DragonWave (Nasdaq: DRWI) shares fall on weak results

Atlanta, GA 7/12/12 (StreetBeat) -- Shares of DragonWave Inc (Nasdaq:DRWI) fell as much as 13 percent after the telecom network equipment maker posted a loss for the seventh straight quarter.

Gross margin for the company, which uses microwave technology to move data between cellular towers and telecom networks, also fell in the first quarter.

"With the difficult global business climate, we believe some of the expected revenue synergies (with Nokia Siemens Networks) may take longer to materialize," Raymond James analyst Steven Li said in a note to clients.

DragonWave acquired Nokia Siemens Networks' NOKI.UL microwave technology business in November [ID:nL4E7M410P].

Li downgraded the company's stock to "market perform" from "outperform" and cut his price target by 50 Canadian cents to C$3.50.

"Given our lower conviction on DragonWave's outlook and integration and execution risks going forward, we recommend waiting for a higher appreciation potential," Li said.

Toronto-listed shares of DragonWave touched a six-week low of C$3.08, while U.S.-listed shares hit a five-week low of $3.02 in early trading. The stock was one of the top percentage losers on both the exchanges.

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DragonWave to buy Nokia Siemens microwave business

Tallahassee, FL 11/4/11 (StreetBeat) -- Canadian telecom network equipment maker DragonWave Inc (Nasdaq: DRWI) will buy microwave technology business of Nokia Siemens Networks in a deal potentially worth up to 110 million euros.

The deal will boost sales and products and more than double staff at DragonWave, which specializes in microwave technology that moves data between cellular towers and telecom networks. DragonWave will become the key microwave technology supplier for Nokia Siemens, allowing the venture to focus better on mobile broadband and managed services. "It makes a lot of sense for both companies," said a spokesman for Nokia Siemens, the world's second largest mobile network gear provider. The move comes as Nokia Siemens, a venture of Nokia and Siemens, faces strong pressure from Ericsson and Chinese rivals in its main business.

DragonWave will pay 10 million euros in cash and 5 million in its stock, while taking over employee liabilities of about 10 million and signing a capital asset lease for 5 million. It expects to finance the transaction through a combination of cash and increased debt facilities. The deal includes a sales-based 18-month earn-out period, which would trigger further cash payments of 80 million euros if DragonWave reaches its quarterly revenue target of $100 million.

The Nokia Siemens business will boost DragonWave's sales 4-5 fold, executives of the Canadian firm told an analyst call. DragonWave's June-August sales dropped to $13.6 million and the firm posted a fourth straight quarterly loss as a cutback in spending at U.S.-based customer Clearwire left a hole in its business. DragonWave sees its gross margins at around 30 percent and operating profit margin at around 10 percent when it reaches $100 million in quarterly revenues.

About 360 Nokia Siemens Networks employees will be transferred to DragonWave under the deal, more than doubling the Canadian firms' 270 staff.

DragonWave shares rose about 6 percent at open on the Toronto Stock Exchange, but are still down around 50 percent so far this year. Currently, the company is trading up 13% at $4.08.

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DragonWave (DRWI) Stock Chart Video Analysis

Going against the market trend on Monday, DragonWave had a solid green day. Breaking resistance and the 50 dma, the chart is now on watch to continue the upward pressure.

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