Alvarion Reports Record Revenues for Second Quarter 2007

Alvarion Ltd. (NASDAQ: ALVR), the leading provider of WiMAX and wireless broadband solutions, today announced financial results for the second quarter ended June 30, 2007. Highlights: Record revenues of $57.5 million, up 31% from Q2 2006; Record BreezeMAXTM revenues of $27.9 million; Gross margin of 51%; Non-GAAP EPS of $0.03; GAAP EPS of $0.00; Positive operating cash flow of $2.6 million. In the second quarter of 2007, revenues reached a new record of $57.5 million, an increase of 11% from $52.1 million in the first quarter of 2007, and 31% from $44 million in the second quarter of 2006. GAAP net income in the second quarter of 2007 was $136,000, or $0.00 per share, which included income from discontinued operations of $618,000. Net loss from continuing operations was ($482,000) or ($0.01) per share, compared to a loss from continuing operations of ($1.1) million, or ($0.02) per share in Q1. Loss from continuing operations in the second quarter of 2006 was ($1.3) million, or ($0.02) per share. Excluding the results of the discontinued operations, amortization of acquired intangibles and deferred stock compensation, on a non-GAAP basis, the company reported a net profit of approximately $2.0 million, or $0.03 per diluted share, compared with a non-GAAP net profit of approximately $1.3 million, or $0.02 per diluted share in the first quarter of 2007, and a non-GAAP net profit of approximately $1.0 million, or $0.02 per diluted share in Q2 2006. The company generated positive cash flow from continuing operating activities of approximately $2.6 million during Q2 2007. Cash reserves as of June 30, 2007 totaled approximately $122 million, up from about $120 million in the previous quarter. For supplemental information to facilitate evaluation of the impact of non-cash charges and comparisons with historical results of continuing and discontinued operations, see the attached table showing the detailed reconciliation of GAAP to non-GAAP results for Q2 2007 and the comparative quarters. Comments from Management "Q2 was a quarter of excellent execution that was reflected in strong bookings, acceleration of revenue growth and continued profitability,” said Tzvika Friedman, President and CEO of Alvarion. "Based on our performance during the first half, and the positive outlook for the balance of the year, we are raising our target for revenue growth in 2007 to 25-30% over 2006, versus our previous target of 15-20%. BreezeMAX shipments amounted $34 million, and we ended the quarter with over 170 commercial WiMAX deployments, up from 150 at the end of Q1. The significance of these initial deployments is the broad base of satisfied customers they represent – from large incumbent carriers to new operators building their business model around WiMAX services. We are also pleased to report that revenues in our non-WiMAX business exceeded expectations, growing 10% both sequentially and year-over-year. This performance reflects the quality of our products, strength of our channel partners and the breadth of our customer base. Perhaps less apparent, but just as important, is the extensive internal development work, interoperability testing and other activities we are pursuing with our technical partners. In addition, we are cultivating relationships with strong local partners in key geographic regions and pursuing numerous business opportunities with our growing roster of ecosystem partners as part of our OPEN™ WiMAX initiative. Our excellent reputation and track record is also enabling a successful recruiting effort, as we position ourselves to play a leadership role in mobile WiMAX during the next phase of the market’s development.” Q3 2007 Guidance The company’s revenue guidance for Q3 2007 is $58 to $62 million. Based on this revenue range, non-GAAP per share results from continuing operations are expected to range between $0.03 and $0.05. GAAP per share results are expected to range between $0.00 and $0.02. Alvarion’s management will host a conference call today, August 1, at 9:00 a.m. Eastern time to discuss the quarter. To participate in the call, please dial one of the following numbers approximately five minutes prior to the scheduled start time: USA: (612)-234-9959, International: +1-(612)-332-0932. The public is invited to listen to the live webcast of the conference call. For details please visit Alvarion’s website at www.alvarion.com. An archive of the on-line broadcast will be available on the website. A replay of the call will be available from 11:30 a.m. EDT on August 1st, 2007 through 11:59 p.m. EDT on August 8th, 2007. To access the replay, please call USA: (USA) (800) 475-6701; International: +1(320)-365-3844. To access the replay, users will need to enter the following code: 879485. About Alvarion With more than 3 million units deployed in 150 countries, Alvarion (www.alvarion.com) is the world’s leading provider of innovative wireless broadband network solutions enabling Personal Broadband to improve lifestyles and productivity with portable and mobile data, VoIP, video and other services. Alvarion is leading the market to Open WiMAX solutions with the most extensive deployments and proven product portfolio in the industry covering the full range of frequency bands with both fixed and mobile solutions. Alvarion’s products enable the delivery of personal mobile broadband, business and residential broadband access, corporate VPNs, toll quality telephony, mobile base station feeding, hotspot coverage extension, community interconnection, public safety communications, and mobile voice and data. As a wireless broadband pioneer, Alvarion has been driving and delivering innovations for over 10 years from core technology developments to creating and promoting industry standards. Leveraging its key roles in the IEEE and HiperMAN standards committees and experience in deploying OFDM-based systems, the Company's prominent work in the WiMAX Forum is focused on increasing the widespread adoption of standards-based products in the wireless broadband market and leading the entire industry to Open WiMAX solutions. This press release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on the current expectations or beliefs of Alvarion’s management and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements: the failure of the market for WIMAX products to develop as anticipated; Alvarion’s inability to capture market share in the expected growth of the WIMAX market as anticipated, due to, among other things, competitive reasons or failure to execute in our sales, marketing or manufacturing objectives; inability to further identify, develop and achieve success for new products, services and technologies; increased competition and its effect on pricing, spending, third-party relationships and revenues; as well as the inability to establish and maintain relationships with commerce, advertising, marketing, and technology providers; and other risks detailed from time to time in the Company’s 20-F Annual Report Risk Factors section as well as in other filings with the Securities and Exchange Commission. Information set forth in this press release pertaining to third parties has not been independently verified by Alvarion and is based solely on publicly available information or on information provided to Alvarion by such third parties for inclusion in this press release. The web sites appearing in this press release are not and will not be included or incorporated by reference in any filing made by Alvarion with the Securities and Exchange Commission, which this press release will be a part of. You may request Alvarion's future press releases or a complete Investor Kit by contacting Kika Stayerman, kika.stayerman@alvarion.com or +972.3.767.4159. ALVARION LTD.& ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (*) U.S. dollars in thousands (except per share data)   Six Six Three Three Three Months Ended Months Ended Months Ended Months Ended Months Ended June 30, June 30, June 30, June 30, March 31, 2007 2006 2007 2006 2007   Sales $ 109,623 $ 87,636 $ 57,546 $ 44,013 $ 52,077   Cost of sales 54,221 44,028 28,420 21,942 25,801           Gross profit 55,402   43,608   29,126   22,071   26,276     Operating expenses: Research and development, net 24,849 18,045 13,075 9,284 11,774 Selling and marketing 26,265 20,851 13,621 10,578 12,644 General and administrative 7,700 6,730 3,787 3,654 3,913 Amortization of intangible assets 1,272 1,338 636 669 636             Total Operating expenses 60,086 46,964 31,119 24,185 28,967           Operating loss (4,684 ) (3,356 ) (1,993 ) (2,114 ) (2,691 )   Financial income, net 3,143 1,492 1,511 824 1,632           Loss from continuing operations (1,541 ) (1,864 ) (482 ) (1,290 ) (1,059 )   Income (loss) from discontinued operations, net 1,054 (30,668 ) 618 (26,276 ) 436           Net income (loss) $ (487 ) $ (32,532 ) $ 136   $ (27,566 ) $ (623 )   Basic net earnings (loss) per share: Continuing operations $ (0.03 ) $ (0.03 ) $ (0.01 ) $ (0.02 ) $ (0.02 ) Discontinued operations $ 0.02 $ (0.51 ) $ 0.01 $ (0.43 ) $ 0.01 Total $ (0.01 ) $ (0.54 ) $ 0.00   $ (0.45 ) $ (0.01 )   Weighted average number of shares used in computing basic net earnings (loss) per share 61,933   60,501   62,097   60,806   61,767     Diluted net earnings (loss) per share: Continuing operations $ (0.03 ) $ (0.03 ) $ (0.01 ) $ (0.02 ) $ (0.02 ) Discontinued operations $ 0.02 $ (0.51 ) $ 0.01 $ (0.43 ) $ 0.01 Total $ (0.01 ) $ (0.54 ) $ 0.00   $ (0.45 ) $ (0.01 )   Weighted average number of shares used in computing diluted net earnings (loss) per share 61,933   60,501   64,316   60,806   61,767     (*) Results of Cellular Mobile Unit that was sold in November 2006, are classified as discontinued operations and are not included in the results from continuing operations. ALVARION LTD.& ITS SUBSIDIARIES RECONCILIATION BETWEEN GAAP TO NON-GAAP STATEMENT OF INCOME (*) U.S. dollars in thousands (except per share data)   Three Three Months Ended Months Ended June 30, March 31,     2007       2007 GAAP Adjustments Non-GAAP Non-GAAP   Sales $ 57,546 $ - $ 57,546 $ 52,077   Cost of sales 28,420 (140) (a) 28,280 25,667         Gross profit 29,126 140 29,266 26,410   Operating expenses: Research and development, net 13,075 (446) (a) 12,629 11,381 Selling and marketing 13,621 (404) (a) 13,217 12,245 General and administrative 3,787 (812) (a) 2,975 3,086 Amortization of intangible assets 636 (636) (b) - -           Total Operating expenses 31,119 (2,298) 28,821 26,712         Operating profit (loss) (1,993) 2,438 445 (302)   Financial income, net 1,511 - 1,511 1,632         Income (loss) from continuing operations (a) (482) 2,438 1,956 1,330   Income from discontinued operations, net 618 (618) - -         Net income $ 136 $ 1,820 $ 1,956 $ 1,330   Basic net earnings (loss) per share: Continuing operations $ (0.01) $ 0.03 $ 0.02 Discontinued operations $ 0.01 Total $ 0.00   Weighted average number of shares used in computing basic net earnings (loss) per share 62,097 62,097 61,767   Diluted net earnings (loss) per share: Continuing operations $ (0.01) $ 0.03 $ 0.02 Discontinued operations $ 0.01 Total $ 0.00   Weighted average number of shares used in computing diluted net earnings (loss) per share 64,316 64,316 63,942   (*) Results of Cellular Mobile Unit that was sold in November 2006, are classified as discontinued operations and are not included in the results from continuing operations.   (a) The effect of stock-based compensation. The Company adopted the provisions of Statement of Financial Accounting Standards No. 123(R), "Share-Based Payment" on January 1, 2006 using the modified-prospective transition method.   (b) The effect of amortization of intangible assets. ALVARION LTD.& ITS SUBSIDIARIES   DISCLOSURE OF NON-US GAAP NET INCOME   FOR COMPARATIVE PURPOSES NET INCOME (LOSS) AND EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS EXCLUDING AMORTIZATION OF ACQUIRED INTANGIBLES, DEFERRED STOCK COMPENSATION AND INCOME (LOSS) FROM DISCONTINUED OPERATIONS   U.S. dollars in thousands (except per share data)   Six Six Three Three Three Months Ended Months Ended Months Ended Months Ended Months Ended June 30, June 30, June 30, June 30, March 31, 2007 2006 2007 2006 2007   Net income (loss) according to US GAAP $ (487 ) $ (32,532 ) $ 136 $ (27,566 ) $ (623 )   Amortization of acquired current technology and customer relationships 1,272 1,338 636 669 636   Amortization of deferred stock compensation 3,555 3,022 1,802 1,597 1,753   Loss (income) from discontinued operations (1,054 ) 30,668 (618 ) 26,276 (436 )           Net Income from continuing operations excluding amortization of acquired intangibles, deferred stock compensation and income (loss) from discontinued operations $ 3,288   $ 2,496   $ 1,956   $ 976   $ 1,330     Basic net earnings per share from continuing operations excluding amortization of acquired intangibles, deferred stock compensation and income (loss) from discontinued operations $ 0.05   $ 0.04   $ 0.03   $ 0.02   $ 0.02     Weighted average number of shares used in computing basic net earnings per share 61,933   60,501   62,097   60,806   61,767     Diluted net earnings per share from continuing operations excluding amortization of acquired intangibles, deferred stock compensation and income (loss) from discontinued operations $ 0.05   $ 0.04   $ 0.03   $ 0.02   $ 0.02     Weighted average number of shares used in computing diluted net earnings per share 64,152   64,142   64,316   63,700   63,942   ALVARION LTD.& ITS SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands   June 30, December 31, 2007 2006 ASSETS Cash, cash equivalents, short-term and long-term investments $ 122,093 $ 118,426 Trade receivables 38,667 34,332 Other accounts receivable 13,414 12,474 Inventories 45,481 30,539 Severance pay fund 9,758 8,749   PROPERTY AND EQUIPMENT, NET 10,923 10,379   GOODWILL AND OTHER INTANGIBLE ASSETS 59,971 61,243   DISCONTINUED ASSETS 2,665 3,921   TOTAL ASSETS $ 302,972 $ 280,063     LIABILITIES AND SHAREHOLDERS' EQUITY   CURRENT LIABILITIES   Trade payables $ 28,782 $ 22,418 Other accounts payable and accrued expenses 54,724 42,295   Total current liabilities 83,506 64,713   ACCRUED SEVERANCE PAY 14,461 12,694   DISCONTINUED LIABILITIES 5,980 7,355   TOTAL LIABILITIES 103,947 84,762   SHAREHOLDERS' EQUITY 199,025 195,301   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 302,972 $ 280,063 ALVARION LTD.& ITS SUBSIDIARIES Consolidated Statements of Cash Flows U.S. dollars in thousands   Three Months ended June 30, 2007   Cash flows from operating activities: Net profit $ 136 Adjustments to reconcile net loss to net cash used by operating activities: Depreciation 1,125 Amortization of deferred stock compensation 1,802 Amortization of intangibles assets 636 Increase in trade receivables (2,152 ) Increase in other accounts receivable (1,950 ) Increase in inventories (8,043 ) Increase in trade payables 1,624 Increase in other accounts payables and accrued expenses 9,720 Accrued severance pay, net 367 Net income from discontinued operations (618 ) Net cash provided by operating activities from continuing operations 2,647   Net cash provided by operating activities from discontinued operations 540   Net cash provided by operating activities 3,187     Cash flows from investing activities: Purchase of fixed assets (1,673 ) Net cash used in investing activities from continuing operations (1,673 )   Cash flows from financing activities: Proceeds from exercise of stock options 657   Net cash provided by financing activities from continuing operations 657     Increase in cash, cash equivalents, short-term and long-term investments from continuing operations 1,631 Increase in cash, cash equivalents, short-term and long-term investments from discontinued operations 540   Increase in cash, cash equivalents, short-term and long-term investments 2,171   Cash, cash equivalents, short-term and long-term investments at the beginning of the period 119,922   Cash, cash equivalents, short-term and long-term investments at the end of the period $ 122,093