Google partner WFI sees revenue rise

Wireless Facilities Inc., the San Diego wireless infrastructure firm that recently joined a team assembled by Google to compete for municipal wireless buildout contracts, said in its third-quarter earnings report today that the Google relationship was one of the highlights of a quarter in which the company also saw revenue increase year-over-year by 14%.

However, WFI also may take a revenue hit in the future as a result of an operational problem in Latin America, as well as the hurricanes that recently have pummeled the southern U.S.

For the third quarter, WFI reported $108.9 million in revenue, up from $95.8 million in the third quarter of fiscal year 2004. The company's operating income was $7.8 million compared with a loss of $16.1 million in the third quarter of fiscal 2004. Net income for the quarter was $5.8 million or $.08 per share (diluted) compared to a net loss of $14.9 million or ($.22) per share in the third quarter of fiscal 2004.

Eric DeMarco, president and CEO of WFI, said the teaming with Google was just one of several recent strategic highlights. "First, we were successful in winning a number of important contracts in our government division, including two sizeable five-year contracts, one with an expected value of $25 million and the other with an expected value of $30 million, and two Blanket Purchase Agreements to supply RFID technology to the Department of Defense," he said. "Second, we were successful in gaining traction on our strategy of targeting the municipal market for network infrastructure services, winning a spot on the team that will build a Wi-Fi network for the City of Madison and joining with Google in a bid to provide Wi-Fi services to the City of San Francisco. We are actively involved with other municipal Wi-Fi projects and expect to be successful in winning additional work in this area in the future."

DeMarco also said the company made key hirings that will drive further success in the public-safety market, and in IP and core network engineering. "As carriers seek to invest in the development of converged voice and data networks, we believe there is opportunity for vendor independent engineering firms such as WFI to assist them in the design, deployment, integration, and ongoing maintenance of their IP and core data networks," he said.

Meanwhile, WFI also admitted to an operational blunder during the quarter. "We unfortunately encountered significant operational issues in our Latin American operations," DeMarco stated in the earnings report. "Cost overruns were identified, resulting in a change in estimates on certain fixed price contracts, and we determined that out of scope and additional work had been performed without formal documentation and formal pricing increases, resulting in a total adjustment of approximately $3 million. We have taken corrective action and are in the process of implementing a reorganization of our entire Latin American operations."

DeMarco said the company is "significantly scaling back" new site deployment plans in Latin America in the short term, which will negatively affect revenue during the fourth quarter. Revenue and profit in the fourth quarter also will take a hit from labor and materials costs related to the recent hurricanes in the southeastern U.S., and how those storms affected WFI's carrier and enterprise customers in the region.

"We currently expect fourth-quarter revenues to be roughly flat compared to third quarter revenues and earnings, including estimated Latin America reorganization costs, to be in the range of $.05 to $.06 [per share]," DeMarco said.