RDL.L Regulatory News (RDL)

3 Dec 2008 14:17

Attention Business Editors: Redline Communications Announces Organizational Realignment and Provides Strategic Update

Plan expected to result in annual cost savings, improved overall financial performance and accelerated delivery of key products All figures in US Dollars unless specified

TORONTO, Dec. 3 /CNW/ - Redline Communications Group Inc. ("Redline" or "the Company"), , today announced it has implemented an organizational realignment to reduce costs, improve the Company's financial performance and focus its resources in key growth areas. Cost savings will be achieved through a decrease in the Company's workforce and discretionary expenses, a ten percent decrease in executive compensation, and changes to the sales and marketing strategies for its Mobile WiMAX product line.

Redline's strategic changes and organizational realignment actions are expected to result in annual cost savings of more than $10 million, drive improved financial performance, and accelerate the growth of Redline's Broadband Wireless Infrastructure (BWI) unit and delivery of certain RedMAX 4C Mobile WiMAX products. In addition to the workforce and compensation reductions, the Company will continue to apply strict controls on discretionary spending and continue to reduce its overdue receivables which have decreased over the past few months.

"Over the past several months, management and the Board have evaluated several strategic options for the Company," said Majed Sifri, President and CEO of Redline. "Due to the current economic environment, we realized that we will not be able to attain full value for the BWI unit. We also anticipate that the market conditions could result in further delays in our customers' RedMAX network expansions. As a result, we have made the strategic decision to increase our investment in BWI to realize its full market potential. We will also continue to deliver on our proven RedMAX family of products and focus our efforts on the commercialization of only the highest-potential products in our RedMAX 4C Mobile WiMAX product line."

BWI has achieved strong revenue growth and profitability since the business unit was restructured in February 2008. On the fixed WiMAX front, Redline will continue to aggressively pursue business with a high return on investment (ROI) potential for its customers and for Redline. In the Mobile WiMAX business, the Company plans to focus its investment on the RedMAX 4C SC-1000 base station and RRH base station radio, which the Company believes have the highest potential for growth and return. For this product family, Redline will move from a direct touch sales model to a partnership model under which the Company will align with other leading telecom equipment manufacturers and System Integrators.

With the realignment of the Company's resources, Redline expects to achieve profitability in Q4 2009. Redline management reiterates its revenue guidance for the second half of 2008 of between $20 million and $25 million.

Forward-Looking Statements

Certain statements in this press release may contain words such as "could", "expects", "may", "anticipates", "believes", "intends", "estimates", "targets", "envisions", "seeks" and other similar language and are considered forward-looking statements or information under applicable securities legislation. These statements are based on Redline's current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which Redline operates. These statements are subject to important assumptions, risks and uncertainties, which are difficult to predict and the actual outcome may be materially different. Redline has made various assumptions in the preparation of its financial outlook in this press release, including the following company specific assumptions: An ability to ramp sales in new WiMAX product lines and in a private label product line in its RedCONNEX business; the continued network and deployment expansion by its largest customers, especially in the Middle East and the Americas; the continued ability to have more WiMAX customers convert to commercial networks, and the ability to add new WiMAX customers, using both its 802.16-2004 and 802.16-2005 solutions; improvement in Redline's product costs due to favorable supplier pricing, offset by higher costs associated with initial customer deployments in emerging markets; increased employee costs relative to expected cost of living adjustments and employee bonuses; and the effective execution of Redline's strategy, including the execution of Redline's supply chain strategy. Redline has also made certain macroeconomic and general industry assumptions in the preparation of its financial guidance including: a modest decrease in the growth rate of the gross domestic product of global economies which is lower than the growth rate in 2007; global service provider capital expenditures in 2008 reflecting mid to high single digit growth as compared to high single digit growth in 2007; global growth rate to remain stable with investments in next generation products and services to offset declines in purchases of legacy equipment; and a moderate impact as a result of expected industry consolidation among service providers in various geographic regions, particularly in emerging markets; and the impact of the rise in the Canadian dollar in 2007 and 2008 compared to the US dollar and other world currencies. The above assumptions, although considered reasonable by Redline at the date of this press release, may prove to be inaccurate and consequently Redline's actual results could differ materially from its expectations set out in this press release.

Further, actual results or events could differ materially from those contemplated in forward-looking statements as a result of the following (i) risks and uncertainties relating to Redline's business including: significant competition, competitive pricing practice, cautious capital spending by customers, industry consolidation, rapidly changing technologies, evolving industry standards, frequent new product introductions and short product life cycles, and other trends and industry characteristics affecting the telecommunications industry; any material, adverse affects on Redline's performance if its expectations regarding market demand for particular products prove to be wrong; any negative developments associated with Redline's suppliers and contract manufacturing agreements including our reliance on certain suppliers for key components; potential penalties, damages or cancelled customer contracts from failure to meet delivery and installation deadlines and any defects or errors in Redline's current or planned products; fluctuations in foreign currency exchange rates; potential higher operational and financial risks associated with Redline's efforts to expand internationally; a failure to protect Redline's intellectual property rights, or any adverse judgments or settlements arising out of disputes regarding intellectual property; changes in regulation of the wireless industry or other aspects of the industry; any failure to successfully operate or integrate strategic acquisitions, or failure to consummate or succeed with strategic alliances; Redline's potential inability to attract or retain the personnel necessary to achieve its business objectives or to maintain an effective risk management strategy; (ii) risks and uncertainties relating to Redline's liquidity, financing arrangements and capital including: any inability of Redline to manage cash flow fluctuations to fund working capital requirements or achieve its business objectives in a timely manner or obtain additional sources of funding; or any negative impact on Redline's ability to make future acquisitions, raise capital, issue debt and retain employees arising from stock price volatility and any declines in the market price of Redline's publicly traded securities. For additional information with respect to certain of these and other factors, see Redline's final prospectus (at page 83 under the heading "Risk Factor") which is available on Redline's website at www.redlinecommunications.com or through www.SEDAR.com. Unless otherwise required by applicable securities laws, Redline disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

About Redline Communications

Redline Communications (www.redlinecommunications.com) is the leading provider of fixed and mobile standards-based wireless broadband solutions. Redline's RedMAX(TM) WiMAX Forum Certified(TM) system, RedMAX 4C Mobile WiMAX(TM) products, and its award-winning broadband wireless infrastructure family of products - RedCONNEX(TM) and RedACCESS(TM) - enable service providers and other network operators to cost-effectively deliver high-bandwidth services, including voice, video and data communications. Redline is committed to maintaining its wireless industry leadership with the continued development of WiMAX and other advanced wireless broadband products. With more than 100,000 systems in 85 countries, and a global network of over 170 partners, Redline's experience and expertise helps service providers, enterprises and government organizations roll out wireless broadband networks to support advanced communications.

NOTE: All registered and unregistered trademarks mentioned in this release are the property of their respective owners.

/For further information: Redline Communications: Carolyn Anderson, canderson@redlinecommunications.com, Tel: (905) 479-8344; Equicom Group: Craig Armitage/Vanessa Beresford, carmitage@equicomgroup.com, vberesford@equicomgroup.com, Tel: (416) 815-0700; Canaccord Adams: Neil Johnson/Andrew Chubb, Tel: +44 (0)20 7050 6500/ (RDL)