News Article

Gigabit Wireless Firm Seeks Fast Turnaround

The introduction of lower-bandwidth products and another employee cull should bring loss-making Gigabeam into the black this year, according to a letter to shareholders from its CEO.

Gigabeam Corporation is entering its second round of lay-offs in the past year, as it struggles to attain profitability with its III-V-based high-speed wireless systems.

In a letter sent to Gigabeam s shareholders in January, CEO S. Jay Lawrence pointed out that the company s narrow focus has so far failed to balance its finances.

"We have found it difficult to achieve profitability or positive cash flow as our product model has been limited to a single product offering," Lawrence wrote.

To illustrate the company s frustrating predicament, he claimed that Gigabeam held 70 percent of the wireless market for gigabit and greater data transmission during 2006. But despite cornering the niche market, over this period the company recorded $4.8 million revenue, and a net loss of $20.2 million.

To broaden its market opportunity, the GaAs and InP technology used in Gigabeam s 1.25 Gbit/s "last-mile" products will now be deployed in 10 and 100 Mbit/s systems, for point-to-point communication and low-capacity backhaul. Lawrence says the company can deliver more attractive products than are currently available with $1000-plus cost savings per link in these markets.

According to his letter, Gigabeam will also reduce its monthly cash requirements from $700,000 to $500,000 by consolidating all operations into its Durham, North Carolina, facility.

"The first step in positioning Gigabeam for positive cash flow and future growth is an aggressive cost-cutting plan," Lawrence wrote. "While there will be some initial expense in this consolidation, the move will ultimately lower labor costs and reduce headcount and travel expense."

Lawrence says that the company s new products will hit the market in late 2008, in time to combine with its cost-cutting efforts and bring a positive cash flow. Profitability should follow shortly after, he adds.

This latest move is another episode in what has been an unsettled year for Gigabeam, which de-listed from the Nasdaq exchange at the same time as the stockholder letter. The de-listing should help management to focus its energies on turning the business around, Lawrence s letter said.

The cost-cuts followed swiftly after Lawrence s appointment as CEO in November 2007, when he replaced predecessor Louis Slaughter. Earlier in 2007 the company had already slashed its headcount from 53 to 26 and closed its Lewisville, Texas, facility.

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