From BTAB.....HIGHLIGHTS:
--FOCUS ON THE WORLD - execution remains strong as noted by recent deals
with leading operators in Hong Kong and China, adding to its stable of
leading operators in Japan, Europe, Brazil, Mexico and Canada, among
others.
--RAISING ESTIMATES. FY00 EPS to $0.25 on $276 mm in sales (up from $0.22
on $270 mm), FY01 unchanged. We will be adjusting our model after pending
deals close end of April (Combox, ANE, Internet Telecom and Ultracom). At
that time, we'll be adding roughly 1.6mm shares as well as additional
expenses (note deals will not necessarily be dilutive based on momentum of
core business revenue growth). Higher estimates driven by across the board
strength from existing and new customers, especially in data and video.
--VIDEO BUSINESS SHOWING LEVERAGE IN DIGITAL CABLE ROLL-OUT (industry wide
digital cable deployments were more than 2x data deployments in 4Q99-
data attached), VDSL (e.g. NextLevel deal), PORTFOLIO OF MSO's
(including Time Warner, Cox, Comcast and MediaOne), VIDEO ON DEMAND
(nCube deal). nCube is the leading VOD server solution and potential
spinout from Oracle.
--COMING EVENTS: continued sales flow from existing customers and new
system wins, better visibility on next generation DSL solutions and video
solutions, and M&A opportunities enabling Terayon to offer more robust
services and further leveraging its global footprint and strong customer
relationships.
--DOCSIS CONTROVERSIES ABOUT TERAYON'S ROLE IN EVOLUTION OF "STANDARDS"
(better described as committee driven specifications) SHOULD BE HIGHLY
DISCOUNTED. Terayon's embrace and extend strategy -embracing suggested
specs, but offering additional layers of functionality - continues to
result in high quality service and a growing list of happy customers. In
addition, the data/cable portion of Terayon's business is only a piece of
its overall opportunity.
--REITERATE STRONG BUY RATING ON THE SHARES. A large, expanding market
opportunity with outstanding execution makes this our top small/mid cap
idea. We believe that Terayon may be the most focused, best executing and
fastest growing company driving the convergence of data, video and voice
for broadband services providers (cable, DSL and ultimately wireless)
attempting to leverage next generation services. |
