Wireless LAN vendor Proxim is staring bankruptcy in the face, unless it gets some serious money or finds a buyer. Tragically, however, it is hard to imagine anyone who would finance it.
Formerly a major player in enterprise wireless LANs, the company has failed to adapt to WLAN technology changes, has had trouble managing mergers and acquisitions, and has been stung by massive royalty payments to Symbol following a patent dispute. In the first quarter of 2005, it made a loss of US$7.8 million, on revenue of US$25.4 million.
"The Company has an immediate need for additional financing," said a starkly worded comment in Proxim's quarterly earnings announcement. "If the Company were not able to enter into an agreement with a third party purchaser or able to obtain sufficient financing in the second quarter of 2005, it would be required to seek protection under applicable bankruptcy laws."
Proxim makes traditional "fat" WLAN access points, of which it has an installed base in the enterprise second only to Cisco. However, over the last two years, fat APs have lost ground to centralized WLAN switch vendors like Symbol and Airespace, who both overtook Proxim in enterprise revenue during 2004. "Their share has dwindled," said Richard Webb, wireless analyst at Infonetics Research. "It's been a long time since they've been up there in the top three."
The company's Orinoco range has a very strong WLAN heritage, descending directly from the ground breaking WaveLAN wireless LAN equipment created by NCR in the 1990s, passing through AT&T, Lucent, Agere, and finally to Proxim in 2002. Much of the Agere talent left the company then, and the acquisition did not go well, according to Webb: "There was this huge mishmash of products. It was hard to know what they were all about."
Proxim's belated effort to get into centralized WLANs, with a software approach did not set the world on fire.
Proxim lost badly to Symbol in a patent dispute that cost it US$23 million, a figure roughly equivalent to a quarter's revenue. Proxim handed over several of its key patents to Symbol and continues to pay royalties. "The lawsuit caused them financial hurt and was a great setback to the company," said Webb.
Proxim's wide area work, including a deal with Intel on WiMax, might be the most attractive part of the company, said Richard Webb, analyst at Infonetics Research: "Proxim has one foot in wireless LAN and the other in wireless WAN. They lack focus."
Its work with Avaya and Motorola on Wi-Fi to cell integration has been slow to take off. "Two years on, we haven't seen the fruits of that partnership come off," said Webb. "Others are now well aware of the wireless VOIP opportunity, and positioned with a story in that space."