Investors jittery over DragonWave's customer prospects

Investors have been concerned about microwave backhaul provider DragonWave's ability to plug a big hole that will be left when Clearwire (NASDAQ:CLWR) completes its first phase of its WiMAX network rollout.

DragonWave derives about 85 percent of its revenue from Clearwire. DragonWave's stock has taken a beating as the company hasn't detailed any plans to replace the WiMAX operator. Since hitting a high of $14.55 in January, the vendor's stock has fallen more than 60 percent since then.

The question is whether DragonWave can grab any significant new customers in the near term or whether the vendor can cut costs enough to ease the pain. Analysts have conflicting opinions.

TD Newcrest analyst Chris Umiastowski expects Clearwire to keep building out beyond its initial phase, and he said the company has good traction in Eastern Europe and the Middle East. In addition, DragonWave has agreements with large wireless OEMs, opening the company up to bigger operators, Umiastowski said.

"We believe that the company's win with Yota in Russia is likely driving its success in Eastern Europe," Umiastowski said in a note to clients.

Kris Thompson of NB Financial, who has an "underperform" rating on the stock, said DragonWave needs to work overtime to grow revenue until Clearwire finds more funds to reach its network buildout goal of 270 million POPs.

For more:
- see this Reuters article

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