Ladies and gentlemen, thank you for standing by. Welcome to the Alvarion Fourth Quarter Earnings Release Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, with instructions given at that time. (Operator Instructions), as a reminder this conference is being recorded. I would now like to turn the conference over to the Director of Investor Relations for Alvarion. Ms. Esther Loewy. Please go ahead.

Thank you operator, good morning everyone. Welcome to Alvarion's Fourth Quarter 2006 Results Conference Call. Together on the line with me today is Tzvika Friedman our CEO, and Dafna Gruber our CFO. The earnings release was issued this morning and is now available on all major news feeds. Matters discussed in this conference call may contain forward-looking statements within the meaning of the Safe Harbor provisions and the Private Securities Litigation Reform Act. These statements are based on the current expectations or beliefs of Alvarion’s management and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The following factors among others could cause actual results to differ materially from those described in those forward-looking statements. Failure of the market for WiMAX products to develop as anticipated. Alvarion’s inability to capture market share and the expected growth to WiMAX market as anticipated, due to, among other things, competitive reasons or failure to execute in our sales, marketing or manufacturing objectives. Inability to further identify, develop and achieve success for new products, services and technologies; increased competition and its effect on pricing, spending, third-party relationships and revenues; as well as the inability to establish and maintain relationships with commerce, advertising, marketing, and technology providers as well as other risks detailed from time to time in the company's annual report of Form 20-F as well as in other fillings with the Securities and Exchange Commission. I would now like to turn the call over to our CEO Tzvika Friedman, please go ahead.

Thank You. Good morning everyone. We have an excellent report for you today a strong finish to an important year. During 2006, we meet all of our broadband wireless and WiMAX technical, financial and strategic objectives. We shipped $72 million of WiMAX products in 2006 that’s more than $100 million total so far mostly for initial small deployments of infrastructure and trials. On the one hand this is far more than any other vendor, on the other hand it’s just the beginning. Most people think the tipping point for WiMAX came in Q3, when Sprint Nextel announced that they selected WiMAX as their 4G technology. We agree that this was an important development, but it’s also important to realize that other large nationwide deployments of Personal Broadband are likely to happen in other parts of the world. We are already responding with our local partners to RFIs from operators in countries such as Japan, Taiwan and the UK, just to name a few. In most cases, we are part of the small exclusive club of vendors asked to respond. Meanwhile, during 2006 we strengthened our position in the market for primary broadband where we expect continued strong growth particularly from emerging markets. Even a standard-based market has a high and premium segment as well as a low-end plain vanilla one. We are viewed as the premium solution vendor with dominant position in the high end of the market, which is probably underscored by our overall 50 plus percent WiMAX market share. Our superior technical capabilities with a strong focus on continuous cost reduction, our premium brand and our excellent product features, which provides our customers with better ARPU enable us to maintain our high gross margin relative to the rest of the industry. We believe we are the most profitable WiMAX company and we would already be at our interim target of 10% non-GAAP operating margin, or if not for the strategic investment we are making in the mobile WiMAX. As far as we can tell, other vendors are still struggling to reach breakeven with lower levels of investments. We believe that we can remain profitable while making the necessary investment to compete effectively in the huge personal broadband market. This is what differentiates us from other pure play companies. Some of our most important accomplishments during 2006 were strategic as well as financial. They include, converting operators from trials to satisfied repeat customers by showing that our solution works, meet their needs and allows them to be successful in their market. I will provide some examples in few minutes. Meeting our product milestones and delivering a WiMAX solution in a full range of frequencies and applications. These allowed us to recapture business that initially went to other vendors based on promises they couldn't keep. In several cases, the customers were tempt to ask because we had a working solution and didn't over promise. Developing a go-to-market strategy based on a variety of strategic partnerships with premier technical companies such as Intel, Cisco and Accton in Taiwan, integration partners such as IBM and other yet to be announced and strong local partners in Taiwan, China and various parts of Europe including several local companies in France and Italy. Continued expand our customer base by adding new customers, while other vendors were showcasing one or two big wins, we were focused on developing a broad base of customer with a potential to grow much larger in the future. Recently, some trails in small scale WiMAX deployments emerged into larger scale commercial deployments. Long-time customer Iberbanda now part of the Telefonica Group continues to expand, so do Telmax companies in Latin America. In addition, Netia, the number one alternative operator in Poland is deploying Alvarion products in 3.6 gigahertz for a nationwide deployment. We received the follow-on order from them in Q4. Recently we shipped $8 million WiMAX order in Romania to a large Pan-European cellular operator for large deployments in 3.5 gigahertz band. We expect to extend this deployment in 2007. Additionally, we secured new business from Nexcom and Trans Telecom in Bulgaria. The Nexcom and Trans Telecom networks are WiMAX based networks launched in Bulgaria and both network will be extended to additional cities by the end of 2007. In Russia, we recently deliver our 2.3 and 2.5 TDD solutions. Clearly Central and Eastern Europe promises to be a very strong market for us. Africa continues to be an area where we are seeing rewards for the efforts we have invested in the region. Telecom South Africa, a longtime customer for non-WiMAX product, plan to use our WiMAX solution to supplement its ADSL service. Alvarion has an early entrance into the Indian market is well positioned with all the major operator. This market is known to be a very price competitive and we are being selective about the deals in which we participate. Recently we announced that Aircel will deploy BreezeMAX solutions. Its plans are for deployments in 50 cities in Northern and Eastern India. Additionally, a major national GSM carrier in India is deploying our WiMAX solution initially in about 10 cities but it is expected to expand to more by the end of 2007. In the US, we experienced solid growth in business. As an example, in WiMAX, we are working with Digital Bridge Communication, a new operator that is using 2.5 gigahertz to also broadband in underserved markets. This relationship is a direct result of our strong performance at Verizon Avenue with our unlicensed products, where we first met some of the key people of Digital Bridge. We continue to believe that Alvarion has a great prospect with US 2.3 and 2.5 license holders that are not necessarily nationwide but are moving fast to build their networks. We continue to be the best partner for these customers. We are also implementing several major municipal project including the Mountain View, Miami Beach, Edmonton, New Orleans, Fresno, and Corpus Christi. Throughout 2006, we have been building our presence in APAC, which is expected to be one of the strongest region for WiMAX. In Taiwan, we are participating in the M-Taiwan initiative in which the Taiwanese Government is committed to providing broadband service and intends on becoming one of the main countries in the world for low online accesses. We also recently announced a deal with Chunghwa Telecom, a Tier 1 operator in Taiwan. Now, I'd like to explain why we are confident in our ability to compete with a larger player. First, our solution has proven successful in the initial interoperability test at the latest industry events. If you put all the press release aside, we are the only commercially available e-solution on the market today. Our successful class in our BreezeMAX 16e TDD platform at 2.3 and 2.5 gigahertz, recently released have already yield more than 15 orders from operators in North America, CIS, and APEC. But our confidence comes from more than just our technology. We also think we have a superior strategy with strong partners in Open WiMAX. Our Open WiMAX best-of-breed strategy is shifting the industry from vendor-centric to operator-centric. Open WiMAX is a fully distributed all-IP architecture, giving the operator the flexibility to choose best-of-breed multi-vendor partners to third-party IP services, while controlling costs. This focus has proven successful in enterprise data networking and the shift to all-IP core networks in telecom is the preferred approach by operators. We are executing upon our Open WiMAX strategy and cultivating key strategic relationship with ecosystem partners such as Cisco and IBM. Our system is designed to work with Cisco ASN Gateway and we are currently offering our solution together with Cisco in certain RFPs. We partnered with Accton, a Taiwanese manufacturer to create Accton Wireless Broadband, AWB, so that Alvarion would be one of the first to design and develop high volume customer premises equipments and other end-user devices based on the 802.16e-2005 WiMAX specification. AWB will sell its devices to Alvarion as part of its Open WiMAX 4Motion solution, in addition to other carrier, service providers, and end-users worldwide. To summarize, we are executing on three fronts; continuous improvement in financial results, expanding our already broad customer base, and positioning ourselves for the larger opportunity we see beginning a year from now. Our goal for 2007 continues to be 15 to 20% growth based on over 50% increased revenue, WiMAX and a stable non-WiMAX business. We currently offer a full suite of products and solution available in all major frequencies Now, I'd like to return the call over to Dafna to discuss the financial results of the quarter and year in detail.

Thank you, Tzvika. Hello everyone. Q4 revenues reached 50.3 million. These are revenues from the Broadband Wireless Access business and exclude any revenues from the Cellular Mobile Unit, which I'll refer to in few minutes. This is a 15% sequential improvement from almost 44 million last quarter. Our revenues following the sale of the Cellular Mobile Unit ranged between 47 to 51 million. Non-GAAP EPS totaled to $0.03 per share. We are pleased that our fourth quarter results were on the high end of our guidance. We had a very strong quarter for our BreezeMAX platform, both in shipments and revenues. All the growth in this quarter came from our BreezeMAX product line and the non-WiMAX portion of the business was stable. In Q4, BreezeMAX shipments were above 28 million and revenues were almost 24 million. Non-WiMAX revenues continued to be relatively stable, as I mentioned. We had two customers that accounted for 11% of revenues, and overall, we had seven customers, which each accounted for over 1 million of revenues. As we indicated in the past, out diverse customer base should enable us to benefit from the conversion from trials and limited deployment to large network deployments of WiMAX infrastructure. We see signs of this trend in Q4. Most of the difference between shipments and revenues is due to the delivery recognition of revenues in contract, where we have specific obligations for features of products we have not yet delivered. Once these features are completed, we will be able to recognize these revenues. Turning to the geographical breakdown, EMEA accounted for close to 65% of revenues in Q4 comparable to Q3. Central and Latin America was 15% and North America was 14%, Asia-Pacific accounted for the remaining 8%. As Tzvika mentioned, the strongest growth was in Central and Eastern Europe. Direct sale accounted for roughly 38% of revenues, distribution for 56% and OEM represented the remaining 6%. GAAP, results from continuing operations was a loss of $282,000. As a result of the sale of the Cellular Mobile Unit, results of the CMU are classified as discontinued operation and are not included in the result of operations -- from continuing operation of 2005 and 2006. The $6.2 million net loss on a GAAP basis includes a net loss from discontinued operations of $6 million related to the sale of the CMU division. In addition, net loss in Q4 included deferred stock compensation and amortization of acquired intangibles. For your convenience we added the information on all of 2006 quarter results from continuing operation to the financial table in the press release. Gross margin was 52% due to favorable revenue mix and our constant effort in cost reductions. For 2007, we are currently modeling gross margin in the high 40s, while our long-term target remain at 45%. Operating expenses in Q4 totaled to $25.3 million, compared with $23.3 million in the previous quarter. Operating expenses continues to decline as percentage of revenues. As we explained at the time of the CMU sale, we intend to divert the resources which we have been devoting to the CMU to our WiMAX initiative and therefore expect to continue to see modest quarterly increase in operating expenses, but not as a percentage of revenues. We're pleased to say that Q4 was a profitable quarter on a non-GAAP basis and excluding the motivation of acquired intangibles and deferred stock compensation, Q4 resulted in a net profit from continuing operation of $2.5 million or $0.03 per diluted share, compared with breakeven results on a non-GAAP basis in Q3. Cash as of December 31st, 2006 totaled to $118 million, which is up from $109 million in the previous quarter. Cash and cash equivalents increased by $9 million at the fourth quarter mainly since BreezeMAX's business that is not translated into revenues yet is already translated into positive cash flow. I would like to take this opportunity and summarize BreezeMAX results for 2006 full year. Year-over-year BreezeMAX revenues totaled $72 million or 40% of total 2006 revenues compared with about $30 million or 17% of revenues in 2005. By the end of 2006, we have completed transition to the BreezeMAX platform with a full set of WiMAX solution in all relevant frequencies and we believe BreezeMAX revenue will grow more than 50% in 2007 over 2006 while non-WiMAX revenues will be relatively stable. In Q1 although we see some effect of seasonality, we expect revenue from continuing operation to range between $49 million and $53 million. Based on these revenues results we expect non-GAAP per share earnings from continuing operation, which excludes amortization, the effect of stock based compensation and one time charges as well as any impact from the CMU business going forward to range between $0.01 and $0.04. GAAP EPS will range between a loss of $0.02 and a profit of $0.01. I would like to take a minute and introduce Esther Loewy, joined Alvarion recently as Director of IR. Esther will replace Carmen Deville in the internal Investor Relation position. I want to express our appreciation to the great job Carmen was doing, wish her a lot of success and tell you that you can continue to count on Claudia Gatlin and now Esther for help whenever you have questions. Now we would be pleased to take your questions.

Thank you. (Operator Instructions). And our first question comes from the line of Rich Church with Unterberg, please go ahead.

Thank you, can you give us the percentage of revenue from the e-Solution the mobile WiMAX's piece?

We've gone to break "e" solution, or revenues of BreezeMAX, we look at whole BreezeMAX as one family of product, sometimes we have customers that are moving from one platform to another, and therefore, we would continue to count the BreezeMAX revenues as one element.

Okay. But, you did say that you had 15 customers for the "e" solution, is that right?

Yes.

Who are running of those 15 among the 7 that were greater than $1 million?

Not yet.

Okay. And Dafna, could you give us some color on what you think the operating margin goal will be for '07? And what the long-term target will be?

Well, long-term target for operating expenses is for total of 35% of revenues. The goal for this year, we see a certain modest growth in operating expenses that can reach up to $1 million per quarter or less than that over 2007.

Okay, great. And Tzvika, could you talk about geographic strength I know, the Eastern Europe is strong for you now but when do you think over the course of the next year do you think, Western Europe and Asia-Pacific and U.S. and Latin America will start to be more significant drivers on the WiMAX side?

On the WiMAX side, I think what we see in Central East Europe is results of a regulation of a year ago, which is now translating into a orders and revenues, and we expect it to continue to be a strong region for us. What we expect next is to see a development in Asia Pacific and in the US market, West Europe at least in some areas, we think will take longer.

And are any of these developments related to the certification lab. And also could you comment on, are you participating in the first Wave on the mobile side, thanks?

It's not related to certification. And the second question you've asked Rich about the Wave 1, we will of course participate in the first Wave 1 of the "e" system, as well as in the Plug fest test that will be conducted I think next week.

All right thanks a lot. Nice job.

Thank you. We will go to line of Ehud Eisenstein with Oscar Gruss. Go ahead please.

Yes, hi. Very nice numbers guys. 140 deployments obviously tremendous growth since the June quarter, if I recall you only had 70 back then. How many vendors do you typically see there? And if you can comment on the win-rates? Thank you.

Good morning, Ehud.

Hi Tzvika.

We usually see in each deal few vendors competing, it's not always this same one, it depends on the application, on the geographical presence. And the hit rate is quite good because we are very selective and focused on the deals we are competing on.

Thank you. And any color on the unlicensed demand in the quarter?

The unlicensed as we indicated in the past is a market which we are targeting to grow. We invested both in having products for this segment, as well as, marketing plans, and this business is stable and shown some growth already.

Excellent. Thank you.

Thank you. Our next question comes from the line of Ittai Kidron with CIBC World Markets. Please go ahead.

Hi guys, congratulations on good results. Dafna, can you clarify in the press release you had a statement that you are expecting in '07, 15% to 20% overall growth, is that excluding interWAVE out of the '06 numbers?

Yes.

Can you tell us what was the annual '06 revenue excluding interWAVE?

It was $182 million.

Okay.

And you can see all the numbers, excluding the CMU in the tables, in the press release.

Okay. And Tzvika, can you give us a little bit more color of the list of customers you have for WiMAX. How many of them are planning to go to mobile WiMAX versus have only plans to stay in fixed?

Regarding plans, I think most of them have plans. Practically, I think many would not be able to do so, but I think significant part of them in the long-term could expand to mobile WiMAX. I believe that most of them who are in the 3.5 gigahertz will be going to more portable solution, than the mobile solution does in 2.3, 2.5 are more likely to go to a full mobile solution. Our advantage is that we provide them this flexibility and they could deploy to their solution, connect customer, have revenues, have experience, and go ahead in the future when regulation will allow to the financial or the business then or even the market itself will allow where they could go ahead into a mobile solution. Ittai Kidron - CIBC World Markets. Very good, and how do you expect to participate with Tier 1 OEMs? You had a nice announcement with Chunghwa and you have that Tier 1 US carrier, and maybe you can give us an update on that, but where do you think, a year or two years down the road, how do you see the profile of your customers, Tier 1 versus not Tier 1?

Actually, we look at the customer not if it's Tier 1 or not, if it's a big potential or not a big potential. So, someone who is a challenger who could be very big is also a very attractive customer for us. Regarding how it would look, I think we will have more big customer and Tier 1 customers in the future, and we've shown execution and ability to win those in the last year. And as I indicated, our way to do it is both our strategy and product superiority, but also a very focused approach with the right partners in combination to win the company we decided to go after. Ittai Kidron - CIBC World Markets. Very good, and Dafna can you comment on the gross margin. I mean just a quarter ago, you were expecting gross margins to move towards the mid-40s, assuming that CPE will gain a little bit more traction, now you're talking about high 40s, what has changed?

I feel that we were saying over the last few quarters that the near-term calls for a high 40s in gross margin, while our long-term target is for 45%, because once we start shipping them more and more standard-based cities, that would decrease the margin, but the near-term this quarter and also in the last two or three quarters ago we were talking about high 40s. Ittai Kidron - CIBC World Markets. But should we expect this above 50 to repeat itself in '07 or--?

That's a possibility, but we're currently targeting high 40s. Ittai Kidron - CIBC World Markets. Very good, and Tzvika, maybe lastly, maybe you can give us an update on the search for a new CFO?

We are doing an extensive and serious search. We have a few very qualified candidates, and both, me, Dafna and people from the Board are interviewing and reviewing these candidates. We expect to close it in the next few weeks. Ittai Kidron - CIBC World Markets. Very good. Good luck guys.

Thank you, Ittai.

Thank you. The next question comes from the line of Dan Harverd with Deutsche Bank. Please go ahead.

Hi, and congratulations on the numbers. Since we -- quite a dramatic increase in the number of trials that you are involved in from 120 last quarter to 200 currently, what do you attribute that to and what sort of a geographic region are you seeing now?

It's actually spread all over. I think one of the reason in the increase is the fact that we currently have more solution to offer in the 2.5, 2.3 band, which we did not had before.

Okay. Do you have any sort of data on conversion ratios from trials and through deployments?

No. But, as I indicated in the last time I was asked about it, some of the trials are trials that would not be converted because that's the trial the operator is doing. They want to try the WiMAX. They may have only a license for a trial. The example we gave last time was Italy, that a few people, a few operators got license for a trial and that’s it. They don’t have a license and they cannot convert it into a commercial deployment, but it's key to do the trials we’ve done. So from those -- I can say that from those who are doing the license as a condition for a commercial trial, we have a very successful conversion rate.

And I want to add, Tzvika mentioned earlier in several names of customers that we see customers that are moving or already moved from trials to commercial deployments. We’re talking about the Telkom South Africa, for example, a large telecom provider in Romania, in Bulgaria, in Russia, in Spain, in all these areas we will see a clear move from having trials or small scale deployments into commercial deployments.

Okay.

The importance of trials is not only the charges, the relations you’ve build and the fact that the people who are doing that trials are engaged with you. This is why we invest in it and it's important. So these people will later they need to think of RFI and RFQs [to right]. They lend the WiMAX. They lend the capability and the feature Alvarion has and can offer, and that's become a major requirement, and some other vendors will not be able to add weekly an offer and what they saw in the trials.

Okay. When you look at these 140 deployments, can you give some sort of color to the extent to which you're seeing repeat orders, the extent for which these early stage deployment or perhaps where the deployment has now completed and you wouldn’t expect to see further business?

It’s a mixture, but from a dollar perspective to repeat all there is significant.

And would you -- overall would you define those deployments as being early stage is that correct, understanding?

Most of them are early stage.

Okay, thank you and good luck.

Thank you Dan.

Thank you, our next question comes from the line Frank Marsala with First Albany. Please go ahead.

Good morning everyone, good solid results.

Thank you

Just want to ask a couple of questions. Number one, on the non-WiMAX customers, do you look at your non-WiMAX customers and generate a percentage of those that are moving to WiMAX or just getting some sense as to what those customers are looking to do in the future?

As we indicated, we consider ourselves the best partner for our customer and the fact we can offer license and un-license is an advantage. I will give you example, some of the U.S. operator would target in order to have the license in some of the regions and other regions they do not have the license and working with us allows them this combination. Another example we gave in the future was Irish Broadband that was using all of our products, license in un-licensed. So, in case they have the license, many of them would move to the WiMAX product but it's a combination and we use the relations with the customer once we are engaged with them even for their license to offer them whatever product we have that fits the business space.

And then just another question on some of the trends in '07. The general thoughts that I heard coming out of the WCA show is that the emerging markets would have a good year from a deployment standpoint, that’s kind of the under served the rural areas things of that sort. But Tzvika mentioned I think in your commentary the U.S. as an expected area of strength for you? What areas are you expecting that to be and what types of customers is the backhauls that access. Just can you give us some color on what you are thinking of it in the U.S.?

In the U.S. we have two major segments, one of them is the distributor of small wireless ASP -- wireless ASP market which is a market, which as I indicated we are refocusing on it both with products offering and a marketing plan and I would include in that some of the activity we are doing in the municipal markets with partners. The second market is the market which is mainly accessed again with bigger carriers which we address some of it with unlicensed product and the change this year is we moved as we introduced WiMAX product which we only introduced in Q4. So we expect to grow the market with the WiMAX product license products in 2.3 and 2.5. The main application is access we need to remember that though U.S. developed it’s a very large country and there are many areas underserved area for broadband.

Okay. And at the municipal -- what are you doing, the work you are doing in the municipal area is that more backhaul than it is access or is it access?

In the municipal area in some cases or most cases currently the solution is backhauling mesh Wi-Fi but in some of them the service we move when the project was -- progress also to a WiMAX.

Okay, thanks very much guys I appreciate it.

Thank you. We will go to the line of Kevin Dede with Merriman. Please go ahead.

Let me offer my congrats on the nice results. Pretty nice step up in R&D from the third quarter to the fourth quarter and I know that you are planning on and continuing to invest there I wonder if you could just be more specific on what features and functionality you plan on adding and how you differentiate yourself from your competitors and finally how those features and functionality help operators to generate higher ARPU?

Hi, Kevin. The investment in R&D is roughly indicated when we announced the sale of the CMU that we intend to convert this investment into investment into a mobile WiMAX. So most of the R&D increase goes to the mobile WiMAX. The product itself would translate to revenues probably only in 2008, where you'll stop commercial deployment of the mobile WiMAX. We invest in several feature that differentiate us. I'll start with the open WiMAX and the ability to build a network with best of suite partners, add to that flexibility, superior radio capabilities which we have. Our very advanced scheduler ability to work with one base station with the several ASN gateway which allow a better handoff and if you add a feature which gradually would be tested and shown to the different operators.

If you have e-Product out now as we go why is investment so high?

There is a lot of things you need to do to have this product fully comply with the Wave One certification add features which are Wave Two certification, add additional features. Just for example you need to have a MIMO, you need to add in the future a Beamforming, you need to improve your handoff capability, you need to integrate into a mobile services. So to do all that, we need the investment and I get the other question always, how do you think you will compete with the big guys? So, we will compete with the big guys by doing a very smart and cost effective investment but still it's a big investment in order to compete well with them.

Can you give us an update on the Accton relationship? When do you expect them to be able to deliver product for you?

The Accton partnership is working on the CPEs for the 802.16e and we expect product shipments starting in the second half of 2007.

And can you just give us an update on China, where you think 3G licenses are there -- are going there and how that might influence WiMAX?

I will but let's remember, I'm not the expert of the Chinese 3G. The expectation in the market is that the 3G, Chinese version of TDS-CDMA was -- the licenses would be awarded during the first half of '07 following by licenses on the 3G in the second half of '07. But I really don't consider myself as expert on that and I think last year people who were quoting the Ministry of Communication that said at the end of 2005 that it will be the first half of '06. So, it's very difficult to focus what would happen there. But this is the current expectations people have.

Do you think there is a link though between 3G rollout and an opportunity for WiMAX?

Yes. I think that until that we resolve the TDS-CDMA and 3G, they would not allow a mobile WiMAX licenses.

Very good. Thanks for taking the questions and congrats again.

Thanks, Kevin.

Thank you. We will go to line of Larry Harris with Oppenheimer. Please go ahead.

Yes. Thank you and if I could also add my congratulations here. I think it was indicated earlier that Western Europe was somewhat behind in terms of deployments relative to Eastern Europe and I was wondering if you can give an update on any developments in France and Germany.

In France, the licenses was given about 5 months ago and it's now in a process of RFI, RFQ, some trials. We don't have anything solid to report there. Germany, a license was just given. I think the operators today are making their plans. They will issue their RFI and RFQ in the first half and probably it will translate to deployments in the second half of '07.

And would you expect to participate in both markets or certainly plan to?

We plan to participate in both markets.

Alright. Well, thank you.

Thank you, Larry.

Thank you. We will go to the line of Daniel Meron with RBC Capital Markets. Please go ahead.

Thanks, Tzvika and Dafna. Congrats on this solid results and the good works in 2006. Couple of questions. Tzvika maybe can you provide us with some sense on visibility, has it improved, it appears so from your commentary?

Good morning, Daniel. Unfortunately, I can not say we have a much better visibility and we hope it will get away throughout '07 and maybe '08 when large orders will create a stronger and long-term backlog.

Great. And moving to -- you mentioned that you have two major customers, I think 11% of the mix, is it combined or separate? And then do you expect repeat orders from them to go through the first half of '07?

Each one of them has the potential to continue to be a significant customer not necessarily to reach 11% of revenues every quarter, but we do see them as an important -- these two as an important customers in 2007.

Great. And then could you comment maybe you can give us more color on your go-to-market. How do you target those niches? You mentioned that you are only targeting or allocating the resources where you can actually win the business. How do you determine that if you can share that and also give us a sense on how you find those niches where you can win?

It's not necessarily niches. It's the places where you have the right combination. We have a very thorough sales process where we analyze the opportunity, we see if there is a real opportunity or not and then we go and check if we have the right partnership both technology partnership and go-to-market partnership that will allow us to win. And then we start working with the operator showing the benefits we have, brings our partner's benefit, relations, and history with the customers to combining all of it to a winning combination. It means that there were places that maybe is a great potential, but we don't have the right partnership. We will not go.

And then, one last housekeeping question, the balance sheet improved materially this quarter and also the cash flow, it's seems like your accounts receivable -- but then also inventory improved. Can you give us a sense of what was the driver there and also how do you expect the cash flow in next few quarters? Thanks.

Cash flow is mainly affected by a shipment, level of shipments and collections from the customers as well as you mentioned the inventory level. Over the last two quarters, this level of shipment was higher than revenues and therefore cash flow from operation is higher than the net profit. Over a longer period of time, we should expect cash flow to be similar to the -- with the non-GAAP results from operations, however, I do see some fluctuations from quarter-to-quarter. And these two numbers would not necessarily match each other.

Thank you, Tzvika and Dafna. And Dafna, good luck. It's nice.

Thank you.

Thank you.

Thank you. We’ll go to line Steve Ferranti with Stephens Inc. Please go ahead.

Hi guys, good morning. Congratulations on the nice numbers this quarter. Quick question on, if you could just give us a little more color on how many you deals that you are bidding on are multi-source deals or – and versus sole-sourced? And then, how many competitors you are seeing on average when you are bidding on these deals and what are the winning factors for -- and success factors for you to win these contracts?

Yeah, I think several of the deals today are a single-source. I think most of the bigger deals are at least are multiple-source. For some of the smaller numbers in these, I would say we don't see more than 5 bidders. On the big deals, which are -- it’s still RFI space, you can have lot of names on the list.

Okay. And what do you generally see as the success factors and when you do win these deals? Is it price driven? Is it feature driven?

It’s a combination. I think it’s not the issue of the price, it’s the issue of who can offer a better business case for the operator and that’s the art of showing it, because, for example, your base station may cause 10% more, but if you can save them 20% of the base station, you'll save much more than the cost of the base station you save in the site acquisition, the backhauling, maintenance cost, and so on. So, the art is to show them that your solution is not only the issue of the equipment cost, but the overall OpEx, as well as to show that there are features you offer allows them to do more revenues.

Okay, great. And can you walk us through what you see as sort of the role of the system integrators, both historically and looking forward as a factor of winning business? You talked about some potential partnerships that we could look forward to, but what's the role of these guys in terms of getting in front of the larger carriers and winning business?

Look, there are two parts of this. The first part is the fact that when the world is moving to more an IP-based, the system integration function become more similar to what I call It integration, and this gives us the opportunity to team up with IT integrator, which are moving into the telecom space. And I gave the example of IBM, but there are other players like HP, Accenture, EDS, Capgemini, and others which are IT integration moving into the telecom world. In some places they even have an advantage of very experienced -- large experience in integrating IT services. Regarding what we see as the role, then I think it depends on the customer, very, very large customer usually will take that as a separate parts, let someone to do the integration, it will not necessarily be part of one big order, and they can take someone to do the service integration into the billing system, they can talk someone else to do the actual deployment, site acquisition, and installation. And when you go to a smaller customer, usually they would want to ask our integrator to take a bigger responsibility for integrating everything.

Very helpful, thanks for taking my questions.

No, that’s good.

Thank you. Our next question comes from Irit Jakoby with Susquehanna. Please go ahead.

Hi, everyone. So with respect to the expected 15 to 20% growth in 2007, does that reflect that you expect to gain market share or lose market share over the course of the year?

First, I want to highlight, this is our target. It’s not a guidance, that’s the target we have for 15 to 20%. And we expect to, I would say, gain market share. It really depends on some very large deals we think will happen in ’07 or not like the Sprint did.

And to follow-up on another question, you mentioned that some of your customers you expect them to also start mobile WiMAX deployment. Do you expect that already in 2007?

No. I think 2000 -- and we always say that mobile WiMAX will only start in 2008 because you will need the end devices, the handsets, the PDAs, and the laptop with integrated WiMAX. So, we expect commercial deployment of mobile WiMAX only in 2008.

Okay. And finally, your WiMAX Wi-Fi product that was introduced this quarter, can you elaborate a little bit more on that? What kind of deployments and is that a meaningful product in 2007?

We think it's a meaningful product because it allows our customer to have early use of two application. One of them is what I call personal broadband based Wi-Fi because Wi-Fi devices exist today, so they could use it in some places in this case in this way. Another application that can use, again it's an example of how we help our customer to do more business, if they deploy a WiMAX network for access and in addition they could add a Wi-Fi access in hot zones to create more revenue for them in specific areas.

Okay. So, is the product meaningful to revenues in 2007?

I think it's meaningful for revenue, but not necessarily the Wi-Fi portion of it, but the overall increase to the WiMAX that we will serve.

Okay, great. That's it from me. Thank you.

Thank you, Irit.

Thank you. Our next question comes from Ben Shamsian with Canaccord Adams. Please go ahead.

Hi, how are you gentlemen? Hello?

Hello, hi.

Hi.

Good morning.

I just wanted to little bit talk about the competitive nature. Again, I know that there were some questions asked. Geographically, where do you see yourselves sort of separating from your other competitors? Is there -- was Eastern Europe sort of your niche at this point or are you looking at other places as well?

Naturally, we're stronger in EMEA. That was seeing the result, as Dafna said. I think we are strong in Africa and Central East Europe. APAC is an area where we need to build our presence and improve ourselves, get more strong local partners and regional partners. So, that's an area where we need to be better and improve compared to competition.

Okay. And then, specifically the Chunghwa announcement, how competitive was that contract to get? I mean who else -- if you can just elaborate on who else might have been there or I guess more as you enroll in getting to success on that?

Many vendors compete on the Chunghwa. Chunghwa has a different -- Chunghwa North, Chunghwa Central, Chunghwa South. We are engaged with all of them. We want the Chunghwa Central. The other vendors announced being selected in Chunghwa North. I think the importance is the fact that such a large incumbent was very well respected in all the Asia Pacific region selecting Alvarion for deployment. That's very important and to allow us to participate in the M-Taiwan very strongly. In addition, that's an example of our strategy having strong local partners like T-Com, who is part of the M-Taiwan Program and that's the key importance here.

Okay, great. Thank you very much.

Thank you, Ben.

Thank you. The question comes from the line of Andrew Schopick with Nutmeg Securities. Please go ahead.

Thank you. Two questions here. On the two 11% customers, Dafna, are these both BreezeMAX or are they non-WiMAX?

Both are BreezeMAX revenues.

Okay. And I did want to ask a question here about managements anticipated or expectations for price erosion in the marketplace over the next year or two or some of the larger players come into this area. To what extent you are anticipating ASPs to come down on the equipment side and the strategies that you will be putting into place to effect the necessary cost reductions to maintain the kind of gross margin levels that you hope to achieve and sustain?

We are constantly investing in a cost reduction, its part of the company efforts. I think that the large players coming to the market not necessarily will reduce the ASP of the base station I think some of them will actually be expensive. And on the CPE side on the other end our way to compete and be profitable in that area strategically is the establishment of the joint venture we'd act on, which in the long term this type of companies know better how to deal with the high volume low margin business.

Okay. Good luck to you, Dafna.

Thank you.

Thank you.

Thank you. We'll go to the line of Anton Wahlman with Think Equity. Please go ahead. Anton Wahlman - Think Equity. Hi, Anton here. Couple of questions, first of all on your kind of view on the converged Wi-Fi and WiMAX market, we saw an announcement the other day from Proxim about shipping this quarter, their combined product. Could you give some sort of status report of whether you plan to have a similar product, and if so, when you would believe it to be generally available or for that matter if such a product for some reason not desirable?

We released a product, which contains the WiMAX / Wi-Fi in the sense that on the same area where we have WiMAX, and we also have WiMAX CPE which provides extended Wi-Fi coverage. It will mainly as I indicate, will mainly be used for hot zones to get access like hot spot but hot zone for the operator or to allow what I call Personal Broadband based on Wi-Fi. In the long-term -- in the municipality market, I expect gradually some of the solution to move from mesh Wi-Fi to WiMAX solution based on frequency, some of the municipality whole through the charity of the education system they have.

So, you are shipping this type of product today in volume.

Yes, but I am not sure it's exactly similar to what the Proxim is shipping, we are starting to -- we released this product, we are not yet shipping it in volumes, we are now in trials with this product in few areas.

The reason I am asking is that they made a claim that nobody else were shipping this product, I am just trying to figure out, your view of that was different or not, but it sounds like your product might actually be slightly different anyway. Okay, one question on Germany, in your view and to the best of your knowledge are there any limitations on the type of WiMAX that can be offered as per the licenses that were awarded little bit over a month ago in Germany?

Well in France, it specifically said they were not allowing hand off. In Germany, I think there are limitations but people hope gradually in time that would work on some grey area and offer portability.

So, how does one enforce that if somebody, now it seems like its difficult thing to enforce not allowing hand off, but I guess that they can do it have less than, alright

In this -- the market of telecommunication there is also a role for lawyers, so they are managing it.

All right good. Another question on, when you believe, I mean you mentioned earlier, you didn't think handsets were coming of course until 2008. Do you think that lets assume in theory that handsets were never coming and would there be a case to be made for operators to deploy the .16e standard anyway because of its potential improvements in efficiency even for so called the fixed or nomadic applications anyway or in the absence of handsets would simply people just never make that infrastructure transition anyway?

We believe, indicated in the past that the "e" standard will be used both for fixed and mobile, it's not because "e" is more efficient, actually "e" is less efficient but we will do something as to make it as efficient for fixed application, its mainly because there is so much investment, innovation that is going to be done for the "e" and nothing will be done further on for the "d" for example, I don’t expect people to come out with any new d-chips. So, the cost reduction expected in the industry is only gear towards the "e" in the future. Therefore, we expect solution for "e" to be good for fix and mobile. Regarding your question I think it's theoretical because there are today some early example of WiBro handsets and both Nokia, Motorola and Samsung who are the three big handset players announce plans for WiMAX handsets, as well as, LG and Sony Ericsson, as well as, consumer electronic players like Sony and Samsung announced plans for that so. I don’t think there is a case that there will not be WiMAX handset.

No, I agree I'm believer so. But then the follow-up question to that would be, in terms of this being a chicken and egg, would you say that on the infrastructure side you are just waiting for the handset, you will be done on that side first or are you of the belief that in order for this system to work well, you first need to have whole bunch of sort of really ready handsets before you can finish the job on your end of the (inaudible) or are you simply waiting for the handsets and as soon as they are available in series, somebody could just deploy this and everything would be fine?

It's not done exactly this way. What usually do as infrastructure providers you work with several chip vendors, who are embedded into these handset to do the IOT and to make sure there is a interoperability between you and these chips. And then when you -- the handsets are coming, you just need to verify that it works well, but the work is done in parallel to the handset development by working with the chipset that are going into the handsets.

Okay. Final question then on the Act and Partnership, and if you have mentioned this before, pardon me, but I don't remember it. In terms of the accounting for the Act and Partnership, I mean in theory these are the products that you otherwise could have or would have produced as a part of your regular operations and now, I guess that will be done in this partnership, so how will you -- how will you account for this as an equity investment or how does that flow into your income statement?

The corporation is based on some minority investment in this company. So we would not consolidate any results of this company in our financial. We would buy most of the products at least in the first phase from this company and we'll book these revenues as cost of goods sold.

Okay. But that's for -- but then at some point there, the enterprise itself must also have a profit or a loss and if so, where would that flow or how does that will be apart from the products that you actually sell or say as you resell?

Our stock in this company is less than 20%, therefore we would account for it on a cost basis.

Okay, alright.

We would not book any profit from this company until we change the ownership or dividends allocated and so forth.

Okay. So I mean how does this joint venture then does sort of increase your long-term revenue outlook? I mean these were presumably CPE revenues that you sort of otherwise would have sold in your general course of business under your own name and so forth and now, it won't be. So doesn't that mean that all other things equal, the revenue targets or guidance or whatever that you would have for this year or beyond this year now are lower than they otherwise would have been?

No, I think it's the other way around. I think this partnership enable us to manufacture low cost CPEs that if we didn't do together with this company, then we would have to do it ourselves and that the cost of these products would be much higher. So we basically --from the company that is doing low cost CPEs and we buy these CPEs from them and sell it under our name.

Okay. Well, that's very helpful. Thank you very much.

Thank you.

Thank you, Anton.

Thank you. Our next question comes from Ehud Eisenstein with Oscar Gruss, please go ahead.

Yes, thank you. First to Dafna, let me just add my congrats for your new position at NICE. Second, follow-up on Rich’s first question regarding operating margin or expenses for '07, can you rate it, please?

Okay. First of all, thank you for the congratulation.

Sure.

Regarding the increase in OpEx, we are targeting up to $1 million quarter-over-quarter increase in OpEx and it range, it can be -- range between few hundred thousands up to $1 million.

Okay and 35% OpEx out of total revenues, your long-term model, is it still at a revenue level of about $72 million?

72, 75. High -- mid 70s.

Mid 70s. So that’s like second half of '08?

We'll have to wait and see.

Okay. Thank you so much.

Thank you.

Thank you.

Thank you and we have no further question.

Okay, thank you everyone for participating in this call and some of you in very early morning. We highly appreciate and we'll be available to speak with you later. Thank you.

Thank you ladies and gentlemen. This conference will be available for replay after 11:45 am Eastern Time today through midnight February 14, 2007. You may access the AT&T teleconference replay system at anytime by dialing 1-800-475-6701 and entering the access code 857787; international participants dial 320-365-3844. Those numbers again are 1-800-475-6701 and 320-365-3844 and enter the access code 857787. That does conclude our conference for today. Thank you for your participation and for using the AT&T Executive Teleconference. You may now disconnect.