WaveRider details new growth plan, focus on buying or merging with another firm

WaveRider Communications Inc. executives say the company must grow through acquisition or die as it faces dwindling cash reserves and an increasing debt load. To that end, the company has unveiled a new strategic growth plan shifting the company’s focus to a merger or acquisition within the next few months to expand its product line and free cash to continue its research and development activities. Bruce Sinclair, president and CEO of the wireless equipment maker, said during a conference call that with organic growth estimated to be about 50% in 2005, it has become incumbent on the firm to look at a merger and/or acquisition as a key growth strategy. "A key goal for us over the next few months will be to merge and/or acquire another company with additional products that will immediately expand the addressable market to grow revenues, share profitability, and ensure our ability to continue to invest in research and development," he stated. Sinclair said WaveRider has specific requirements for any fixed wireless equipment provider that it might acquire, noting that companies with multiple product lines, and sales and development activities to support them are more often than not successful. "Global distribution is required. Minimal annual revenue run rates in the $100-million range are required to support continued development, to be competitive in future market growth and provide acceptable financial market profitability." It became apparent earlier this summer that the company faces some hard choices if it is to continue as a going concern. In a quarterly report filed with the U.S. Securities and Exchange Commission on July 29, WaveRider highlighted its current predicament. "…The requirements to continue investment in research and development activities to meet the company’s growth objectives, without assurance of broad commercial acceptance of the company’s products, lend significant doubt as to the ability of the company to continue normal business operations," reads the July 29 Form 10-QSB. "The company has a plan that it believes will allow it to achieve profitability and cash flow positive operations without the need for additional financing. However, if the company fails to achieve positive cash flow in the near term, the company does not presently have adequate cash to fund ongoing operations. In that case, in order to meet its needs for cash to fund operations, the company would need additional financing. In the past, the company has obtained financing primarily through the sale of convertible securities. If the company is unable to either achieve its planned cash flow positive operations and profitability or obtain significant additional financing, it will, in all likelihood, be obliged to seek protection under the bankruptcy laws in which event, the company believes it is unlikely that its common stock will have any value." WaveRider’s accumulated deficit grew from approximately US$83.6 million at June 30, 2003 to US$88 million at Dec. 31, 2003, increasing to US$92.4 million at the end of June 30, 2004. Revenue was also down about US$1.5 million from the six-month period ended US$6.3 million at June 30, 2003 to US$4.7 million at June 30, 2004. Sinclair noted that growth in the fixed wireless access market has come only through acquisition, citing the examples of Alvarion and Airspan. WaveRider has tried in the past to get in on that game, but has so far been unsuccessful, he said, adding that part of the problem is associated with its share capital structure, balance sheet and the Nevada registration location. The company took steps earlier this summer to remedy the share capital structure by implementing a reverse 10-for-one stock split that was approved by shareholders last year. Sinclair said the share reduction right-sized the capital structure to a more appropriate number of shares befitting the size and stage of development of the company. Another step WaveRider is taking to address its situation is to ask shareholders to approve a plan to change the registration location from Nevada to Canada at the annual shareholder meeting on September 27. Despite possible merger and acquisition activity and a change in incorporation location proposal, the company will not stop investing to develop and introduce products both its core offerings and new ones. Sinclair said the company plans to introduce new 900 MHz products before the end of the year and will incorporate new capabilities. "Some of these new capabilities especially in the areas of capacity and Voice over Internet Protocol applications will be very helpful in speeding up some of our development. And from our market seeding activity in Latin America, we will be developing new applications of our current products, which should help us expand our North American market," he said, citing the example of applications around public safety. Further, WaveRider plans to introduce new products outside of its core 900 MHz offering, Sinclair said. "You’ll see us launch new unlicensed and licensed products for existing sales channels and current customers primarily in the 5.8 GHz and the 18-38 GHz digital licensed systems. We will continue to explore the future of WiMAX and what that will mean to us, the market and our customers as well as the investment we’ve made in MIMO opportunities are fairly modest internal R&D investments." Earlier this year, WaveRider inked a development agreement with Montreal-based Wavesat Wireless Inc. under which the two companies will work together to develop a line of broadband wireless access equipment operating in the 3.5 GHz licensed band and the 5.8 GHz unlicensed band (RoW, June 11/04). Jim Chinnick, VP of engineering at WaveRider, told Report on Wireless in June that the two companies will also explore ways of bringing WiMAX-like features to 900 MHZ products. "What we’re doing is basically developing 900 MHz products that are based on OFDM and high-level modulation and brings enhanced services and all those capabilities and hopefully takes advantage of integration and low cost," he said at the time.

WaveRider details new growth plan, focus on buying or merging with another firm

News | September 9, 2004

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