Cingular Snarl Unplugs Powerwave

Analysts are blaming Cingular for Tuesday's crushing blindside hit at Powerwave (PWAV).

The Santa Ana, Calif., supplier of power amplifiers and other wireless infrastructure warned of a 20% revenue shortfall for the first quarter ended last week. The news caught investors by surprise, and they retaliated by sending Powerwave down 19% Tuesday.

Powerwave blamed its big miss on weak demand from "a major North American wireless network operator," which analysts identified as No. 1 cell phone service Cingular, which is a venture of AT&T (T) and BellSouth (BLS).

Analysts cautioned that other suppliers, including Andrew (ANDW) and to a lesser extent Lucent (LU) and Ericsson (ERICY), could feel the Cingular effect. Cingular represented 23% of Powerwave's revenue in the fourth quarter and about 10% of Andrew's fourth-quarter sales, JP Morgan Chase analyst Kim Anderson wrote Monday.

Both Lucent and Ericsson are supplying so-called 3G wireless data upgrades to Cingular, but analysts say those orders appear to be on track.

"This isn't a huge issue -- they aren't switching vendors or anything like that," says Harris Nesbitt analyst John Bucher, who doesn't cover Powerwave. "Cingular is not backing off the throttle," says Bucher, who sees the company's spending catching up in the coming quarters.

Cingular declined to comment on the Powerwave warning. But analysts say Cingular ran into a few snarls in its effort to integrate all regions of its network. Investors will recall that Cingular acquired rival AT&T Wireless and other cellular systems in the past two years, creating the nation's largest wireless network.

Unifying the various systems is a major undertaking, say analysts, and in some regions the process may have broken down. "They ran into some surprises," says one industry observer. In a few cases "they had to replace some regional managers," says the observer, who is familiar with Cingular's transition efforts.