OTTAWA — January 2010 — It’s taken nine years and surviving a recession for DragonWave to finally turn a profit. Now it’s consumer demand for smartphones that has given the Ottawa-based technology company the boost it needed.

“The dynamics of telecom service providers, particularly the mobile operators is changing and more and more of them are seeing high growth on the networks associated with much more data traffic than ever before … a lot of it is being stimulated by smart internet devices like the iPhone,” says Peter Allen, DragonWave’s president and chief executive officer.

The iPhone, created by Apple, is one of many smartphones on the market. A smartphone is a cell phone that accesses the internet through the cellular network. Their growing popularity has put pressure on service providers. They need networks to support the growing demand for internet access on cell phones.

When DragonWave was created, the Ottawa high-tech market was booming. To survive against larger companies such as Nortel, DragonWave carved out a niche in an area that Nortel ignored: Ethernet backhaul, which refers to the transmitting of information from a remote site to the main site.

Mike Darch, executive director at the Ottawa Centre for Research and Innovation praises DragonWave’s foresight.

Longer-term planning

“DragonWave is an excellent example of a company that looked and said ‘okay this is where the world is going so we’re going to be there,’” he says.

“Essentially it’s a case of doing your research at the beginning and it paid off.”OCRI is an organization of businesses, including DragonWave that share information and “war stories” says Darch. Allen will be speaking at an OCRI event in January.

The company’s biggest customer is Clearwire Corp, an U.S. company trying to grow and provide a wireless network for American smartphones says Allen.
“Clearwire is building out its network very aggressively in the U.S. to have a network to deliver this kind of experience and they are our biggest customer,” he says.

DragonWave reported a $6.3 million profitfor the second quarter ending August 31 based on total revenue of $35.6 million.

Clearwire accounted for 77 per cent of DragonWave’s revenue in that quarter.
However, DragonWave has also gone through tough times during the recession. Despite having Clearwire as a customer, no actual transactions occurred and left the company in a vulnerable position says Allen.

Alistair Bentley, financial analyst at TD Bank Canada says DragonWave took a common approach to avoid bankruptcy.

“Manufacturers were hit particularly hard in this recession … some companies have responded to the recession by laying off workers,” says Bentley.

But DragonWave was careful not to downsize too much says Allen. With the Clearwire transaction not yet signed, DragonWave did not want to be crippled during growth.

“We were conscious not to downsize too aggressively because we wanted to leave room that if the Clearwire transaction did complete, we were going to see considerable growth and we didn’t want to invalidate our ability to participate in this growth by cutting too deeply,” he says.

After a period of downsizing, DragonWave is now hiring. The company hired John Lawlor as the vice president of investor relations Nov. 11.

Global visions

With North America under control, DragonWave is expanding their reach to a global scale. The company already has offices in the United Kingdom and the Middle East and has signed deals with companies in Russia and Australia. Darch says DragonWave’s global growth was well planned.

“Essentially DragonWave was ahead of the curve and it also was looking at not just the Canadian market, not just the North American market but the world market,” he says. “How are people going to stay connected in a mobile world?”

DragonWave hopes to ride its current momentum to a very successful future, predicting revenue of over $150 million in fiscal 2010. Also, the company began trading on the NASDAQ global market last month.

Allen is confident his company will keep growing far into the future.

“DragonWave is the microwave market share leader in the US and therefore we ought to be able to exploit this opportunity of the infrastructure build out starting in the U.S. but cascading around the world and therefore the opportunity to grow, we hope for many years.”