UPDATE 2-DragonWave cuts Q3 revenue forecast, shares fall

* Says cost cuts at Clearwire to delay some Q3 revenue

* Expects Q3 rev of $27 mln vs forecast of $30 mln

* Shares fall 9 percent
(Adds details, analyst comments; in U.S. dollars unless
noted)

By Bhaswati Mukhopadhyay

TORONTO, Nov 8 (BestGrowthStock) – Telecom equipment maker
DragonWave Inc (DWI.TO: ) lowered its third-quarter revenue
forecast on Monday, citing cost cuts at its largest customer,
Clearwire Corp (CLWR.O: ). Its shares fell 9 percent.

Ottawa-based DragonWave had been drawing more than 80
percent of its revenue from Clearwire and has been helping the
company roll out a fourth-generation WiMax-based network in the
United States.

However, there have been concerns about DragonWave facing a
gaping hole in its revenue stream as the 4G WiMax-based network
rollout for Clearwire nears completion and there is still no
clarity on new funding for the next phase of the rollout.

“With continued delay of a funding announcement by
Clearwire, we believe business from the operator could decline
even further,” analyst Sera Kim of GMP Securities said in a
note.

Last week, Clearwire announced plans to cut its workforce
by 15 percent and costs by $200 million to $400 million by
mid-2011 as it looks to secure funding to expand its high-speed
wireless network. [ID:nN04236203]

Kim said a financing decision could take longer than
expected, otherwise “we believe Clearwire would not be
implementing such disruptive cost reduction measures.”

DragonWave, whose products aid the movement of large
amounts of data through wireless networks, expects some of its
previously anticipated third-quarter revenue will now be
delayed.

It now expects quarterly revenue of $27 million, down from
its prior forecast of $30 million.

“The tail from the Clearwire business is less predictable
than they (DragonWave) had thought and ultimately it will be a
question whether or not Clearwire will build up the rest of the
country,” analyst Ilya Grozovsky of Morgan Joseph said.

Grozovsky, who has a “hold” rating on DragonWave stock,
said the ultimate success of the company depends on
non-Clearwire business.

DragonWave has recently added customers in Canada, Greece
and Saudi Arabia and is banking on a wave of telecom company
upgrades, especially in Eastern Europe, the Middle East and
Latin America. [ID:nN06125104]

DragonWave shares were down 66 Canadian cents at C$7.06
Monday afternoon on the Toronto Stock Exchange. They have lost
nearly 36 percent of their value so far this year.

($1=$1.00 Canadian)
(Reporting by Bhaswati Mukhopadhyay; editing by Rob Wilson)

UPDATE 2-DragonWave cuts Q3 revenue forecast, shares fall