Powerwave Technologies Inc. still has some industry watchers in its corner, despite a rash of problems that have plagued the Santa Ana-based company for most of the year.
Powerwave, which makes cellular base-station gear for wireless networks, has been hampered by declining sales linked to a significant slowdown in equipment spending by Dallas-based AT&T Inc. and other North American network operators. The cutbacks hit Powerwave in the third quarter, as sales plummeted 51% from a year earlier to $77.1 million.
The dropoff prompted the company to initiate a series of moves to conserve cash and build up capital. But the company is better positioned for the long-term, said Kevin Dede, a managing director and telecommunications analyst at New York-based Brigantine Advisors LLC.
“There’s an incredible traffic burden on the AT&T wireless network, and they need to address it,” Dede said.
AT&T’s telecommunications grid, along with its competitors, has been taxed with the explosion of streaming video, and music and photo uploads and downloads on cell phones, tablets and other mobile devices. Demand continues to escalate—with no end in sight—prompting the nation’s largest wireless carriers to pump billions into infrastructure and connectivity improvements.
The fight for 4G supremacy is playing out in Orange County, where hundreds of millions of dollars are being invested in communications infrastructure.
AT&T is spending $20 billion nationwide in an effort to boost speed and reduce dropped calls on its network. From 2008 to 2010, the telecom invested more than $450 million in upgrades centered in Orange County.
AT&T still has some strides to make. Consumers ranked its wireless network the lowest among the big four industry players in a J.D. Power & Associates survey of 22,110 wireless customers between January and June.
AT&T is the nation’s second-largest mobile carrier in subscribers behind Verizon Wireless, a unit of New York-based Verizon Communications. Other big competitors are Sprint Nextel Corp. in Kansas and Bellevue, Wash.-based T-Mobile, the U.S. wireless operation of Deutsche Telekom AG.
Stalled Merger
Powerwave executives and analysts also have cited the stalled merger between AT&T and T-Mobile for the revenue drop. The proposed $39 billion deal appears to be on the verge of collapse.
The Federal Communications Commission said last week the merger wasn’t in the public interest. That prompted AT&T to announce it would take a $4 billion charge in the current quarter to cover a break-up fee.
With so much still clouded, analysts and company watchers have avoided linking any benefits or disadvantages for Powerwave regarding the merger.
Meanwhile, mobile data traffic on AT&T’s network has grown some 8,000% in the last four years. As customers consume more data, network traffic is projected to increase eight to tenfold by 2015, the company said.
“Spending needs to stay robust in wireless,” said Dede, who has maintained a “buy” rating on Powerwave since March. “It’s a matter of timing.”
That bodes for well for the company if it can tread water until then.
Powerwave makes antennas, filters and other equipment for cell phone towers.
Its devices capture and boost radio signals between cell phones and base stations inside towers.
• Headquarters: Santa Ana
• Business: cellular base station gear for wireless networks
• Founded: 1985
• Ticker symbol: Nasdaq (PWAVD)
• Market value: about $66 million
• Notable: struggling through steep dropoff in revenue; eventual boost from AT&T upgrade plan expected
Plans
The company is planning on rolling out a suite of products next year and is developing several technologies to boost capacity in areas with high-data use or weak network signals.
“We’re hoping to see the benefits of all those things at some point,” Dede said.
Powerwave has initiated a series of moves the last few months to conserve cash or build up capital.
In late October its board and stockholders approved a 1-for-5 reverse split of its outstanding shares of common stock and a reduction of authorized shares of its common stock.
The move was initiated to prop up Powerwave’s share price and stave off a possible delisting by Nasdaq, which requires companies to maintain a share price above $1.
Powerwave’s newly issued shares debuted a few days later on the Nasdaq Global Select Market.
Powerwave in late October sold its Santa Ana headquarters—as part of the restructuring plan— for $49.1 million in one of the larger office deals of the year.
The company is expected to lease back the property from the new owners under a 15-year lease with two, 10-year extension options.
Powerwave filed plans last month to cut about 110 employees companywide and an unspecified number of contract manufacturers.
The reductions amount to about 5% of its global work force.
Powerwave executives did not return calls for comment on this story.
