|
The continued sluggish fixed wireless market is prompting some broadband access companies to revamp their business plans and product offerings, while others face an uncertain future.
The abrupt suspension of financing for money-hungry competitive local exchange carriers (CLECs) and data local exchange carriers (DLECs) threw a wrench into the vendor business plans for both wired and wireless equipment. Until the middle of last year, Wall Street happily was funding the construction of these nationwide data networks. As overall market dynamics changed, investors developed less tolerance for losses and more emphasis on profitability.
It's really hard to fault the DLECs, says W.R. Hambrecht & Co. analyst Tim Savageaux. "They were being encouraged to rapidly expand footprints at the expense of near-term profitability. And then almost on a dime, the Street turned around and said, 'Wait a minute. We're not going to give you any more money. You've got to be profitable soon.'"
Privately held Fuzion Wireless Communications is repositioning itself to deploy wireline as well as wireless technologies to serve the growing demand for high capacity bandwidth. "The focus is on the DS3 market which is exploding right now," CEO Dave Frank says. "We're trying to go where the growth is."
The company has negotiated a co-location agreement with AT&T Corp. that lets Fuzion place its switches between AT&T's fiber network and the RBOC local loops. Fuzion gets to price local loop and ATM frame relay services for its customers based on the steep discounts AT&T gets from the RBOCs. AT&T gets more IP traffic on its fiber backbone.
"This is a very different from the DSL providers that went after regional Bell operating companies' co-location. What you had there was a forced relationship between RBOCs and the DSLs. The RBOCs took their money for co-location and absolutely stifled their ability to get to the customer," says Frank.
Fuzion's goal now is to build a wireless/wireline infrastructure across the United States, utilizing wireline solutions in Tier 1 cities to avoid such problems as line-of-sight obstructions around tall buildings or obtaining roof rights. For suburban or rural areas, where wireline is too expensive, wireless may be a faster solution to deploy, Frank says.
The wired solution also can generate more revenue, Frank says. Fuzion eventually expects two-thirds of its revenue to come from the wireline solution with AT&T. It's rolling out the new product beginning this month and expects to eventually offer both solutions in the top 40 U.S. markets.
"The play is a totally different playing field," Frank says. "We want to play in a larger arena."
Fuzion's revised business plan was a factor in the January decision by Western Multiplex Corp., which makes broadband wireless systems, to cancel it's planned $339 million acquisition of Adaptive Broadband Corp.
Adaptive's revenue for the quarter ended Dec. 31 was $8.4 million, far less than the forecast $31 million. The falloff partly was due to a $12.4 million overdue bill owed by Fuzion, one of its major domestic customers. Adaptive, which is a Fuzion investor, also deferred $13 million in contracted shipments to Boca Raton-based Fuzion.
"While we believe that Fuzion has a viable business plan as a service provider, given the extreme devaluations of other companies in similar businesses, and the more difficult capital markets environment, we felt it prudent to provide a reserve for the overdue receivable and for our Fuzion-related investments," Peter Maloney, Adaptive's chief financial officer, said in the company's earnings release Jan. 25.
Daniel Scharre, Adaptive's new president and CEO, says the current weakness in the fixed wireless industry and eroding financing for emerging carriers made the Western Multiplex deal untenable.
"From a stock market point of view, fixed wireless specifically, and telecommunications stocks, in general, have really taken a beating," Scharre says. Adaptive's shares, which were selling for around $12 when the acquisition was announced in mid-November, plunged after it cut its revenue forecast. Adaptive sells point-to-multipoint fixed wireless broadband equipment.
Adaptive is working with its current customers to help them reschedule and meet their aggregate contracted forecasts, is accelerating the push for sales internationally, and is accelerating its product cost reduction program to provide customers with greater flexibility. The company is expecting flat to moderate revenue growth until market conditions improve.
"We believe that over the next two to three quarters, CLEC financing issues will start to ease if interest rates are lowered," Scharre says. The company also is expecting to see consolidation among CLECs. Adaptive plans to release a revamped strategic plan Feb. 22.
Fuzion won't comment about the dispute with Adaptive Broadband, but a spokeswoman says her company is on a sound financial ground.
Hambrecht's Savageaux says the outlook also remains uncertain for vendors that concentrated on meeting the broadband needs of emerging carriers offering DSL, and the future depends on their ability to reshape their products for other markets. Equipment providers Copper Mountain Networks Inc., and Touchstone Systems Inc, already have issued steep downward revisions of 2001 revenue.
Copper Mountain is seeking to widen its horizons by offering a new T1 line card that expands DSL range to business customers who are too far from central offices to receive the technology's full benefit. The company's product also diversifies its product line from its focus on the troubled DSL sector.
|
