DragonWave revenue down as Nokia channel continues to dry up

Ottawa-based DragonWave continues to be in transition, CEO Peter Allen told a conference call Thursday.

The packet microwave radio system provider reported fourth-quarter and year-end earnings late Wednesday that clearly reflected how its Nokia channel continues to dry up after the Finnish firm’s acquisition of DragonWave competitor Alcatel-Lucent.

DragonWave reported fiscal 2016 fourth-quarter revenues of $12 million, down from $21 million in the previous quarter. Full-year revenue of $86.3 million was down from the $157.8 million posted in its 2015 fiscal year.

Revenue from the company's Nokia channel was $37.6 million in fiscal 2016, compared with $84.3 million the year before.

Mr. Allen reiterated to analysts previous comments that DragonWave’s relationship with Nokia will focus on the supply of and support for legacy products. That still represented $5.6 million or 47 per cent of the firm’s fourth-quarter revenue.

DragonWave plans to continue transforming its business by going direct to customers. Mr. Allen said the company acquired five new direct customers in the last quarter, a bit of good news for a firm that has had its share of struggles over the last couple of years.

“We will be able to restructure our regional operations around key higher margin opportunity sets,” he said.

Mr. Allen said DragonWave’s transformation will see the company rework its channel arrangements in different geographies, opening up areas of new relationships ahead of the arrival of 5G connectivity.

5G will bring the “need for a new ecosystem around around wireless networking,” Mr. Allen said, adding DragonWave was pleased to be working with Mitel on its recently announced 5G cloud connectivity initiative.

“We share a focus to bring innovative solutions to the 5G mobile network,” he said.

While DragonWave focuses on markets in India and North America, Mr. Allen said there are good opportunities to develop channels in Europe, although Asia remains a challenge because most of its product in that market went through the Nokia channel.

DragonWave had fourth-quarter operating expenses, excluding restructuring charges, of $7.6 million, down from $8.7 million the previous quarter.

The company’s head count is now under 170, chief financial officer Patrick Houston said, down from 270 a year ago.

“We expect to continue to optimize our cost structure during the coming quarters as we look for additional ways to reduce our quarterly operating costs,” Mr. Houston said.

DragonWave’s fourth-quarter net loss was $9.1 million or $3.02 per share, compared with $6.2 million or $2.07 per share in the third quarter.

The firm had cash and cash equivalents worth $4.3 million as of Feb. 29, down from $7.8 million at the end of the previous quarter because of debt repayments made during the quarter, the company said.