint customers.”

"This action, while difficult, was a necessary step addressing Nortel’s current situation and intention to narrow the company's focus," said Richard Lowe, President, Carrier Networks, Nortel. "Planning is underway to transition our joint mobile WiMAX customers to Alvarion and ensure there is no disruption to service or support."

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