Wi-LAN ends fiscal 2005 on difficult note, begins 2006 with big patent win

Senior managers at Wi-LAN Inc. hope the struggles of 2005 are behind them and that a significant win early in fiscal year 2006 could mean brighter days are ahead. Last year was "a year of transition and a very difficult year financially for our employees and shareholders," Bill Dunbar, president and CEO of Wi-LAN, said during a conference call. "It has also been a year of change for the wireless broad-band industry. WiMAX broadband wireless is becoming a reality, but it is still at the beginning." Fiscal year 2006 started off on a high note for the struggling broadband wireless equipment maker one month into FY 2006. On December 2, the company announced that it had reached an agreement with Cisco Systems Inc., settling a more than five-year-old legal tussle. Under terms of the agreement, Cisco will pay Wi-LAN US$10 million, plus US$1 million in additional costs, for several issued and pending patents relating to WiMAX and antenna technology. Wi-LAN will continue to hold the majority of patents relating to OFDM and WiMAX implementation. The cash comes at a critical time for Wi-LAN as the company finds itself in a precarious position: mounting losses and operating expenses (opex) with few prospects of making enough money to chip away at the growing debt. As a result, the company hired GMP Securities to advise on strategic alternatives, which could ultimately mean the sale of assets. Cash burn is a concern for the company since it more than doubled in FY 2005 compared to the previous year. It increased from $6.3 million in FY04 to nearly $15 million in FY05. Wi-LAN posted a net loss for the year of $25.6 million. Revenue for fiscal 2005 was nearly $26 million (see chart below for more revenue details). Keith Bittner, CFO, said opex in the first two months of the first quarter of 2006 is about the same as that of previous quarters in FY 2005. "I think we are managing our cash flow as well as can be expected in our situation," he stated. "We’re looking obviously…at rightsizing opex expenses to ensure that they are in line with our revenue and eventually to ensure that we are moving towards cash flow break-even and profitability." Bittner added the company has the financial resources to survive until it gets the US$10 million from Cisco. Selling non-strategic assets is also an option the company is exploring. Wi-LAN has put its antenna division up for sale, and interested parties have begun kicking the tires of the old Til-Tek outfit. The broadband wireless equipment maker acquired Til-Tek more than five years ago for $22.5 million in stock. Wi-LAN’s future relies on its ability to sell broadband wireless equipment and license its technology to other equipment makers. To better position the company for this new environment, management separated the firm into two operating units in August 2005: an intellectual property unit and one for its wireless gear. "This strategy is designed to enable us to perform better for our customers, partners, employees and shareholders through better aligning corporate resources and expense management with each of Wi-LAN’s key opportunity areas," Dunbar said. The Calgary-based wireless equipment maker is also at the mercy of the WiMAX Forum, which certifies WiMAX-compliant equipment. The body has organized three waves of certification. The first wave is limited to a small number of companies and small numbers of tests. The second and third waves will have an expanded battery of tests across the full range of WiMAX protocols. Dave King, senior VP and GM of Wi-LAN’s product division, noted that the certification waves have been delayed, but the hope is to get Wi-LAN gear into the second wave in about 12 to 18 months. "It is our intention to be in the second wave of testing and the expectation we currently have is that puts products into the market sometime between September and December of next year," he said. Fiscal 2006 will be a challenging year for Wi-LAN, but Dunbar is optimistic the company will come through. "In 2006, we will continue to place emphasis on maximizing value for our intellectual property and we expect to see improved results from our IP division as our licensing agreements yield results and sales of our IP products continue to grow," he said.

Wi-LAN ends fiscal 2005 on difficult note, begins 2006 with big patent win

News | January 10, 2006

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