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What: Wireless network equipment maker DragonWave (NAS: DRWI) shares fell as much as 10% on moderate trading volume, like a fire-breathing dragon reduced to mere embers.
So what:Nokia (NYS: NOK) and Siemens (NYS: SI) just announced that their Nokia Siemens joint venture will slash 17,000 jobs by 2013, sending shockwaves across the wireless infrastructure industry. New competition from Chinese network builders is making it harder to run a profitable infrastructure business; DragonWave rivals Ceragon Networks (NAS: CRNT) and Alcatel-Lucent (NYS: ALU) also fell hard on the news.
Now what: DragonWave is buying Nokia Siemens' microwave networking operations in a supposedly game-changing $20 million cash-and-stock deal. Under that deal, Nokia Siemens becomes a major DragonWave customer as most of Nokia's microwave needs will be filled by the acquirer. But if the Finnish-German consortium is giving up on network installations, which is what this looks like, the value of that deal is eviscerated. On the brighter side, DragonWave avoids earn-out payments of as much as $100 million if the new division doesn't reach certain sales targets.
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At the time thisarticle was published Fool contributor Anders Bylund holds no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Ceragon Networks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.