AWARE INC. Bedford, Massachusetts Cashing In On Telecom Firms' Need For Speed
Date: 4/12/99
Author: Matthew Benjamin
You can't get much farther from Silicon Valley without leaving the country. Yet a tiny company based in New England is poised to realize the dream of every entrepreneur in that technology mecca: striking it rich on the Internet.
Since 1993, Aware Inc. has worked furiously at perfecting a technology that converts sluggish phone wires into fat data pipes.
Until now the Bedford, Mass.-based company has toiled in relative obscurity. But the growing demand for high-speed Internet access may finally make all that effort worthwhile.
Aware's software and chip architecture are the brains behind a new form of broadband data access called Digital Subscriber Line, or DSL.
''Right now the DSL business, which is something we've been involved with for a very long time, is actually catching some traction,'' said President and CEO Michael Tzannes. ''We're very happy to see that. We've invested a lot of time and money and effort by a lot of people in this company.''
Catching traction is probably a gross understatement.
Last week Bell Atlantic Corp. announced what is the beginning of a major DSL rollout. The company said it will buy $1 billion of telecom switching gear from Northern Telecom Ltd. over the next five years. That equipment will allow it to provide broadband Internet access to more than 8 million households in the Northeast.
Because the chips in those switches will most likely be based on Aware's designs, the company should begin to see a lot of royalty revenue from the deal. And industry forecasts reflect it.
Analysts expect Aware to earn 14 cents a share this year, vs. an 11-cent loss in 1998. Earnings should jump 191% to 32 cents in 2000, First Call says.
Michael Neiberg, an analyst at IMG Baring Furman Selz, sees revenue growing 70% to $20 million this year and 65% to $33 million in 2000. Aware trades as AWRE near 66.
The Bell Atlantic deal is just the start of a nationwide DSL ramp-up. In January SBC Communications Corp., the San Antonio-based Baby Bell, announced plans to roll out DSL service to the majority of its customers in six states, including California and Texas.
Although that plan doesn't involve any Aware-based products - French rival Alcatel S.A. got the nod - it's still a big boost for DSL technology, and for all companies involved in it. All the other Bells have either begun to provide DSL or are gearing up to do so.
Their enthusiasm for DSL, once cold, ''now ranges anywhere from warm to white hot,'' said Jeff Kagan, an independent telecom industry analyst based in Atlanta.
''All of the Bells recognize the importance of providing high-speed data lines to consumers, and some of them understand the urgency of first-mover advantage,'' he added.
Much of that enthusiasm is a reaction to strategies emerging from rival AT&T Corp. The long-distance giant recently announced plans to use its newly acquired cable unit, Tele-Communications Inc., to begin a massive effort to provide fast Internet access over cable lines.
The ultimate prize, of course, is much bigger than just DSL service revenues. As phone, Internet and television technologies converge, there's a rush to be the first high- bandwidth conduit into U.S. homes. That high-speed line may eventually be the key to all those services.
''If (AT&T and TCI) get into the home first, it will be very hard for the local phone companies to unhook them,'' Kagan said.
Switching high-speed data services, he says, is not like switching long-distance service. It's very cumbersome and onerous, involving installations and service trips.
Aware also licenses its DSL technology to Germany's Siemens AG and ST Microelectronics, the world's third-largest maker of telecom chipsets.
Because personal computers and modems must be compatible with DSL to make the technology work, Aware's designs go into those products as well. Modem chips sold by Lucent Technologies Inc. and the U.S. Robotics unit of 3Com Corp. generate more royalties for the company.
Aware earned 3 cents a share in the fourth quarter, up from a loss of 9 cents a year before. Revenue rose 123% to $4 million. For the year, the company lost 11 cents, vs. a 23-cent loss in 1997. Revenue rose 90% to $11.8 million.
Besides Alcatel, Aware's competitors include Orckit Communications, Texas Instruments Inc. and PairGain Technologies Inc.
A more formidable foe, though perhaps further away, is the competing technology of cable modems. Though the market is now wide open, with plenty of room to grow for both technologies, telecom experts expect an eventual knock- down-drag-out battle between the two technologies.
--------------------------------------------------------------------------------
(C) Copyright 1999 Investors Business Daily, Inc.
Metadata: AWRE BEL ALA T LU COMS TI PAIR I/4890 I/4891 I/3574 E/IBD E/SN1 E/NAM E/NAM1 |
