Is Terayon Strategy Sustainable?
Some of you may be surprised but there is very good discussion going on on Yahoo thread about COM21.
I have posted three of them :
Terayon's true test will be their ability to certify their own docsis 1.1 modem. The bulk of their sales to date are "bought" sales. Rogers and Shaw
were having a very difficult time with data product due to the length of time taken to upgrade cable plant to the point it could sustain internet use.
The robust nature of the Terayon equipment allowed these operators the ability to replace equipment that simply took too much maintenance to
operate. If docsis equipment had been available 12 months ago in the quantity they needed I don't think they would have chosen another proprietary
system.
With the millions of dollars paid by Terayon for these sales the operators had little to lose. I don't think many operators would turn down a free
stop-gap fix that would allow them to generate millions in internet revenue and also to build a huge lead over the telcos in terms of subscriber base
for high speed access.
They also received the bonus of a rapid increase in the shares they received. Part of the increase was created just by announcing the deal they
signed. It may be interesting to note that many of these shares have been sold.
Terayon delayed developing docsis 1.0 modems and 1.1 modems as they were determined to dominate the 1.2 standard. This standard has been
effectively shelved by Cablelabs for the time being. Terayon's solution was to re-label another modem. I don't know what commitment they have for
supply but they must rely on a potential competitor for product.
Is this a sign of good management?
Rogers and Shaw must move towards voice over IP in the near future. This will most likely mean moving to the docsis standard. Other operators
who hove adopted docsis to date we have a much smoother and quicker transition to voice. Most of these companies could not afford or were not
offered the money that Shaw and Rogers received to deploy a stop-gap solution. Please keep in mind that as part of the docsis standard 1.0
modems will interoperate with 1.1 modems. Thus those operators wil not have to throw out the orginal modems deployed. In fact the old modems
will automatically provide another level of service for customers. IE while proprietary systems will most likely have to replace the original modems
and sell them as scrap or dust collectors, the 1.0 modems will continue to generate revenue for customers who don't require the features of 1.1.
I suggest that Com21 management has ensured shareholder value by creating products with continued product life that is a major consideration for
their customers. Not everyone can afford to throw away a product 2 or 3 years after deployment. Number one the tax man won't let you right it off
that fast and number two the consumer of the service will not support recovery of the cost over this short a term. Now if that product was given to
you ..............
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by: laoosh
1/15/00 11:58 am
Msg: 10994 of 10997
Perhaps I was unclear. If I didn't spell it out I should have. My comment is 'Primary' concern. I have been on the selling end of Terayon's hype and
it took very little effort to see through the hype. Bottom line is patch solutions may sell today if you give it away but ultimately someone has to pay
the piper.
I beleive sustained product development including vertical integration of those products and the securing of a solid customer base will long term
assure shareholder value.
I have read a Guilder report last summer that pumped Terayon's product but I did not get the feeling that there was much independant analysis of
the technology at the time.
I don't know the nature of the float of the CMTO shares but I think there may exist a few larger holders that do not see a problem with the current
share value in light of their investment. In fact if they had doubts they might take up your suggestions.
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by: badtrade_99
1/15/00 11:59 am
Msg: 10995 of 10996
I believe you are saying that cmto's share value is less than terns because tern's management is doing a better job of convincing the investing public
that their long term prospects are better than cmto's.
The problem I have with this approach is that it's based on a HUGE misconception. Many shreholders of tern, including Gilder, have bought into
the concept that tern's cdma technology is going to be embedded into the physical layer of DOSIS 1.2. Because the cdma is proprietary to tern, tern
would receive royalties for EVERY modem sold using their technology. Given that argument, I would be investing in tern also. But the reality is that
CAble Labs have scrapped their plans to employ their cdma technology, but tern managment is still telling the investing public that Cable Labs is
moving forward with their original plan.
I do not want to invest in a management team that deceives their shareholders. There share price is house of cards that is ready to tumble. Also
contributing to tern's value is the perception that their cdma technology will have a similar impact as qualcoms cdma. That type of perception is
wrong and cmto cannot compete with that.
At some point however, terns stock will have to float on its own merit, and I don't want to be holding the bag when the shit hits the fan.
In conclusion, I agree with you that Tern's management is doing a better job of touting their benefits to the investing public, but the content of their
message is a bunch of bs. At some point, terns method will come back and bite them in the ass. |
