Piper Jaffray initiates coverage of Alvarion, spells out cautious market for WiMAX

Piper Jaffray commenced coverage of Alvarion with an underweight rating and a $3 price target, which is well below the $4.49 closing price on Wednesday.

"While we believe Alvarion is well positioned as a WiMAX provider, we remain cautious on the ramp in Alvarion's WiMAX sales due to macro factors" and valuation concerns, T. Michael Walkley wrote in a research note. Alvarion has indeed been racking up the WiMAX contracts, including a $100 million contract with Open Range Communications earlier this month.

Walkley believes operators are likely to conserve capital in the second half of the year, and therefore the firm is remaining cautious about Alvarion's overall WiMAX sales in 2009.

The analyst also noted that existing technologies, primarily CDMA 1xEV-DO and WCDMA, are being expanded aggressively in emerging markets such as China.

"We believe these incumbent technologies have economies of scale and a diverse product portfolio for handsets which are essential for carriers to attract customers and recoup capital expenditure spent on the network upgrades," Walkley wrote. "We believe WiMAX will remain only in niche markets and we remain cautious on ramping WiMAX sales in 2009."

For more:
- see Barron's [1]

Related articles:
Alvarion lassos $100M WiMAX deal with Open Range [2]
Alvarion scores WiMAX contract for rural America [3]