Alvarion Reports First Quarter 2005 Results

Alvarion Reports First Quarter 2005 Results

    Business Editors/High-Tech Editors

    TEL AVIV, Israel--(BUSINESS WIRE)--May 4, 2005--Alvarion Ltd. (NASDAQ: ALVR)

--	Broad-based growth continues
--	BreezeMAX(TM) continues to dominate WiMAX trials and commercial deployments

    Alvarion Ltd. (NASDAQ: ALVR), the leading provider of wireless broadband solutions worldwide, today announced financial results for the first quarter ended March 31, 2005.
    On a GAAP basis, revenue for the first quarter reached a record of $57.2 million, up 2% sequentially from $55.9 million and up 28% from $44.7 million in the first quarter of 2004. Net income was $0.4 million, or $0.01 per share for the quarter, compared with a net loss of $6.8 million or $0.12 cents loss per share in the fourth quarter of 2004 and net income of $1.4 million, or $0.02 per share in the first quarter of 2004. First quarter results included $0.9 million acquisition-related expenses pertaining to the purchase of interWAVE Communications on December 9, 2004, as well as $1.1 million of amortization of intangibles and $0.5 million amortization of deferred stock compensation. Management indicated that any additional acquisition-related charge in Q2 will be minimal.
    Excluding amortizations and acquisition-related charges, on a non-GAAP basis, net income was $2.8 million, or $0.04 per share compared with $5.4 million, or $0.08 per share in the prior quarter and $2.1 million, or $0.03 per share in Q1 of 2004.
    Gross margin increased to 46% as a result of favorable product mix. Excluding amortizations and acquisition-related expenses mentioned above, operating expenses increased to $24.2 million or 42% of revenue, on a non- GAAP basis, due primarily to the inclusion of interWAVE Communications' operating expenses for a full quarter.

    Comments of Management

    "Our team executed very well this quarter on all major objectives - financial, technical, and market development," said Zvi Slonimsky, CEO of Alvarion. "We are meeting our targets and continue to expect revenue growth of at least 25% this year.
    "Demand is strong for both WiMAX and non-WiMAX solutions, and growth in Q1 was broad-based, coming from products for both licensed and license-exempt frequencies. Europe was a particular source of strength again this quarter as a result of increasing demand from independent operators using the 5.4 GHz licensed-exempt band that recently became available throughout Europe. These operators are moving aggressively to fill the holes in DSL coverage and, in turn, are prompting the Tier 1 operators to begin moving as well.
    "The integration of interWAVE's business is progressing according to plan, and we are beginning to expand our pipeline of new opportunities. Based on this we continue to believe that, once we move through the normal sales cycles for this business, we will begin to see more traction during the second half of the year.
    "We recently celebrated another important milestone in the widespread adoption of the WiMAX standard when Intel officially launched their Intel PRO/Wireless 5116 chip. Alvarion is the first company to offer a live demonstration of a working CPE, based on the Intel chip, connected to a live operator's network. This important event took place during the last WiMAX summit in Malaga and is an indication of our time-to-market advantage.
    "It was certainly gratifying that most of the operators that participated in the Intel launch event, including Altitude, Iberbanda, and Millicom, are Alvarion customers. Evaluation and trial deployment activity remains brisk, with Alvarion involved in most of the active trials around the world. The scope and duration of these trials up to this point reinforces our belief that our growth will accelerate in the second half of the year.
    "We believe that we stand on the threshold of the WiMAX revolution in fixed broadband access, and we look forward to continuing to lead the market for mobile WiMAX through our collaboration with several major partners. We see a bright future for both fixed and mobile applications of this technology," concluded Mr. Slonimsky.

    Guidance

    The Company's revenue guidance for Q2 2005 is $53 million to $58 million. This guidance assumes no substantial contribution from additional orders related to a major customer's ongoing project due to the difficulty in predicting the precise timing of orders.
    At the revenue range above, net earnings per share are expected to range between breakeven and 3 cents while non-GAAP net earnings per share, which excludes amortization of intangibles and acquisition-related charges, is expected to range between 2 and 5 cents.
    Alvarion's management will host a conference call today, May 4, at 9:00 a.m. Eastern Time to discuss the quarter. To participate in the call, please dial one of the following numbers approximately five minutes prior to the scheduled start time: USA: 612-332-1025; International: +1-612-332-1025.
    The public is invited to listen to the live webcast of the conference call. For details please visit Alvarion's website at www.alvarion.com. An archive of the on-line broadcast will be available on the website. A replay of the call will be available from 2:30 p.m. EDT on May 4 through 11:59 p.m. EDT on May 11, 2005. To access the replay, please call USA: 320-365-3844, International: +1-320-365-3844. To access the replay, users will need to enter the following code: 777770.

    About Alvarion

    With more than 2 million units deployed in 130 countries, Alvarion is the worldwide leader in wireless broadband providing systems to carriers, ISPs and private network operators, and also in extending coverage of GSM and CDMA mobile networks to developing countries and other hard to serve areas.
    Leading the WiMAX revolution, Alvarion has the most extensive deployments and proven product portfolio in the industry covering the full range of frequency bands with both fixed and mobile solutions. Alvarion's products enable the delivery of business and residential broadband access, corporate VPNs, toll quality telephony, mobile base station feeding, hotspot coverage extension, community interconnection, public safety communications, and mobile voice and data. Alvarion works with several global OEM providers and more than 200 local partners to support its diverse global customer base in solving their last-mile challenges.
    As a wireless broadband pioneer, Alvarion has been driving and delivering innovations for more than ten years from core technology developments to creating and promoting industry standards. Leveraging its key roles in the IEEE and HiperMAN standards committees and experience in deploying OFDM-based systems, the Company's prominent work in the WiMAX Forum is focused on increasing widespread adoption of standards-based products in the wireless broadband market and leading the entire industry to mobile WiMAX solutions.
    For more information, visit Alvarion's World Wide Web site at www.alvarion.com

    This press release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on the current expectations or beliefs of Alvarion's management and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward -looking statements. The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements: failure of the WiMAX market to develop as anticipated; failure by us to deliver WiMAX products as anticipated; inability to further identify, develop and achieve success for new products, services and technologies; increased competition and its effect on pricing, spending, third-party relationships and revenues; as well as the in ability to establish and maintain relationships with commerce, advertising, marketing, and technology providers and other risks detailed from time to time in filings with the Securities and Exchange Commission. In addition, our limited history in completing acquisitions may adversely impact our ability to successfully integrate the business of Alvarion and interWAVE; we may face liabilities and expenses in excess of those currently anticipated with respect to the acquisition of interWAVE; and we may be unable to retain key personnel of interWAVE.
    Certain information set forth in this press release pertaining to third parties has not been independently verified by Alvarion and is based solely on publicly available information or on information provided to Alvarion by such third parties for inclusion in this press release. The web sites appearing in this press release are not and will not be included or incorporated by reference in any filing made by Alvarion with the Securities and Exchange Commission, which this press release will be a part of.

    You may request Alvarion's future press releases or a complete Investor Kit by contacting Carmen Deville, Investor Relations: carmen.deville@alvarion.com or +1 650 314 2653.

ALVARION LTD.& ITS SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands

March December 31, 31, 2005 2004 -------- -------- ASSETS Cash, cash equivalents, short-term and long-term investments $127,162 $132,682 Trade receivables 31,533 28,148 Other accounts receivable 5,553 6,492 Inventories 37,892 41,328 Severance pay fund 7,191 7,025 Long-term receivables 468 456

PROPERTY AND EQUIPMENT, NET 12,150 11,925

GOODWILL AND OTHER INTANGIBLE ASSETS 99,385 100,479 -------- --------

TOTAL ASSETS $321,334 $328,535 ----- ======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

Trade payables $ 29,214 $ 26,481 Other accounts payable and accrued expenses 45,683 55,611 -------- --------

Total current liabilities 74,897 82,092 -----

LONG TERM LIABILITIES 1,728 3,505

ACCRUED SEVERANCE PAY 10,418 10,126 -------- --------

TOTAL LIABILITIES 87,043 95,723 -----

SHAREHOLDERS' EQUITY 234,291 232,812 -------- --------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $321,334 $328,535 ------ ======== ========

ALVARION LTD.& ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS U.S. dollars in thousands (except per share data)

Three Three Three Months Months Months Year Ended Ended Ended Ended March March December December 31, 31, 31, 31, ------- ------- -------- -------- 2005 2004 2004 2004 ------- ------- -------- --------

Sales $57,233 $44,679 $55,878 $201,507 $

Cost of sales 30,739 25,654 31,328 113,741

------- ------- ------- -------- Gross profit 26,494 19,025 24,550 87,766 ------- ------- ------- --------

Operating expenses: Research and development, net 9,356 6,614 7,598 27,816 Selling and marketing 11,989 8,987 10,002 39,038 General and administrative 2,850 2,240 2,663 9,682 Amortization of acquired current technology, customer relationships and trademarks 1,094 669 772 2,779 Amortization of deferred stock compensation 530 11 27 60 Acquisition related expenses 868 - 369 369 In Process Research & Development write-off - - 10,993 10,993

------- ------- ------- -------- Total Operating expenses 26,687 18,521 32,424 90,737

------- ------- ------- -------- Operating income (loss) (193) 504 (7,874) (2,971)

Financial income, net 549 932 1,119 3,821

------- ------- ------- -------- Net Income (loss ) $ 356 $ 1,436 $(6,755)$ 851 $ ------- ------- ------- --------

Basic earnings (loss) per share $ 0.01 $ 0.03 $ (0.12)$ 0.02 $ ======= ======= ======= ========

Weighted average number of shares used in computing basic earnings (loss) per share 58,083 55,190 57,619 56,549 ======= ======= ======= ========

Diluted earnings (loss) per share $ 0.01 $ 0.02 $ (0.12)$ 0.01 $ ======= ======= ======= ========

Weighted average number of shares used in computing diluted earnings (loss) per share 63,708 62,804 57,619 63,754 ======= ======= ======= ========

ALVARION LTD.& ITS SUBSIDIARIES

DISCLOSURE OF NON-US GAAP NET INCOME

FOR COMPARATIVE PURPOSES NET INCOME AND EARNINGS PER SHARE EXCLUDING AMORTIZATION OF ACQUIRED INTANGIBLES, DEFERRED STOCK COMPENSATION, ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT WRITE-OFF AND OTHER ACQUISITION RELATED EXPENSES

U.S. dollars in thousands (except per share data)

Three Three Three Months Months Months Year Ended Ended Ended Ended March March December December 31, 31, 31, 31, ------- ------- -------- -------- 2005 2004 2004 2004 ------- ------- -------- --------

Net Income (loss) according to US GAAP $ 356 $ 1,436 $ (6,755)$ 851

Amortization of acquired current technology, customer relationships and trademarks 1,094 669 772 2,779

Amortization of deferred stock compensation 530 11 27 60

Acquisition related expenses 868 - 369 369

Acquired In-Process Research & Development write-off - - 10,993 10,993

------- ------- -------- -------- Net Income excluding amortization of intangibles and deferred stock compensation, acquisition related expenses and In-process Research and Development write-off $ 2,848 $ 2,116 $ 5,407 $ 15,052 ======= ======= ======== ========

Basic net earnings per share, excluding amortization of intangibles and deferred stock compensation, acquisition related expenses and In-process Research and Development write-off $ 0.05 $ 0.04 $ 0.09 $ 0.27 ======= ======= ======== ========

Weighted average number of shares used in computing basic net earnings per share 58,083 55,190 57,619 56,549 ======= ======= ======== ========

Diluted net earnings per share, excluding amortization of intangibles and deferred stock compensation , acquisition related expenses and In-process Research and Development write-off $ 0.04 $ 0.03 $ 0.08 $ 0.24 ======= ======= ======== ========

Weighted average number of shares used in computing diluted net earnings per share 63,708 62,804 64,447 63,754 ======= ======= ======== ========

ALVARION LTD.& ITS SUBSIDIARIES CONDENSED CONSOLIDATED CASH FLOW U.S. dollars in thousands Three Months ended March 31, 2005 ----------------

Cash flows from operating activities: Net Income $ 356 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,053 Amortization of deferred stock compensation 530 Unrealized gain from derivative financial instruments (187) Amortization of intangibles 1,094 Increase in trade receivables (3,385) Decrease in other accounts receivable and prepaid expenses 939 Decrease in inventories 3,436 Increase in trade payables 2,733 Decrease in Long term receivables (12) Decrease in other accounts payables and accrued expenses (6,374) Accrued severance pay, net 126 -------------- Net cash provided by operating activities 309

Cash flows from investing activities: Purchase of fixed assets (1,278) -------------- Net cash used in investing activities (1,278)

Cash flows from financing activities: Proceeds from exercise of employees' stock options, net of expenses 780 Repayment of long term liability (1,777) -------------- Net cash used in financing activities (997)

Cash flows from non-recurring activities: Cash used to IWAV trade payables related to the merger (3,554) -------------- Net cash used in non-recurring activities (3,554)

-------------- Decrease in cash, cash equivalents, short-term and long-term investments (5,520) Cash, cash equivalents, short-term and long-term investments at the beginning of the period 132,682 -------------- Cash, cash equivalents, short-term and long-term investments at the end of the period $ 127,162 ==============

--30--PP/ny*

CONTACT: Alvarion Ltd. Dafna Gruber, 650-314-2652 / +972-3-645-6252 dafna.gruber@alvarion.com or Carmen Deville, 650-314-2653 carmen.deville@alvarion.com

KEYWORD: ISRAEL INTERNATIONAL AFRICA/MIDDLE EAST INDUSTRY KEYWORD: TELECOMMUNICATIONS SOFTWARE NETWORKING INTERNET E-COMMERCE EARNINGS CONFERENCE CALLS SOURCE: Alvarion Ltd.

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