COM DEV International offers up RF components business for sale or merger

COM DEV International Ltd plans to sell or merge its wireless components business and focus on operations that promise better returns, particularly its space and wireless Internet systems businesses. In a conference call with analysts last week following the release of the company's third-quarter results, president and CEO Keith Ainsworth explained that the global market for RF components has deteriorated significantly, resulting in fewer orders from its largest customers. "For some time, we have been concerned the scale of our business has been insufficient to achieve an acceptable level of performance," he told analysts and reporters Aug. 29. "In the past quarter, we have firmed up our view that the path towards profitability for this business lies in some form of merger or divestiture in order to grow its scale." Third quarter revenue hit $40.7 million, down 19.4 per cent compared with $50.5 million in the third quarter of 2000, although total revenue for the first nine months of 2001 increased 13 per cent to $155.3 million compared with $137.4 million for the same period in the prior year. For this quarter, COM DEV Wireless and COM DEV Space generated revenue of $10.3 million and $30.4 million, respectively. The wireless components business, which has low margins, was the least profitable and has the least potential for turning around in the near term. Sales for second-generation and 2.5G products continue to be sluggish and 3G sales were non-existent during the last quarter. COM DEV's wireless subsystems division was the only under-performing part of the company and Ainsworth said it makes more sense to divest than embark on an acquisitions spree to broaden its customer base to achieve greater efficiencies of scales. The division's book value is at about $50 million, although company executives wouldn't speculate on whether it expects to generate that amount from a sale. One of the main selling features of the division, however, will be a letter of intent COM DEV signed with Nortel Networks Corp. Full speed ahead with wireless Internet system, M/ERGY COM DEV's finances do have a silver lining. The company's space division is headed for a record year for revenue and profit, and interest in its M/ERGY wireless Internet access system is growing in the U.S., Canada, Europe and Korea. Public tests of M/ERGY are scheduled for the Cellular Telecommunications and Internet Association's IT conference and trade show in San Diego next week (see the calendar section on Decima Publishing's web site for more information on CTIA IT 2001). Earlier testing of the system demonstrated mobile data throughput rates of nearly 2.5 Mbs at speeds of more than 120 km/h (RoW, June 11/01). Research and development into the system has cost about $23 million to date, and executives say spending will remain constant for the foreseeable future.

COM DEV International offers up RF components business for sale or merger

News | September 4, 2001

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