Terayon - S CDMA player (TERN) Message Board

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Technology Stocks : Terayon - S CDMA player (TERN)

TERN 18.48

+1.2%

Nov 7 9:30 AM EST

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To: Pluvia who wrote (449)	4/11/2000 8:07:00 PM
From: arun gera	Read Replies (1) of 1658

Something Does Not Seem Kosher I have a small long position in Terayon. All I am trying to do is figure out the truth. The CEO was not very forthcoming about correspondence with Cablelabs. We all know that there may be some confidential information involved and need not be told. But to complteely shut up on the issue raised my suspicion. The cease and desist letter in isolation does not seem that implicating. It is possible that the statement by an analyst claiming S-CDMA will be included in the next Docsis standard could have incited it. Can anybody check on the dates for the statement by the analyst and the letter from Cablelabs? The margin issue is not very crucial. A net margin of 35 percent is OK at this stage of commercialization. After all the economy of scale may not have been reached. And pricing pressure is out there. May want to check Broadcom's net margin at the same level of revenue.(May not be an apple to apple comparison, as Broadcom sells chips and is essentially fabless). Regarding sales by insiders, it is no more suspicious than other companies. Insiders will sell whenever the stock price is high enough and they have a window to sell. And why not sell your current years quota if you are going to get more options around the corner. And if the market has given you a gift by valuing your company at an incredible amount. TERN was not the only company that saw a four to five fold increase in stock price in the period from Nov to Feb. Dozens of tech companies did. And their insiders must have sold. I will be more suspicious of insiders if they sell even when the price is low. What I do like about Terayon - they have been aggressively selling to a large number of customers. The selling practices and issuing warrants is fishy, but no customer will buy TERN products if they do not work and especially the headends. No Cable operator is going to risk committing to a headend because TERN is giving discounts on modems. However, it is possible that the warrant sweet deal could have inflated margins.That would be something to worry about. Like all companies consolidating in a market with acquisitions, all the bad numbers will be hidden or written off in in-process R&D acquisition related costs, goodwill etc. A good example of that is LHSP. It is impossible to say how good TERN numbers are in terms of profitably. Just assume that they are worse than the company puts out. But that does not mean TERN will not grow or have more revenues. But that it may not be as profitable as a shareholder imagines. Obviously that will ultimately affect its valuation. Arun

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