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Adaptive Broadband halved on profit warning

Adaptive Broadband Corp. (Nasdaq: ADAP) was halved Tuesday after it lowered guidance for its second quarter.

The company blamed the deferral of $13 million in contracted shipments of its AB-Access product to a major customer. It said its balance sheet remains strong and intends to ramp up international business to offset domestic weakness.

Shares were off 3.25 to 2.87. The company said it remains committed to its merger with Western Multiplex (Nasdaq: WMUX), but added it needs to sort out any ramifications that may result from today's announcement. The company will announce any news about the merger prior to, or at the time of its second-quarter report on Jan. 25.

Adaptive Broadband estimates revenue will now be about $8 million, with gross margin in the mid-30 percent range, for the quarter. This compares to $2 million for the same period last year, and to $24.2 million for the company's immediately preceding quarter ended Sept 30. In its first quarter report, the company said it expected revenue growth to be greater than 30 percent each quarter, which would have resulted in revenue of over $31 million for the second quarter.

Adaptive recently invested $15 million in Fuzion Technologies, Inc., but recent joint business development and financing issues between the two companies have caused a delay in the $13 million shipment and the payment to Adaptive Broadband for a $12 million overdue receivable from a subsidiary of Fuzion.

The company said $4 million in international orders were also delayed.

The company also remarked that a "rapid and continuing decline in the financial state of the domestic Competitive Local Exchange Carrier (CLEC) market" has led to delays in customer deployments in the U.S.

It plans to balance domestic weakness by aggressively pursuing international business; it recently negotiated a distribution agreement with Hitachi, and agreements have been reached with Siemens for Europe and with CASTEL of China.

Adaptive's balance sheet is strong, with some $77 million in cash and no debt, creating a book value for the business of about $4 per share.

"We expect our strong balance sheet will allow us to maintain our leadership position in ultra high-speed wireless last mile Internet access while the wireless broadband market sorts itself out," president and COO Daniel L. Scharre said in a release. >