DragonWave Eyes the World

Source: Ottawa Business Journal
February 28, 2008 - Ottawa, Canada
 

"I didn't foresee Facebook. I don't own an X-Box. I don't understand how ringtones is a $3-billion industry. I've never downloaded a ringtone in my life," Peter Allen, CEO of telecom equipment maker DragonWave Inc., told the crowd at OCRI's Technology Executive Breakfast Thursday morning.

"On the other hand, I'm 'mildly' addicted to my iPod, my Blackberry and my slingbox.

"I like to have control over my content," he said. "I know I'm not alone."

DragonWave is banking on that selfish desire for a "life unwired" in which people can get the content they want when they want it where they want to drive adoption of 3G and 4G wireless networks. The Ottawa-based maker of wireless backhaul technology is focused on jumping past large incumbents still fighting over a 2G market struggling with bandwidth bottlenecks.

Mr. Allen characterized it as taking advantage of "network discontinuity." In fact, it's the only way for a new company to break into a market – when there is a weakness not being addressed by larger, less nimble incumbents who have billions tied up in existing infrastructure and are distracted by industry consolidation.

DragonWave makes wireless Ethernet networking equipment focused on addressing what the company considers to be the main bottleneck hindering the deployment of next generation wireless networks.

That bottleneck is in the "backhaul" – where the connection is made between fibre-based networks and wireless networks. And various attempts to deal with this bottleneck with copper lines, fibre etc. have proven to be either unreliable, insufficient or too costly for the large incumbent service providers.

DragonWave's solution use wireless microwave technology. It's a compelling enough value proposition, says Mr. Allen, that the company's ambition is to be nothing less than a global leader.

Since its IPO last spring, DragonWave has continued to raise capital. It has secured deals to provide broadband in rural Canada, spread across Europe with partners NextWave Broadband Inc., Spain's Consorcio de Telecomunicaciones Avanzadas S.A. and France's Prosystel SAS, and teamed up with Orascom Telecom Holding S.A.E. to penetrate the Pakistani market.

In its third-quarter results released last month, the eight-year-old firm saw revenues grew 139.1 per cent year-over-year to $11.5 million. Net losses were cut to $1.2 million, or four cents per share, from $2.5 million, or 71 cents per share, the year before.

Mr. Allen admitted it is difficult to see what is coming in terms of what new services will be available to consumers over 3G and 4G networks. "If you came here seeing me as a visionary to tell you what the forward applications are, I'm sorry to disappoint you," he said. "I don't know."

However, he noted the shift in the market that has occurred since the heady days of the tech bubble, with service providers much more conservative about their growth and infrastructure investments. Gone are the days of "if we build it they will come." Instead, things have become much more incremental and evenly paced to match consumer demand.

A big leading indicator for him is how wireless spectrum is being auctioned off in a host of markets around the world at a fraction of the cost of a few years ago. In some markets, service providers are obligated to put that spectrum to use or risk losing it. It's an investment that is made because service providers are looking to monetize it, he said. The volume of spectrum auctioning underway around the globe right now points to a growing market for services – services that will demand technology such as DragonWave's.

Of course, competitors will not be far behind, and maintaining a technological lead will be the company's challenge going forward, Mr. Allen acknowledged.

"The only way to win is to out-innovate your competitors," he said, and partner with other large incumbents who do not have a backhaul solution of their own.