A softer-than expected market for fixed wireless equipment and the drop in the U.S. dollar have contributed to the decision by SR Telecom Inc. to seek court protection from creditors this week, a telecommunications analyst says.
SR Telecom, a Montreal-based supplier of fixed wireless transmission equipment for carriers, has asked the Quebec Superior Court for protection from creditors under the Companies’ Creditors Arrangement Act (CCA). It also announced it will cut 35 jobs from its workforce of about 400.
The move comes on the heels of a decision announced Nov. 8 to seek a buyer for the company, which lost $49.3 million during the first nine months of 2007, compared with a loss of $84.4 million during the same period in 2006. SR Telecom owes $46.7 on a credit facility, and an additional $36.1 million on a term loan.
“They had hefty cash burn for their size,” said Brownlee Thomas, Montreal-based principal analyst for Forrester Research Inc.
SR Telecom officials did not comment for this story. Marc Girard, SR Telecom’s senior vice-president and chief financial officer, referred media calls to the company’s vice-president for communications, Anna di Giorgio, who had not returned ComputerWorld Canada’s call by press time.
Thomas said the filing for creditor protection does not mean the company will fail, as several firms in the Canadian telecom sector have also filed for court protection and have restructured.
SR Telecom, which was incorporated in 1981, sells most of its non-line-of-sight equipment to incumbent and competitive carriers outside North America, in regions such as Latin America and the Middle East, where telecommunications infrastructure is far less advanced and carriers are more inclined to provide local service through wireless base stations rather than copper cabling.
It recently began using Wireless Interoperability for Microwave Access (WiMAX) technology, which is designed to allow transfer rates of up to 40 Mbps per channel over a wide-area wireless network, in its Symmetry product line. WiMAX is a set of standards administered by the Institute of Electrical and Electronics Engineers (IEEE).
SR Telecom’s financial woes may be an indication of the time it takes for carriers to adopt new technologies, Thomas said, adding incumbent carriers “are not in such a big hurry for WiMAX” because some have long-terms investments in other technologies.
Therefore, SR Telecom may have relied on WiMAX too soon, she said.
“You know when you ride the wave and you’re too far ahead of the wave? You can get hit by the wave. You’re not surfing the wave.”
In its financial statements released last month, SR Telecom stated: “Going forward, the Company will continue to require substantial funds as it continues the development of its WiMAX suite of solutions.” Thomas said the recent rise of the Canadian dollar could not have helped SR Telecom, which earns much of its revenue in U.S. currency but pays much of its costs in Canadian dollars.
“That’s one factor that puts the squeeze on them.”
Another factor is the attention WiMAX has been getting from the larger equipment manufacturers, such as Motorola and Siemens.
“As usual in telecom when something is new … this is a domain of specialist and smaller players,” she said. “As market opportunities become more viable this is a domain for larger players.”