The men who engineered a merger to create a wireless net powerhouse have resigned from Proxim’s board of directors, as the company warned it expects to post a greater than anticipated loss.
Proxim said revenue for the second quarter would be from $US34 million to $US35 million, and the loss would be $US0.03c to $US0.04c per share.
Analysts were expecting a loss of about $US0.02c. The company releases its results this week.
Board chairman, Jonathan Zakin, and vice-chairman, David King, have resigned. Zakin was formerly chairman and CEO of Western Multiplex before its 2002 merger with Proxim. King held the same posts at Proxim.
The merger was touted as a way of combining Proxim’s wireless LAN (WLAN) expertise and markets with Western Multiplex’s portfolio of fixed wireless products for carriers and enterprises. In theory, the company could offer a full range of local and long-distance wireless products, a portfolio that would be attractive to service providers and enterprise net executives.
But the reality has been starkly different.
In the last four quarters, Proxim has lost more than $US190 million, on revenue of about $US160 million. Revenue in the most recent quarter (first quarter of 2003) dropped 20 per cent, to $US40 million from $US50 million in the previous quarter (fourth quarter of 2002).
The stock price has been hammered. From a high of about $US25 per share in 2001, the stock dropped after the merger, eventually hitting bottom at a mere $US0.40c. The NASDAQ considered de-listing Proxim. Following the financial warning and resignations, the stock price dropped from about $US1.70 to about $US1.20 within two days.
The results are striking when compared with the aggressive strategy Zakin and King continued to unfold in 2002. After the merger, Proxim bought out the Orinoco WLAN product line and brand from Lucent spin-off, Agere Systems, a move that was intended to solidify Proxim’s presence in the general enterprise market. Its existing Harmony line of WLAN products was phased out in favor of the better-known Orinoco label.
Last December, the company announced a big reorganisation, with King shifting from his duties as Proxim president and COO to a new position on the board of directors: vice-chairman. Zakin, besides being chairman and CEO, temporarily took on the duties of both titles left vacant by King’s transfer. At the same time, four operating divisions were consolidated into two; and the board launched a search for a new president.
That search led to Frank Plastina, a former high-ranking Nortel veteran, who had joined the investment firm, Warburg Pincus, in April 2003, which owned at that time about 86 per cent of Proxim’s stock. A month after joining the firm, Plastina was house-shopping in California after being named Proxim’s new president and CEO.
A Proxim spokeswoman said the company would have no further comment until the formal earnings announcement later this month.