Buy Recomendation-Aviat Networks

Aviat Networks, Inc. (NASDAQ-AVNW)
Price February 27, 2012-$2.62

Aviat is trading at a huge discount to our valuation. They have just over half their market cap in cash ($1.19 per share).

Their last quarter (12/31/2011) sales were down 10% from the prior year to about $105 million, gross margins were 30% and on a non-GAAP basis were breakeven on the bottom line. They did report a $12.8 or $.22 a share loss for the quarter but this included about $13 million of write-offs.

Forward earnings guidance for next quarter is about $100-$110 million in sales, 30% margins and breakeven cash flow.

Over 80% of Aviat’s shares are owned by institutions and just 2% by management.

With over $400 million in annual sales, $1.19 per share of cash, trading at a market cap of $161 million and at about a 70% discount to our valuation, we think this is a strong BUY.

Average trading volume is about 314,000 shares a day. There are about 59 million shares outstanding.

Aviat Networks, Inc. is a leader in wireless transmission solutions. We apply innovation and IP networking expertise toward building a carrier class foundation for future mobile and fixed broadband networks. With more than 750,000 systems installed around the world, Aviat Networks has built a reputation as a leader in offering best-of-breed solutions including LTE-ready microwave backhaul and a complete portfolio of service and support options to public and private telecommunications operators worldwide. With a global reach and local presence in more than 46 countries, Aviat Networks works by the side of its customers allowing them to quickly and cost effectively seize new market and service opportunities. Aviat Networks is headquartered in Santa Clara, California and is listed on NASDAQ (AVNW).


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