wall street journal article part II
by: chbartel (24/M/Zionsville, IN) 3/30/00 11:52 pm
Msg: 1923 of 1971
TeraBeam's system works by establishing a series of hubs in rented offices around a metropolitan area. Those hubs have a fiber-optic connection to the Internet, and can beam the signal up to a mile and a half away to a small unit that sits just inside a company's window. There must be a clear line of sight between the company's window and the hub for the service to work.
So far, TeraBeam has set up a number of hubs in Seattle, but only has one customer. "We're looking to perfect everything before we plan any more large roll-outs," says Dan Hesse, TeraBeam's chief executive, who joined the company two weeks ago after heading up AT&T's wireless division.
He says TeraBeam will lay out the terms of its agreement with Meade "sometime in the very near future," but declines to comment further on the agreement.
Regardless, analysts say it remains to be seen just how many customers will go for the laser Internet service.
"For most businesses, offerings from the local phone company are enough to meet needs," says Dylan Brooks, a broadband analyst with Jupiter Communications in New York. "One of the real challenges is going to be getting enough customers to make this a cost-effective alternative."
"It's very much a niche market, and I think it's going to remain that way," says Tom Valovic, an analyst who follows optical networking for International Data Corp. "There are definitely some situations where a product like this could be useful, but there are concerns about the technology. What happens when a flock of birds flies through the beam?"
The "flock of birds" scenario is something TeraBeam's Mr. Hesse has heard before, and he says that birds alone can't disrupt the stream. The weather, however, is a different story. "We have found some problems with very dense fog that we're looking into," he says.
Uncertainty about the terms of Meade's agreement with TeraBeam make it impossible to assign a value to the deal, says Timothy Conder, an analyst at A.G. Edwards who has a "buy" rating on Meade's stock.
"At this point, we really don't know anything about it," he says. "How meaningful is the TeraBeam relationship? We just don't know. The company has said it won't be material in any way for fiscal 2001, and that's all that they've said."
Meade is the dominant telescope maker in the United States, and the company's sales have increased significantly this year. For its quarter ended Nov. 30, 1999, Meade reported net income of $7.7 million on sales of $63.7 million, about double from the same period a year earlier.
Although the party was still going strong on Meade message boards Thursday, a few of the Meade faithful were starting to have their doubts. "This thing is just getting too overvalued and I just can't take it anymore," wrote one participant on a Yahoo! Finance (quote.yahoo.com) message board. "Come on people, this is a telescope company!"
Write to Jason Anders at jason.anders@wsj.com
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