Proxim Posts 2Q Loss; Signs Investor Deal for Debt Conversion and Bridge Loan
The board of directors for Sunnyvale, Calif.-based Proxim Tuesday also gave the go-ahead for the transition of Kevin Duffy, president and chief operating officer of Proxim, to take over as its CEO in January 2005.
Duffy would take the reins at that time from Frank Plastina, who said he would remain with the company as executive chairman of the board. Plastina told investors during a conference call Tuesday afternoon that, "splitting the chairman and CEO roles is good governance."
For its second-quarter 2004, Proxim reported a pro-forma, net loss of $3.3 million, or 3 cents per share, on sales of $31.4 million. That compares with a pro-forma loss of $4.7 million, or 4 cents per share, on sales of $34.8 million for the same quarter last year. The results are in line with consensus estimates of a 3-cents-per-share loss, according to Thomson/First Call.
Shares of Proxim closed the day trading at 99 cents per share, up 6 cents for the day, but fell 7 cents to 92 cents per share in after-hours trading just after the earnings results were released.
Sales were up $4.7 million sequentially for the quarter when compared with Proxim's first-quarter revenue of $26.7. Proxim also reported an increase in sales of its new flagship Orinoco AP-4000 access point product line, but that increase was offset by a greater-than-expected decrease in sales of its Orinoco AP-2000, which the new product is replacing, Plastina said.
Meanwhile, under the terms of the agreement with investors Warburg Pincus and Broadview Capital Partners, the investors have agreed to convert $49 million in aggregate principal amount of secured convertible promissory notes, which include accrued but unpaid interest, into shares of Series B convertible preferred stock. The exchange relieves the need to retire the notes at their September 30, 2004 maturity.
In addition, Proxim would also receive a $10 million bridge loan from Warburg Pincus and Broadview Capital Partners in exchange for a new convertible bridge note. Subject to shareholder approval, the two investors also have agreed to surrender all of their Series A convertible preferred stock, all of their Series B convertible preferred stock, and all of their warrants to purchase Proxim common stock in exchange for an aggregate of 164,000 shares of common stock and 400,000 shares of newly issued Series C preferred stock.
As a result of the common stock issuance, Warburg Pincus would own about 49.45 percent of Proxim, and Broadview Capital Partners would own about 7.6 percent of Proxim.
Plastina said the arrangement is intended to simplify Proxim's capital structure and provide additional funding so the company can continue its aggressive pursuit of WiMAX and Wi-Fi wireless networking market opportunities.
Earlier on Tuesday, Proxim, along with Motorola and Avaya, introduced a collaborative Enterprise Seamless Mobility solution. The new offering includes a new mobile office device from Motorola, Session Initiation Protocol-enabled IP telephone applications and new WLAN products from Avaya, and voice-enabled WLAN infrastructure from Proxim.
"Essentially we have added a complete mobility upgrade to Avaya's existing successful voice over IP solutions," said Duffy, who expressed optimism in the market demand for seamless, fast roaming between Wi-Fi and cellular networks.
Duffy said the mobility announcement, along with the recent partnership with Intel aimed at working to deliver WiMAX 802.16 wireless broadband equipment by early next year, is cause to be optimistic that Proxim would soon emerge from its current challenging financial position.
Plans with Intel include the delivery of certified WiMAX base stations for service providers, large enterprises and customer premises equipment by early 2005, based on the 802.16a standard for fixed wireless broadband. The initial equipment would be branded the Proxim Tsunami MP 16, Duffy said.
Looking forward to next quarter, Plastina estimated revenue for Proxim to be between $31 million to $34 million, and a pro-forma loss between 2 cents to 4 cents per share.