DragonWave chief executive Peter Allen has been waiting a long time for this moment: a piece of good news. Well, actually, it’s really good news.
U.S. telecom giant Sprint announced late Wednesday that it has placed an initial order for Dragon Wave’s latest-generation microwave technology — the gear that allows telecom carriers to significantly expand their capacity for handling wireless traffic.
DragonWave shares soared nearly 50 per cent after-hours trading on Nasdaq — trading at $3.27, up $1.06.
While the value of the Sprint order wasn’t released, this is potentially major stuff. Sprint has a long-standing relationship with DragonWave and is investing billions of dollars to modernize its network over the next few years. Just how quickly it intends to roll out the wireless component that involves DragonWave’s technology is unclear. And Dragon Wave’s engineers will have to satisfy Sprint that their technology remains solid.
“We’re going to have to earn this partnership,” Allen agrees. “There are a lot of moving parts in this rollout and we’re just at the beginning.”
Allen said DragonWave would begin shipping products to Sprint during the fourth fiscal quarter, which begins in December.
The news from Sprint brings an end to several long seasons of bad news for DragonWave — which suffered a product glitch in its key market of India and early this year lost a significant sales partner. Nokia — its ally — acquired Alcatel-Lucent, a rival, early this year. The result was to compress DragonWave’s overall sales — which have slipped to a quarterly average of $13 million U.S. compared with nearly $40 million U.S. two years ago.
However, Allen maintained that his company could survive, then thrive, by pursuing customers through its own sales channels. He also had high hopes for landing an order at Sprint, which owns the Clearwire network. The reason for optimism: Sprint and Clearwire are longtime customers of DragonWave. However, Allen had no control over when Sprint would resume its current rollout.
Large carriers such as Sprint typically spend many months testing new technologies such as DragonWave’s Harmony Enhanced MC gear in the laboratory and in the field to make sure they don’t conflict with established pieces of the network.
The upside is that when customers do establish a foothold for the latest generation of gear, they tend to do very well. Regardless, the very fact of landing an initial order with Sprint should stand DragonWave in good stead with other potential customers. Sprint was just one of five carriers that had been testing the Harmony product line.
“This is a pretty important moment for us,” says Allen.
By James Bagnall
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