Riding the backhaul wave
B uried in dense fog, a Viking ship is depicted sailing across a rolling ocean in a mural just outside the main entrance of DragonWave’s Leggett Drive office.
It’s a souvenir of the technology company’s genesis in the early 2000s, when the upstart firm saw itself as a gang of “marauders,” according to chief executive Peter Allen.
“ We were one of the challenging (companies) invading the incumbents’ territory,” said Mr. Allen of the early days.
Although Mr. Allen isn’t at all Scandinavian and wasn’t there at the time, he has helped carry that spirit forward as the company – which powers mobile wireless networks – fought through a somewhat frothy 2010.
All was rosy that January, when DragonWave raised its outlook as third-quarter sales jumped 421 per cent to $55.82 million from $10.7 million.
But 82 per cent of that growth came from a single customer: Clearwire, a wireless broadband service provider based in Virginia.
The vulnerability was noted by several analysts, but became clearer later in the year when Clearwire delayed the rollout of its nextgeneration network. That took DragonWave’s revenues down with it as the microwave backhaul provider scrambled to sign new customers in the interim.
In the third quarter alone, DragonWave cut its revenue guidance 10 per cent to $27 million as Clearwire slashed spending.
“ We had this really good relationship with Clearwire, and who wouldn’t want that?” Mr. Allen said.
“But at the same time, it’s an exposure, right? Because you have a lot of revenue tied up with one customer. So of course we’re trying to win as many other customers as possible.”
Part of DragonWave’s road map for growth in 2011 includes “digestible mergers and acquisitions,” officials say – essentially targeting a company with complementary technology and products, and ideally one with customers, contacts and a positive cash flow. Then, snapping it up.
Investors got a preview of this in October,