Powerwave Avoids Bankruptcy For Now

February 4, 2013

After filing for Chapter 11 bankruptcy, Powerwave Technologies has secured the cash it needs to continue operations from its private-equity investor, the Gores Group, the Dow Jones Newswire reported on Friday.

The U.S. Bankruptcy Court in Wilmington, Del., said it will confirm the agreement this coming Thursday, allowing Powerwave to make payroll on Friday. It now has enough funds to operate until Feb. 22 when it will have to return the court for access to more funds.

The wireless-equipment maker’s Chapter 11 filing last week was precipitated by a fight for cash with Gores Group, which loaned it $35 million last September. On Jan. 25, the Gores Group pulled $8.3 million out of PowerWave’s account without providing notification, according to Dow Jones Daily Bankruptcy Review. A judge subsequently ruled that the withdrawal was improper. The Gores Group has returned $2 million.

PowerWave’s net sales in the third quarter of fiscal 2012 were $42.1 million, compared with $77.1 million in the third quarter of fiscal 2011. The company suffered a net loss of $52.7 million, in the quarter.

PowerWave’s financial woes result from a stale product line, according to industry insiders. It has invested heavily in the development of an LTE picocell and active array antenna, but that market has yet to really take off and it is a question mark as to whether carriers will depend on their main equipment providers for picocells.

Over time, PowerWave has seen demand for its products drop from Nokia Siemens Networks, Alcatel-Lucent and Samsung, and prices have become commoditized. This put them into direct competition with the end-to-end solutions companies like Ericsson. Financial news services say PowerWave will most likely be forced to sell its treasure trove of hundreds of patents to survive.