Redline Communications Group Inc., (TSX/AIM: RDL), a leading provider of standards-based WiMAX and broadband wireless infrastructure products, today updated its outlook for fiscal 2008 and provided estimated revenue for the second quarter ended June 30, 2008.
Preliminary results for the second quarter indicate revenue to be approximately $9.0 million to $9.5 million, a decrease of approximately $6.0 million from analyst forecasts. The second quarter financial results were affected by several factors, including a softening in the overall demand for WiMAX products based on the current 802.16d standard as operators consider whether or not to wait for the next generation of Mobile WiMAX technologies. Their decisions have been impacted by recent industry developments, including the early level certification of next generation 802.16e Mobile WiMAX equipment.
The impact of these market forces was compounded by two key customers delaying network expansions due to complications in integrating the latest release of the Redline Management Suite (RMS) with their existing networks. RMS is a software product that acts as a gateway between Redline's WiMAX equipment in the network and the network management system. The latest release of the RMS is an industry first in that it supports auto-provisioning of WiMAX subscriber units, as well as seamless billing and subscriber management. The integration of the RMS involved the re-architecture of fully operational core networks that support existing GSM voice and data mobility services with a new fixed WiMAX network that supports Voice over IP (VoIP) and data services. The Company has now successfully completed the integration for one key operator and is working with its partners to integrate the other network.
The results for the second quarter were also affected by senior sales management changes, including the departure in April of the Managing Director for Europe, who has since been replaced, and the unexpected long-term medical leave of the Managing Director for the Middle East region later in the quarter. Redline has also initiated the process to replace its Vice President of Worldwide Sales and expects to fill the position in the third quarter of 2008.
As a result of these factors, Redline now expects second half 2008 revenue of approximately $20 million to $25 million. The Company will therefore not achieve EBITDA profitability in the fourth quarter as previously projected. At quarter-end, the Company's balance sheet showed cash and cash equivalents of $14.8 million.
"Some prospective and existing customers have delayed their rollouts and purchasing decisions as they review the option of adopting a next generation mobile WiMAX solution," said Majed Sifri, President and CEO of Redline Communications. "We believe that market opportunities remain strong due to the demand for broadband access, but the timing of customer decisions has become more difficult to predict. Based on compelling proven and projected returns on investment, we continue to believe in the long-term growth potential of fixed and mobile WiMAX and in Redline's ability to be a leader in these markets."
"We acted quickly to resolve the integration complications with the RMS; however, we expect the delays to impact the timing of revenue from new orders from current customers, which were in our original forecast for the year. We are moving quickly to strengthen our management and sales teams in several key areas and are confident we will secure a strong telecommunications veteran to lead the further growth of our WiMAX business. We are also examining several strategic options to leverage the value of our BWI business unit."
"We continue to focus on accelerating the development of our RedMAX 4C Mobile WiMAX product family, while offering a leading fixed WiMAX solution to customers that are successfully rolling out WiMAX networks today. The WiMAX Forum's announcement on the first phase of Mobile WiMAX certification is a good proof point for the WiMAX industry. We have submitted products for the next phase of certification and will deliver solutions that offer the features and functionality necessary for the successful rollout of a Mobile WiMAX network," added Sifri. -- www.cnxmarketlink.com
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