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It has not received nearly the amount of attention its flailing telecommunications counterpart Nortel Networks Corp. has in the last year, but DragonWave Inc. has quietly grown into an emerging power in the global wireless industry.


Similar to Nortel, the Ottawa firm founded in 2000 makes equipment for cellphone networks. But quite unlike the once-mighty technology giant now in bankruptcy protection, DragonWave has been booming.


Revenues more than tripled last quarter alone while its share price has appreciated an eye-popping 865% from last January to close Monday at $11.77. On Thursday, DragonWave reports third-quarter earnings after the closing bell and analysts expect DragonWave to continue with its near-term tradition.


“There’s a huge tailwind for them,” said Peter Misek, analyst at Canaccord Adams in Toronto. Wireless carriers the world over are beginning to migrate from third-generation cellphone networks to ultra-fast 4G systems.


The new networks require microwave “backhaul” technology to move voice and data traffic quickly. “You really only have two or three pure plays in that space and DragonWave is one of them and I think DragonWave has the best technology,” Mr. Misek said.


Fuelling growth through 2009 was DragonWave’s key contract as the primary backhaul provider to Clearwire Corp., a U.S. wireless operator spending billions rolling out a new WiMax network across that country.


Led by the deal, analysts expect the company to report a 360%-plus year-over-year rise in quarterly revenue this week to about $50-million. Mr. Misek has forecast profit of 26 cents a share.


There remains plenty of room for growth. The burgeoning movement among North America and European operators to 4G networks means the next 12 months could well be another banner period for the Ottawa firm.


“Overall, we believe that DragonWave is well positioned for continued growth during calendar 2010 and beyond,” said Mr. Misek, who has a “buy” rating on the stock with a $15 price target.


Analysts at National Bank Financial suggest that less than 5% of global cellphone towers are using 4G backhaul equipment now.


That is expected to grow to 20% “in a few years” creating a $1-billion market in which DragonWave is in the pole position to take advantage of.


National analyst Kris Thompson says there is a “strong macro outlook for DragonWave’s technology,” but cautions that there are threats to growth investors should consider.


Although its reliance on Clearwire has been diluted through smaller deals with operators — Quebecor Media’s cable subsidiary Videotron being one of them — the firm must further diversify its revenue base. “DragonWave needs to complement its Clearwire deployment with one or more additional large contract wins,” he said.


A deal with either U.S. cellphone giant AT&T or Verizon Wireless is possible and the firm has hired new senior executives to pursue those contracts, the analyst wrote in a note.


Still, Mr. Thompson expects the firm to outperform its peers over the next several quarters, with a price target of $14. He expects DragonWave (DWI/TSX, DRWI/NASDAQ) to report revenue of $46-million on Thursday and profit of 19 cents a share, though he noted that the company may beat his expectations.


(Courtesy of The Financial Post)


Revenues more than tripled last quarter alone while its share price has appreciated an eye-popping 865% from last January




I wish I knew about these people a little sooner.


Man I need money now to buy some shares. I just hope its not to late.

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I didn't mean you in person, in general when you hear about something good on the stock market, then you should be looking at something else!


just joking around :silly:


Anyways would have been nice to know about them before. I just hope they can help Videotron hurry up and launch already :yawning:

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