Layoffs at DragonWave

Howard Solomon

12 years ago

An Ottawa maker of IP microwave radio systems for wireless carriers is cutting 48 jobs to get its finances under control.

DragonWave Inc. said Monday the decision was made to reduce expenses and save cash.

It hopes to save $6 million a year in annual operating expenses as a result of the layoffs and other measures.

The move comes after the company finalized a deal to buy the microwave transport business of struggling Nokia Siemens Networks.

“We have now completed our first full quarter of expanded operations that include the microwave transport business acquired from NSN on June 1,” DragonWave CEO Peter Allen said in a news release.

“We are utilizing this experience to rationalize our operations, with a focus on reducing recurring costs. Transition and integration activities with NSN are ongoing and we continue to evaluate the appropriate scale for the combined business. We will closely monitor the need to adjust our cost profile as these activities progress and as we gain greater visibility into revenue opportunities.”

Most of the layoffs will come at DragonWave’s offices in Ottawa and Israel.

Allen also said the company expects revenue for the quarter that ended Aug. 31 (the company’s second quarter of fiscal 2013) to be “above” US$40million.

According to a research note issued in July by National Bank Financial, DragonWave had said earlier it expected revenue in the quarter would be between $35 and $45 million. Still, financial analysts were expecting around $50 million.

In that research note, NBF analyst Kris Thompson noted that in a July conference call with financial analysts DragonWave management sounded “much more cautious” on the potential revenue after absorbing the NSN division. DragonWave is expecting that a year from now it will be pulling in US$75 million a quarter from the deal.

That deal sees DragonWave become the maker of microwave backhaul units that will be sold by NSN, a global provider of equipment to carriers.

However, Thompson wrote that the deal is now a risk for DragonWave because NSN’s future is in question. Things are bad enough at NSN that in November it announced it would lay off 17,000 staff world-wide.

Remember that NSN is a partnership between handset maker Nokia and Siemens. If Nokia is sold, Thompson wrote, then NSN might be drop-kicked at fire-sale prices and partnerships with companies like DragonWave “may be in jeopardy.”