Two Israeli WiMAX plays in wake of Sprint announcement

Posted Nov 15th 2007 8:10AM by Zack Miller
Filed under: Sprint Nextel Corp (S), Technology, Israel

Investors learned last week that Sprint Nextel Corporation (NYSE: S) and Clearwire Corporation (NASDAQ: CLWR) were ending their agreement to create a nationwide, high-speed WiMAX network, citing the complexity it would have added to their businesses. Sprint said in a separate statement that it would review its WiMAX business plan and outlook in light of the announcement and plans to make further comments on the topic early next year.

BloggingStock's Aaron Katsman seemed to blame some of this fallout on Sprint's own internal issues, but deferred positing a true forecast on the future of WiMAX. Whether or not WiMAX overhauls telecommunications as we know it, there are two smallish firms already benefiting from the limited roll-out of WiMAX in emerging markets -- both happen to be Israel-based.

Alvarion Ltd. (NASDAQ: ALVR)'s strength comes in winning projects in emerging markets. Markets that the big-boys aren't ready to play in. The company finished the 3rd quarter with 200 commercial deployments, up from about 170 at the end of their second quarter. Sprint's decision not to move forward with their large WiMAX project doesn't seem to have affected Alvarion's ability to win new deals, though the stock has been pounded after a recent earnings report. Cisco recently purchased a WiMAX firm called Navini, and I wouldn't seem surprised to see another large player buy Alvarion.

Israel's Ceragon Networks Ltd. (NASDAQ: CRNT) had seen a huge run-up in its share price this year before recently pulling back strongly. Ceragon provides wireless backhaul equipment in the US to companies that build telecommunications relay stations and lease these to telephony companies. An article in Israel's Globes website said that, "[Ceragon] does not concern itself with the type of communications these stations transmit, be it WiMAX, 2G, 2.5G, 3G or 4G." Ceragon's Q3 results were way ahead of estimates and raised its outlook for the rest of 2007 and 2008. It is highly likely that Ceragon will still stand to benefit should Sprint decide to upgrade its existing networks, instead of rolling out a new WiMAX network.

Ceragon recently did a secondary offering which further pressured shares and increased the share count. While the company has more cash in its coffers, there may be an acquisition in the wings. Investors should do their own homework before making an investment decisions.

Zack Miller is the Managing Editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund. Author's fund holds a position in ALVR as of 11/14/2007.