A young Ottawa maker of Ethernet microwave backhaul radios has scored big success by chalking up sales to Canadian wireless startups such as Wind Mobile and Videotron Ltee., as well as veteran Barret Xplore

However, DragonWave Inc.’s reliance on U.S. carrier Clearwire Inc. is causing it both joy and heartache.

Sales to Clearwire, which is building a mobile WiMax network for Sprint-Nextel Corp. and other wireless operators, made up the bulk per cent of DragonWave’s $170 million business in the last fiscal year that ended Feb. 28.

In the quarter that just ended, DragonWave pulled in $63.8 million – a 463 per cent increase over the same period a year ago –which was almost half of the year’s revenue. Clearwire counted for 87 per cent of that.

Net income was $29 million for the year.

But while Clearwire says it wants to push its network out to cover 120 million Americans by the end of this year it hasn’t given details about the pace after that.

As a result, DragonWave couldn’t give financial analysts guidance past the first quarter, which ends this month.

Having Clearwire as a major customer is “a great strength,” DragonWave CEO Peter Allen said in an interview Friday after the release of the latest financial results. “But there is ambiguity about Clearwire’s pace of deployment during our fiscal 2011.”

The company’s shares on the Toronto Stock Exchange immediately dropped more than 20 per cent Friday and continued Monday.

In January the stock was as high as $14.50, but at noon Monday the lowest bid was $5.58. In a Monday report, National Bank Financial analyst Kris Thompson wrote that “DragonWave’s fire has been extinguished, at least in the near-term.”

The note added that “while industry data and our discussions at trade shows all support a strong microwave backhaul market, we believe large wins are taking longer to close than we had previously expected.”

Allen noted that the company has added 46 new customers around the world (14 in North Amercia), and that as a result of the revenue he’s been able to open new sales offices in Singapore, Australia and, shortly, Mexico City. DragonWave’s gear will also be carried by an original equipment manufacturer, which Allen wouldn’t identify.

 In the meantime he has to hope for more sales from other carriers.

“Of course it’s a concern,” he said in an interview about the reliance on Clearwire. On the other hand, he added, “it’s a great strength as well.”

Clearwire is a first mover in a fourth-generation technology, he said, referring to mobile WiMax. That gives DragonWave “great insight” into the needs of a 4G operator, he said.

Asked when the signing of new customers will turn into big sales, Allen said the pace of their rollouts can be variable. Some wireless operators won’t move into a new city until they’ve maximized coverage in an area they are serving, he said.

He takes comfort in knowing that demand for mobile Internet services is increasing, a demand that is pushing wireless operators to seek cost-effective ways to expand networks and network capacity.

Clearwire says its average customer uses 7 Gigbytes of capacity a month, he said. “So we think we’re in a pretty exciting place.”

However, “in the short term that doesn’t mean we’re not going to see some bumps and lumpiness in the revenues quarter to quarter” until the mobile market matures.

DragonWave believes it will pull in US$50 million this quarter.

Although its radios are used by governments and enterprises, DragonWave is focusing on the carrier market.

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