Those irritating tones of ringing cellular phones in movie theaters, libraries and restaurants are music to the ears of officials at Irvine-based Powerwave Technologies Inc.
The company, which makes equipment that boosts wireless signals from phone companies’ transmission towers, has profited handsomely from the cellular phone’s mushrooming popularity. And even as those established technologies continue to grow briskly, service providers are frantically upgrading their networks to handle new forms of data communication such as e-mail and Web browsing, creating more demand for Powerwave’s business.
The company ranked No. 8 on this year’s Business Journal list of fastest-growing companies, up from No. 20 last year. The 15-year-old company was founded under the name Milcom International Inc. and changed its identity to Powerwave in 1996.
Wall Street is apparently listening to those electronic blips, too. Despite a roller-coaster stock performance that started during last spring’s tech downturn, Powerwave’s share prices have risen about 55% in the past couple of months to nearly 50.
While that’s 20 points away from its 52-week closing high of nearly 73, revenue and earnings continue to climb. For its most recent quarter ended July 2, Powerwave reported earnings of $11.4 million on sales of $110.5 million, compared with earnings of $4.3 million on sales of $68.5 million for the same period last year.
Customers include big players such as Hyundai Electronics Industries Co., LM Ericssphone Co., Lucent Technologies Inc., Metawave Communications Corp., Nokia Corp., Nortel Networks Corp. and Samsung Electronics Co. It also counts service providers among its customers, including AT & T; Wireless Group, BellSouth Cellular Corp. and Verizon Wireless.
The company employs about 750 and expects to add more as wireless phones take off in foreign markets, particularly Asia. International sales account for about a third of Powerwave’s revenue, down from more than 40% a year ago. But officials expect that to rebound as countries such as South Korea continue to recover from the region’s economic crisis.
In some areas, the wireless phone market has leapfrogged standard landline connections because building cellular towers is often easier than creating traditional phone networks from scratch.
One of the company’s biggest challenges in coming months will be reducing manufacturing costs in the wake of intensifying competition. Powerwave also is trying to wean itself from the South Korean market, which has accounted for most of its international sales and virtually all of its sales in the more advanced digital PCS arena.
South Korea has proved especially problematic, and the cancellation of a build-out there in 1998 hit Powerwave hard. The company’s primary global customers, Hyundai, LG Electronics and Samsung, are trying to reach out to other countries, and Powerwave has managed to reduce its dependence on South Korea for overseas revenue.
While many foreign markets are considered ripe for the picking, Powerwave won’t be alone. Competitors include AML Communications Inc., Microwave Power Devices Inc. and Spectrian Corp., and all of them have their eye on Asia and other areas.
And Powerwave could find itself challenging many of its own customers, which are continually deciding whether to build signal amplifiers themselves.
Still, Powerwave has high hopes, recently padding its war chest with a $61.8 secondary offering and plans to use the money to buy or build new plants and equipment. n
