Amidst the slowdown in the wireless market, o2wireless
reported plenty of grim news for the first quarter.

The company acknowledged a net loss and 21 percent drop in revenues, write-off of goodwill and restructuring charges that resulted in the loss of more than 100 employees since last year. The firm also said that it is seeking other merger partners after negotiations with an Israeli firm failed to generate an agreement.

The telecommunications services provider (Nasdaq: OTWO) had a net loss of $32 million on $24.1 million in revenue in the first quarter, compared with a net loss of $7.4 million on $30.3 million in revenue for the same period last year. Loss per share was $1.14, compared with loss per share of 27 cents in the first quarter of 2001.

The announcement had little effect on o2wirelss stock. Close to midday, it was trading around 37 cents, up only 2 cents over its previous close of 35 cents and only 8 cents above its 52-week low of 29 cents. The high for the same period is $2.74.

Performance in the first quarter was impacted by continued economic uncertainty and continued delays by the major wireless carriers to fund the expansion of their wireless infrastructure, o2wireless said.

The company attributes some of its losses to the write-off of goodwill. On January 1, o2wireless adopted “Goodwill and Other Intangible Assets,” also known as SFAS No. 142, which asserts that goodwill needs to be removed from company balance sheets in order to more accurately portray its performance.

“A lot of telecom companies (like SpectraSite) are writing off goodwill this quarter because of newly required accounting rules,” Gregory Lundberg, an analyst with Morgan Stanley who follows SpectraSite, told Local Tech Wire earlier this month. Lundberg said that a goodwill write off does not affect the company’s cash flow or bottom line, and acts more as an accounting benchmark of sorts, especially in light of Enron.

o2wireless also reported it experienced decreasing margins and revised its operating forecast based on these trends. As a result, the company performed an impairment review as required and recorded a pre-tax charge of approximately $28.8 million for the impairment of goodwill. This amount was the entire goodwill balance.

The company ended the first quarter with 460 employees compared
to 574 at the end of 2001, a loss of 114 employees.

In February, o2wireless announced that it had entered into a non-bonding letter of intent with Baran Group Ltd., a diversified engineering services and construction firm based in Tel Aviv, Israel. Under the terms of the letter of Intent, Baran was granted exclusive rights for a period of time to enter into a merger agreement with the o2wireless. That period of time has elapsed without the execution of a definitive merger agreement, the company said.

While negotiations with Baran are ongoing, o2wireless says it has begun negotiations with other parties regarding a potential merger agreement. Under any agreement, the company envisions that additional funding would be provided it for its day-today operations.