SR Telecom & Co.
TSX : SRX

SR Telecom & Co.

November 08, 2007 18:43 ET

SR Telecom Announces Third Quarter Results

- Actively pursuing sale of the Company - Announces formation of special committee

MONTREAL, QUEBEC--(Marketwire - Nov. 8, 2007) - SR Telecom Inc. (TSX:SRX), a leading vendor of broadband wireless access solutions through its WiMAX Forum-certified symmetryMX product line, today announced its third quarter results for the period ending September 30, 2007. All dollar figures are in Canadian funds unless otherwise indicated.

SR Telecom reported improved revenues and decreased losses in its third quarter compared to the same period in 2006; however, these results remained below management's expectations. Third quarter revenues were adversely affected by a longer-than-anticipated sales cycle with several large potential customers. The Company nonetheless remains encouraged by the continuing interest in its symmetryMX suite of WiMAX solutions from customers around the world.

The Company also announced that, further to the strategic review initiated on May 10, 2007, its Board of Directors has evaluated the Company's strategic options in the context of SR Telecom's past and present financial situation, its order backlog, and the likelihood of future success with its existing structure. The Board has concluded that it is in the Company's best interests to actively pursue the sale of the Company and/or its assets. SR Telecom has engaged investment bankers Lazard Ltd. to assist the Company in identifying interested parties. The Board has appointed a special committee in connection with this process, which will continue to evaluate the Company's strategic options.

"To grow and succeed in the global WiMAX market, SR Telecom needs a strong financial footing, a diversified product portfolio and the purchasing power to benefit from economies of scale," said Paul Griswold, Chairman of the Board of SR Telecom.

Added President and CEO Serge Fortin, "While SR Telecom has taken positive strides in 2007, its past financial performance and current market perceptions weigh heavily on operations, and the Company needs to consider alternatives to strengthen itself other than solely through additional financing options."

Consolidated third quarter results

SR Telecom's third quarter revenue grew 10% to $18.0 million from $16.4 million during the same period in 2006. Revenue in the third quarter of 2007 was below management's expectations and was generated mainly through the ongoing implementation of major legacy contracts in Mexico and Argentina. Operating loss from continuing operations was $19.6 million, a significant decrease from the $41.5 million operating loss recorded during the same period one year ago. Net loss and comprehensive loss was $22.2 million compared to $53.5 million in 2006.

A large portion of these improvements are due to the $21.6 million in restructuring charges that were incurred in 2006. Nonetheless, the 2007 third quarter showed a $6.3 million decline in selling, general and administrative (SG&A) expenses. The SG&A gains, however, were offset by a $7.0 million shift from gross profit to gross loss, due primarily to a $3.6 million write down of inventory, and to the Company's symmetryONE product experiencing significant price pressure in the market.

Year-to-date revenue was $63.2 million, up 25.0% from $50.4 million in the first nine months of 2006. Operating loss for the nine-month period in 2007 was $42.1 million compared to $70.7 million in the same period of 2006. The year-to-date net loss and comprehensive loss was $49.3 million compared to $84.4 million during the first nine months in the prior year.

Backlog at September 30, 2007 stood at $19.3 million, the majority of which is expected to be delivered by the end of this year. This compares with $45.4 million at the end of 2006 and $27.1 million at the end of the second quarter of 2007.

Financial position

As announced on July 3, 2007, the Company entered into an agreement with a syndicate of lenders comprised of shareholders providing for a term loan of $35.0 million, all of which was drawn at closing. An additional $10 million term loan could be available for drawdown, subject to certain conditions being met, for a period of up to one year from closing. As at September 30, 2007, management believes the Company had not met all of the conditions required to drawdown the additional $10 million.

As at September 30, 2007, the Company's consolidated cash, including restricted cash, was $27.1 million, up slightly from $26.2 million at December 31, 2006.

About SR Telecom

SR Telecom (TSX:SRX) is a recognized global leader in delivering innovative broadband wireless access (BWA) solutions that enable service providers to efficiently deploy quality voice, Internet and next-generation services in urban, suburban and remote areas. A technological pioneer with more than 25 years of experience in wireless networking, SR Telecom is the only BWA vendor with extensive real-world expertise in deploying the advanced features of the WiMAX standard. It actively promotes standards-based BWA networking through its role as a principal member of the WiMAX Forum.

With its primary offices in Montreal and Mexico City, SR Telecom is an agile, customer-focused organization with a proven track record. SR Telecom's products are currently deployed in more than 110 countries worldwide. For more information, visit www.srtelecom.com.

FORWARD-LOOKING STATEMENTS

Certain information in this news release, in various filings with Canadian and US regulators, in reports to shareholders and in other communications, is forward-looking within the meaning of certain securities laws, and is subject to important risks, uncertainties and assumptions. This forward-looking information includes, among others, information with respect to the Company's objectives and the strategies to achieve those objectives, as well as information with respect to the Company's beliefs, plans, expectations, anticipations, estimates and intentions. The words "may", "could", "should", "would", "suspect", "outlook", "believe", "anticipate", "estimate", "expect", "intend", "plan", "target" and similar words and expressions are used to identify forward-looking information. The forward-looking information in this news release describes the Company's expectations as of November 8, 2007.

The results or events predicted in such forward-looking information may differ materially from actual results or events. When relying on the Company's forward-looking information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events.

In making the forward-looking information contained in this news release, the Company does not assume any significant acquisitions, dispositions or one-time items. It does assume, however, the renewal of certain customer contracts. The Company has also assumed a certain progression, which may not be realized. Additionally, the Company made a number of assumptions about the market, operations, finances and transactions. Certain factors that could cause results or events to differ materially from our current expectations include, among others, our ability to implement our strategies and plans, the intensity of competitive activity and the ability to deliver our products on time while significantly reducing costs, the proper execution of our contract manufacturing arrangements, timely development of our WiMAX product offerings, the attainment of cost reduction targets, a sustained demand for symmetryone in 2007, the impact of competition on pricing and market share, and the ability to fund the required investment in working capital to sustain revenue growth.

It has also assumed that the material factors referred to in the previous paragraph will not result in such forward-looking information to differ materially from actual results or events. However, the list of these factors is not exhaustive and is subject to change and there can be no assurance that such assumptions will reflect the actual outcome of such items or factors.

For a more complete discussion of the assumptions and risks underlying our forward-looking statements, please refer to the section entitled Assumptions, risks and uncertainties in the Company's management's discussion and analysis for the year ended December 31, 2006 as updated by the Company's Management's discussion and analysis and the section entitled Risk factors in the Company's annual report on Form 20-F for the year ended December 31, 2006, which can be found under the Company's name at www.sedar.com, at www.sec.gov and on the Company's website at www.srtelecom.com.

The forward-looking information contained in this news release represents expectations of SR Telecom as of November 8, 2007 and, accordingly, is subject to change. However, SR Telecom expressly disclaims any intention or obligation to revise any forward-looking information, whether as a result of new information, events or otherwise, except as required by applicable law.

SR TELECOM, symmetry, symmetryONE and symmetryMX are trademarks of SR Telecom Inc. All rights reserved 2007. All other trademarks are property of their owners.

Contact Information

  • Investors: SR Telecom Inc.
    Marc Girard, Senior vice-president and CFO
    514-335-2429, Ext. 4690
    or
    Media: SR Telecom Inc.
    Anna di Giorgio, Vice-president-Communications
    514-335-2429, Ext. 4605
    www.srtelecom.com