Ottawa wireless backhaul maker cuts 20 staff

Another Canadian IT manufacturer is laying off staff, blaming uncertain financial markets that are making customer purchases shaky.

Ottawa’s DragonWave Inc., which makes wireless Ethernet gear for enterprise Internet access and for backhaul for carrier and providers, said Monday that in a bid to save money it is cutting 20 people from its staff of 160, reducing spending and dropping its listing on London’s AIM financial market. It will continue to be traded on the Toronto Stock Exchange.

The announcement came immediately after the company’s third quarter closed. However, president and CEO Peter Allen wouldn’t comment on the results, which will be announced early in January.

In the last quarter, which ended Aug. 31, DragonWave reported revenue of $10.6 million, slightly down from the $10.7 million reported in the first quarter and a loss of $2.8 million. North American revenue, which accounts for roughly three-quarters of its sales, dropped to $7.6 million from $8 million.

DragonWave’s layoffs follow similar moves last month by Nortel and March Networksafter they announced losses. Also last month DragonWave competitor Redline Communications of Markham, Ont., said it is putting up one of its divisions for sale because it is burning through cash.

DragonWave’s announcement was the first of several cutbacks announced this week by Canadian IT companies.

Late Monday Vancouver’s Intrinsyc Software International, a maker of mobile and embedded software solutions, said it will lay off about 90 people – or 30 per cent of its workforce – to preserve cash. With that and other measures it hopes to save between US$10 million and US$19 million a year.

And on Wednesday morning, AirIQ Inc., a Toronto provider of telematics services for commericial fleets, said it’s cutting 36 per cent of its workforce due to “current economic conditions.” The statement didn’t say how many people are being let go, but did say the savings would amount to $1 million a year.

In November, when it announced its latest quarterly results, AirIQ said in the first nine months of the year it lost $4.1 million. The company, which is still trying to break even, has an accumulated debt of over $91 million.

Allen portrayed the DragonWave layoffs and spending restraint, which will save about $4 million a year, as a defensive move.

“We see uncertainty in the market, particularly around liquidity, that is impacting the deployment plans of prospective customers,” he said in an interview. “There are projects that are being competed for (but) what’s not clear to me at all is which of those projects will be able to more forward, even if I win them, because many of them require financing that (customers) have to acquire from banks or new investors.”

So far the strategy of DragonWave – which has yet to break even – has been to spend to support existing customers and try to break into new markets, he added. Now, he said, “rather than continuing to operate a loss in anticipation we’re going to win some of those things,” the company will “invest upon success” – meaning it will hire when contracts are won – “rather than continue to invest too much ahead.” As a result, he said, the company should be “more resilient” if things get worse.

He did note that last week the company’s biggest customer, U.S. provider, Clearwire Corp., had completed a deal to combine its wireless Internet assets with those of Sprint Nextel. In July, Sprint said it had selectred DragonWave to be a supplier.

[The combined company, which has started to build out a mobile WiMAX-based service in the U.S. called Xohm, will be called Clearwire.]

As part of the deal, announced in the spring, Clearwire was to get a US$3.2 billion injection from big names including U.S. cablecos Comcast and Time Warner, Intel and Google. However, that was held up pending regulatory approval of the deal. That was the reason why Clearwire wasn’t a big spender in Q2, Allen said, and the biggest factor why North American revenue dropped.

Still, for 2009 Allen is uncertain. “I do expect we will experience growth from Clearwire,” he said. Otherwise, he wouldn’t commit to what he sees for the next 12 months.

DragonWave makes the Horizon and AirPair wireless Ethernet transmitters and recievers.

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