BUSINESSWEEK ONLINE : JUNE 19, 2000 ISSUE
COVER STORY Powerwave: Amplifying the Wireless Revolution Casual motorists wouldn't notice. But for Bruce C. Edwards, president and CEO of Powerwave Technologies Inc., those flimsy propeller-like antennas spinning atop billboards and phone booths are mesmerizing. They are the visible part of base stations for cellular networks, a growing number of which use the power amplifiers his company makes. His amplifiers let mobile-phone companies cram more calls over the same radio spectrum -- a much-needed capacity boost as wireless services become more popular. The booming demand for wireless infrastructure is creating a bonanza for Powerwave and other specialty-equipment makers. Industry giants such as Ericsson, Motorola, and Lucent have their hands full meeting mushrooming demand for wireless gear from phone companies such as Bell Atlantic Corp. and Sprint Corp. So the big equipment makers are farming out more and more of their manufacturing to niche companies like Powerwave. "The big boys are turning to them in full force, and in some cases, [they're] working together to develop new products," says Chase H&Q analyst Ed Snyder. That's a formula for supercharged growth. Powerwave's revenues more than doubled, to $340.4 million for the 12 months ended Mar. 31, while net income hit $28.5 million, compared with a loss in the year-earlier period. That, combined with a 535% surge in its stock price, helped the Irvine (Calif.) company earn the 18th spot on this year's Info Tech 100. Among telecom-equipment makers, only famed Finnish phone maker Nokia, the top company on the list, ranked higher. "LUMPY" REVENUE. And Powerwave is just warming up. The company thinks the $1.4 billion market for power amplifiers will grow 20% annually over the next few years, and the outsourced segment of the market will grow 30% each year. Prudential Securities reckons Powerwave's revenues will rise about 49%, to $437 million, in 2000 and an additional 27%, to $553 million, in 2001. That should boost earnings per share from $1.95 this year to $2.50 in 2001. Still, Powerwave's strategy may raise some eyebrows. The company plans to stay focused just on power amplifiers so it can build up expertise, giving customers even more reason to buy the company's lower-cost equipment. Powerwave is plowing about 10% of its revenues back into research and development. But the niche strategy could leave Powerwave vulnerable because technology could shift in unexpected ways. A competitor could come up with vastly superior amplifiers. "We don't see a paradigm shift on the horizon, but that's always a danger," says Tom Waechter, president and chief executive of top competitor Spectrian Corp. Alternatively, big equipment vendors could decide to start making amplifiers themselves. Nortel Networks Corp. accounted for 41% of Powerwave's revenues in the most recent quarter, and Ericsson accounted for more than 10%. "I hate to use the word 'lumpy'," says Edwards, "but we supply large volumes to a small customer base." Analysts, however, think a highly focused strategy makes sense for Powerwave and other niche players. "Powerwave now has scale and cost advantages, and will dominate [its market] going forward," says Snyder. To accomplish that, Edwards can't afford to get too spellbound by those whirling blades. By Steven V. Brull in Los Angeles _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Asia Gets Hooked on Wireless TABLE: Top of the Telecom World Making All the Right Calls ONLINE ORIGINAL: Powerwave: Amplifying the Wireless Revolution INTERACT E-Mail to Business Week Online

Copyright 2000-2009, by The McGraw-Hill Companies Inc. All rights reserved. Terms of Use   Privacy Notice