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Friday, February 6, 2009
Starent, wireless gear sector buck downward stock trend
By Efrain Viscarolasaga
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Even as customers and partners report losses and layoffs, Tewksbury-based Starent Inc., a publicly traded maker of wireless infrastructure equipment is turning a profit, and officials expect that trend to continue.
Last week Starent, which was one of a handful of local communications equipment makers to go public in 2007, reported a fourth quarter net income of $17.5 million and a full-year income of $60.5 million, increases of $13.3 million and $49 million, respectively, over last year’s numbers. Starent generated $254.1 million in total revenue in 2008, a 74 percent increase over 2007. While the jump is dramatic, it is a trend expected to be seen when other wireless equipment providers, such as networking giant Cisco Systems Inc., release their own quarterly earnings.
The success has sent Starent’s stock from a low of $7.60 per share on Nov. 20, to a current price hovering above $14 per share.
According to officials, Starent’s recent success stems from continued spending from its carrier customers and an industrywide push to new, faster wireless broadband networks, including the new 4G standard called Long Term Evolution (LTE), which is gaining ground as the next step in wireless networks, both in North America and abroad.
“The mobile industry continues to grow, and our customers — the operators — are seeing growth, particularly in the use of data in the wireless market,” said Ashraf Dahod, founder and CEO of Starent and longtime telecommunications entrepreneur. “We happen to be in the right place at the right time.”
The positive earnings came just days after the company also made public a new partnership with Motorola Inc. for the development of multimedia core networking products for use in Motorola’s LTE/SAE (System Architecture Evolution) network offerings. While Motorola this week announced deep losses and layoffs, officials publicly stated much of the hit came from the cell phone side of its business, rather than its networking side.
According to Michael Grossi, a director with Boston-based communications consulting firm Altman Vilandrie & Company, wireless carriers have continued to allocate dollars to building out their networks, in light of the economic downturn, and that is supporting equipment companies such as Starent.
“Carriers have shifted more dollars to long-term buildouts, taking a longer-term view,” he said, but warned that what will happen in the coming quarters remains uncertain, and there is no telling if the current pace will be maintained.
The LTE standard has quickly become the focus of carriers and equipment makers moving to 4G networks. While it still competes with WiMAX, it has the advantage of being an easy migration from both CDMA-based networks (predominantly in North America) and GSM-based networks (the standard in the majority of wireless networks in the rest of the world). Last year, CDMA stalwart Verizon Wireless announced its switch from WiMAX to LTE as its next-generation standard, and earlier this month announced that it was accelerating its timetable, moving its expected deployments from 2010 to 2009.
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