The Nortel-Alvarion agreement is a win-win for both companies and a loss for Airspan. We believe this deal begins the rationalization of the WiMAX equipment sector.

Company Impact: Alvarion (ALVR), Nortel (NT), Motorola (MOT), Alcatel-Lucent (ALU), Nokia (NOK), Cisco (CSCO), Airspan (AIRN).

• The deal is a win for Alvarion because it needed a large partner like Nortel. Alvarion has had OEM agreements in the past with Lucent, Alcatel and Siemens for their proprietary broadband wireless access (BWA) solution and for 802.16d (fixed WiMAX) gear, but not for 802.16e (mobile WiMAX):
  • This deal provides Alvarion the ability to market an end-to-end solution, including design and deployment services, and it should remove some concerns voiced by certain end-user customers. It also provides Alvarion with system integrator capability and global reach for 24/7 technology support.
• The deal is a win for Nortel because it enables Nortel to leverage Alvarion's R&D for WiMAX radio access technology, and it provides Nortel with an opportunity to focus its R&D on other areas such as fourth-generation Long Term Evolution (4G LTE), carrier Ethernet and optical infrastructure. It also enables Nortel to leverage its multiple-input multiple-output (MIMO) intellectual property rights and continue deploying applications like its CS2K softswitch for VoIP over WiMAX, with potential fixed-mobile convergence (FMC) applications like seamless roaming.
• The Nortel-Alvarion agreement is a loss for Airspan, which has an agreement with Nortel that covers fixed WiMAX gear (802.16d). Mobile WiMAX is expected to be a larger opportunity, meaning that Airspan was not able to leverage its existing Nortel relationship into something larger.
• We believe this deal marks the beginning of rationalization in the WiMAX equipment sector.
• We do not believe the WiMAX equipment space will be large enough to support all the vendors currently playing in the market, and we have believed a shakeout was on the horizon.
• Nortel is the first vendor to decide to play in this market by partnering with another manufacturer of access gear. We expect there could be other large infrastructure players that do the same. This does not mean that Nortel is exiting the business. Instead, we view this as a way to remain in the market for WiMAX equipment without having to develop, design and manufacture WiMAX access equipment:
  • The current players in this space are Motorola, Alcatel-Lucent, Nokia-Siemens, Samsung, Cisco and a host of smaller players.
  • Of that cast of players, we believe that Alcatel-Lucent, Nokia-Siemens and perhaps even Motorola could decide to make a move similar to that of Nortel given the financial pressures faced by each of these vendors — as it may be wiser to reduce the expenses associated with WiMAX and focus their development efforts on LTE.
  • It might be a little early for this to happen in a big way because these vendors have current initiatives that will keep them active in WiMAX, but we believe consolidation will eventually happen.

• Nortel and Alvarion announced that the companies have entered into an agreement to create an end-to-end WiMAX solution.
• The joint solution combines Alvarion's WiMAX radio access solution with Nortel's core network solutions, backhaul solutions, applications and professional services (network consulting, design and deployment).
• Nortel and Alvarion have agreed that Alvarion will be the exclusive supplier of mobile WiMAX base stations (802.16e) to Nortel.
• Nortel and Alvarion will be jointly funding R&D to develop the radio access network equipment beyond the initial offering.

• We have positive long-term expectations for broadband, and we believe that the market for broadband wireless is beginning to move along. We continue to be believers in WiMAX as a broadband solution for subscribers where there are few or no wires. WiMAX will have success in emerging markets, such as India and Africa, where competition from copper DSL and cellular data is weaker.
• In 1Q08, Motorola gained the lead position in the total market with 31%, followed by Alvarion with 21%. However, in the WiMAX portion of the market, Alvarion dominated with 24%, followed by Airspan, Samsung and Motorola with 13%, 12% and 11%, respectively.