DragonWave's forecast drives stock sell-off

Shares of microwave backhaul provider DragonWave fell more than 20 percent on Friday after the company said revenue figures for the current quarter would fall.

Investors fear that WiMAX operator Clearwire--which accounted for some 87 percent of DragonWave's revenues in the fiscal fourth quarter--is slowing its purchases. Analysts fear the company will have a hard time making up for the shortfall. DragonWave was the second-largest loser on a percentage basis on both the Toronto Stock Exchange and Nasdaq Friday. The company lost some $62.5 million in market capitalization as its stock sank on both exchanges.

DragonWave now estimates fiscal first-quarter sales to reach $50 million, below the $56 million to $57 million analysts had expected.

"What's giving people concern is Clearwire may be getting ready to roll off or slow down. And so the question will be just how does the company navigate if there is a change in pace of activity at Clearwire?" said Pacific Crest analyst James Faucette in an interview with Reuters.

Meanwhile, DragonWave reported record results in the fourth quarter. Revenue increased 463 percent ro $63.8 million, compared with $11.3 in the fourth quarter 2009. Clearwire's contribution to DragonWave's sales was $53.8 million, representing a 21 percent increase over the fiscal third quarter. Meanwhile, sales from other customers decreased 15 percent to $8.4 million.

Fourth-quarter net income was $13.4 million, or 35 cents per diluted share, compared with a net loss of $2.2 million or 8 cents per diluted share in the fourth quarter of 2009.

For more:
- see this Reuters article

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