Santa Ana’s Powerwave Technologies Inc. has been getting some love from Wall Street.
The maker of amplifiers, antennas and other gear for cell phone towers has seen its stock rise 125% in the past 12 months.
A modest climb picked up speed earlier in the month after analysts and investors got word that the nation’s biggest wireless carriers are set to boost spending on their networks.
“Spending on wireless infrastructure components seems to be picking up as carriers look to augment their networks to handle increased data traffic,” said Amir Rozwadowski, an analyst at Barclays Capital Inc. in New York. “Order activity from carriers such as AT&T and Verizon seems to be improving now, off of low orders in 2009.”
That’s good news for Powerwave, which sees sales on the upswing during the current quarter after years of choppy results.
Powerwave’s devices capture and boost radio signals between cell phones and base stations inside towers.
It sells to bigger wireless equipment makers such as Nokia Siemens Networks and Alcatel-Lucent, as well as directly to service providers Verizon Communications Inc. and AT&T Inc.
The company’s customer base shrunk by as much as 30% after consolidation among telecommunications companies in 2006 and 2007.
It saw a bit of recovery in the first half of last year but was hit hard as credit tightened and wireless carriers froze spending on projects.
That is turning around, but Powerwave still is cautious with its outlook.
In February, Powerwave projected modest sales growth for the year.
“While we were establishing a target forecast for 2010, we want to stress that we remain conservative in our outlook for overall capital spending within the wireless infrastructure industry,” Chief Financial Officer Kevin Michaels said in a call with analysts.
Powerwave said it’s expecting 2010 sales of $590 million to $620 million, up about 7% from 2009’s yearly sales. It didn’t give a profit outlook.
Analysts, on average, are looking for profits of $11 million on $603 million in sales for 2010.
Industry watchers are looking for spending to start in earnest during the current quarter.
“Our sense is that orders have begun to pick up and that should translate into revenue growth in the back half of this year for Powerwave,” Rozwadowski said.
Powerwave declined to comment for this story.
Wireless carriers are constantly building out and maintaining their networks.
Increasing consumer demand for data services, photos, videos and music on phones keeps them on their toes.
This year they’ve been testing out new gear—some made by Powerwave—that’s set to create a fourth-generation wireless network.
“Business trends are still subdued, but there is a lot of focus on wireless networks needing to beef up their capacity because of demand from iPhones and the Droid,” said William Choi, an analyst at Jefferies & Co. in New York. “There is a renewed hope that wireless operators will have to build up a stronger footprint. This will ultimately lead to spending on antennas and power amplifiers.”
New Product
Powerwave has had a new product be qualified by both AT&T and Verizon, which bodes well for sales down the line. The product also nets better profits.
Powerwave is making a power amplifier that has multiple bands, so it can work with several different frequencies of data traffic.
“These multiband antennas sell at a significant premium to single-band antennas,” Choi said.
The multiband antennas go for about $1,000, according to Choi, while the singles sell for $250 apiece.
“We believe these wireless operators could begin ordering additional broadband antennas and amplifiers starting in the second quarter,” he said. “As a result, Powerwave’s business will likely bottom in the first quarter with steady sequential growth through 2010.”
For the past year or so, Powerwave has been focused on cutting costs.
It sold an empty manufacturing facility in Salisbury, Md., making $3.9 million in late 2009.
It also opened up a 135,000-square-foot factory in Thailand that’s set to have some 500 workers to reduce production costs.
“Management has made a concerted effort toward reducing operating expenses,” analyst Rozwadowski said. “As we see revenue growth return, we should see a return to stabilized profitability.”
Despite the bullish view, Rozwadowski downgraded Powerwave last week after the stock run-up.
He gave the stock a rating of “equal weight,” which is down from a previous rating of “overweight.” He also upped his share price target to $2 from a previous estimate of $1.60 per share.
Powerwave was trading at about $1.50 per share late last week on a market value of about $200 million.
