Sprint's long shadow
Alvarion and Ceragon looked to gain from its WiMAX launch.
Shiri Habib 12 Nov 07 07:20
Shares of Alvarion Ltd. (Nasdaq: ALVR; TASE: ALVR) and Ceragon Networks Ltd. (Nasdaq: CRNT; TASE:CRNT) have been falling in recent weeks after surging earlier in the year. Friday's announcement by Sprint Nextel Corp. (NYSE:S) that it was cancelling its planned nationwide WiMAX deployment with Clearwire Corp. (Nasdaq:CLWR), will give no comfort to investors in either Israeli company.
In July, Sprint and Clearwire announced their letter of intent to collaborate to speed up and expand the WiMAX deployment in the US at a multi-billion dollar investment. The goal was to launch in 2007 and reach 100 million subscribers by the end of 2008. On Friday, the companies announced said that they were unable to solve complexities in the terms of agreement.
Questions have arisen in recent weeks about Sprint's commitment to WiMAX in wake of the resignation of CEO Gary Forsee in October. Sprint said on Friday, "In light of this announcement, Sprint is reviewing its WiMax business plans and outlook and the company expects to comment further on these topics early next year."
Alvarion provides WiMAX broadband wireless solutions and Ceragon makes wireless backhaul solutions. The announcement was enough to cause Alvarion to fall 4% on Nasdaq on Friday to $9.92, giving a market cap of $620 million. The share has fallen by a third since October. Ceragon fell 0.8% on Nasdaq on Friday, to $13.30, giving a market cap of $395 million.
Although Alvarion has no direct link to the Sprint-Clearwire deal, it did not rule out possible income from it. More generally, a wide-scale WiMAX deployment like the one Sprint was to make was a boost for the technology as a whole. Two weeks ago, Alvarion president and CEO Tzvika Friedman told "Globes", "Sprint's deployment affects the entire market, and the project's success will help the market as a whole."
Oppenheimer analyst Laurence Harris believes that Alvarion will be affected by developments at Sprint in the short-term. He stresses, however, that Alvarion has no direct connection with Sprint, and he predicts that WiMAX deployments will continue. He reiterated his "Buy" recommendation for the share with a target price of $17, a 71% premium over its market price.
Ceragon was linked to the Sprint-Clearwire deal through FiberTower Corporation (Nasdaq:FTWR), which won the tender to provide backhaul services. FiberTower is a major Ceragon customer. In August, CE Unterberg Towbin (now Collins Stewart) said that Ceragon would benefit from the Sprint project. A few weeks ago, Ceragon president and CEO Ira Palti told "Globes" that he considered WiMAX as the most mature 4G technology, and that the company had many projects in the sector, albeit only small ones. Last week, Ceragon raised a net $75.7 million in a secondary offering on Nasdaq.
Published by Globes [online], Israel business news - www.globes-online.com - on November 12, 2007
