DragonWave's Shares Got Crushed: What You Need to Know
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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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