DragonWave roars out after public offering

Flush with some $43 million in cash thanks to a recent public offering, an Ottawa-based broadband wireless Ethernet backhaul company is preparing to expand internationally to slay some of the biggest vendors in the telecom industry.

DragonWave Inc. is a seven-year old company which in the year ending Feb. 28 chalked up $24 million in revenue, including sales to Bell Canada, and carriers in Spain, Germany and Dubai.

It has yet to make a profit – in fact it’s $63.6 million in the red – but it is already moving to spread its footprint around the globe. Last month Clive Belfort, formerly vice-president of Ceragon Networks, an Israeli competitor, was appointed DragonWave’s U.K.-based vice-president for Europe, the Middle East and Asia as part of that world push.

Meanwhile, it is expanding its products by bringing out the AirPair Unite, a pseudowire solution which it says converges TDM and Ethernet traffic across a single wireless stream for service providers or organizations.

Emmy Johnson, founder and principal analyst at Skylight Research of Scottsdale, Ariz., which covers the microwave industry, estimates the young DragonWave has five per cent of the Ethernet backhaul market.

Considering its competition includes Alcatel, Ericsson and Siemens, “it’s impressive that DragonWave has been able to grow in that kind of market,” she said.

Company CEO Peter Allen acknowledges that it’s been quite a year for the company, going public on London’s junior AIM market as well as the Toronto Stock Exchange at a time when capital markets are in a turmoil. In fact, he timed it just right, with the IPO in February.

Originally Allen and his venture investors – which included Enterprise Partners of LaJoya, Calif, and Terry Matthews’ Wesley Clover fund – were going to go public on the AIM alone. “London is an enormous port of capital and obviously you want to attract as broad a base of investors as possible,” he explained. However, because a number of the investors were from here and the company is headquartered here it was felt a dual listing had advantages. One reason for going public was to raise money for expansion, he said. Another is to assure major carriers the company “is going to be around for more than five minutes.”

As Allen explained, many wireless carriers have been using low-capacity leased copper lines as backhaul between cell towers. But 3G and faster technologies mean those lines can’t keep up with increasing data demands of users, so many are turning to broadband wireless solutions.

DragonWave was founded by employees of Matthews’ Newbridge Networks who believed that microwave transmission systems at the time were more complicated than they needed to be. Over time it refined that into a backhaul package.

Now with 120 employees, it sells two lines of products which operate over licensed and unlicensed spectrum. The Horizon Compact is an 800 Mbps system which can be bolted to a cell tower; the AirPair family can scale up to 500 Mbps.

They can be configured in solutions for WiMax backhaul, school district or WISP backbone, last mile access or fibre extensions.

Allen came to the company in 2003 after an optical network company he started sunk in the dot-com implosion.

While Bell Canada would be one of DragonWave’s most recognizable customers, the company’s biggest buyer is American service provider Clearwire Corp., which recently announced a partnership with Sprint to build a WiMax network for cellphones in the U.S.

Allen intends to use some of the money raised by the IPO to stave off competitors. “I’m healthily paranoid about doing that,” he said.

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