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Technology Stocks : COM21 (CMTO) -- Ignore unavailable to you. Want to Upgrade?

To: Jay Fisk who wrote (554)	6/14/1999 3:58:00 AM
From: pat mudge	Read Replies (1) \| Respond to of 2347

After reading Gilder's article on Terayon, I decided to compare their earnings to Com21's and see if the numbers supported their purported superiority. Here's how they stack up: Terayon --- market cap: $891.2 million shares outstanding: 20.7 million float: 3.0 million Per Share: book: 5.32 earnings: -7.69 sales: 3.63 Income: after-tax: -23.4 million sales: 45 million Valuation ratios: Price/Book: 8.11 P/E: NA Price/sales: 11.87 Total Cash: 108.5 million (includes 44.7 million from warrants) Com21 -- market cap: $404.4 million shares outstanding: 21.3 million float: 5.0 million Per Share: book: 5.94 earnings: -.63 sales: 3.38 cash: 5.49 Income after tax: -10.8 sales: 60.3 Valuation Ratios: Price/book: 3.20 Price/earnings: NA Price/sales: 5.61 Total Cash: 60.3 million Considering the fact Terayon's major sales point is their S-CDMA technology, I think it's good to keep in mind they are co-authoring the 1.2 DOCSIS paper with Broadcom and therefore will be required to develop BRCM's technology in addition to their own. The 1.2 standard won't be implemented until some time in 2000 and when it is, it won't be backward compatible with 1.0 or 1.1, unlike 1EEE's 801.14, which would be fully compatible with both. When Terayon says they've kept some of their technology to themselves, they hint it includes voice and tiering and other advances. This may be true, but it's also true none of these are part of 1.2 and therefore won't impact CMTO or anyone else. Terayon is fully aware of the razor's edge they walk as stated in their most recent 10-Q: There are Many Risks Associated with Our Participation in Co-Authoring the DOCSIS 1.2 Specification. In November 1998, CableLabs selected us to co-author a technical specification for DOCSIS 1.2, an enhanced version of the DOCSIS cable modem standard based in part on our S-CDMA technology. Our agreement to co-author the DOCSIS 1.2 specification will require us to contribute some aspects of our S-CDMA technology to a royalty-free intellectual property pool. As a result, any of our competitors who join the DOCSIS intellectual property pool will have access to some aspects of our technology and will not be required to pay us any royalties or other compensation. Further, some of our competitors have been successful in reverse engineering the technology of other companies, and our contribution to the DOCSIS 1.2 intellectual property pool would expose some aspects of our technology to those competitors. If a competitor is able to duplicate the functionality and capabilities of our technology,we could lose some or all of the time-to-market advantage we might otherwise have. CableLabs may select additional authors to contribute to the DOCSIS 1.2 proposal. Any vendors that participate in the drafting process, including us, must contribute any of their technology that to implement the DOCSIS 1.2 specification to the DOCSIS intellectual property pool on a royalty-free basis. If the DOCSIS Certification Board includes our proposal in the DOCSIS 1.2 draft specification, it will then be made available for comment by the organizations that participate in the DOCSIS specification process. The DOCSIS Certification Board may decide not to proceed with our proposal.Further, the comment process may take considerably longer than expected and may delay the publication of a DOCSIS 1.2 standard, currently anticipated to occur in 2000. If our draft proposal is not approved by the DOCSIS Certification Board, we may be unable to develop DOCSIS 1.2-compliant cable modems in a timely fashion or at all. We believe the adoption of DOCSIS 1.2 will result in increased competition in the North American cable modem market. This competition could come from existing competitors or from new competitors who enter the market as a result of the adoption of DOCSIS 1.2. This increased competition is likely to result in lower ASPs of cable modem systems and likely will harm our gross margin. Because our competitors will be able to incorporate some aspects of our technology into their products, our current customers may choose alternate cable modem suppliers or choose to purchase DOCSIS 1.2-compliant cable modems from multiple suppliers. We may be unable to produce DOCSIS 1.2-compliant cable modems more quickly or at lower cost than our competitors. The inclusion of our S-CDMA technology in DOCSIS 1.2 could result in increased competition for the services of our existing employees who have experience with S-CDMA. The loss of these employees to one or morecompetitors could harm our business. DOCSIS standards have not yet been accepted in Europe and Asia. If standards that are not compatible with DOCSIS standards ultimately achieve widespread acceptance outside of the United States and Canada, we could be required to redesign our products for use in those markets. Even if we were able to successfully redesign our products, this would likely delay the deployment of our products in markets outside of the United States and Canada. We Need to Develop New Products. Our future success will depend in part on our ability to develop, introduce and market new products in a timely manner. We must also respond to competitive pressures, evolving industry standards and technological advances. Our current products are not DOCSIS-compliant,and we do not expect to sell our DOCSIS 1.2-compliant products until 2000. As 2000 approaches, existing or potential customers may delay purchases of our current cable modem system in order to purchase systems that comply with the DOCSIS 1.2 standard. In addition, potential new customers could decide to purchase DOCSIS 1.2-compliant products from one or more of our competitors rather than from us. As a result, in the second half of 1999 and early 2000, our product sales may be lower than we anticipate. As 2000 approaches, we may be required to reduce the price of our current products for sales to existing customers. This would harm our operating results and gross margin. It is expected that the DOCSIS 1.2 specifications will be based upon both S-CDMA and advanced TDMA technology. In that event, we will have to incorporate advanced TDMA technology into our DOCSIS 1.2-compliant products. If we are unable to do this effectively, or in a timely manner, we will lose some or all of the time-to-market advantagewe might otherwise have had. >>> Earlier section reveals their customer base isn't as stellar as Gilder claims: We Are Dependent on a Small Number of Customers. Three customers accounted for approximately 63% of our revenues inthe first three months of 1999 and for approximately 62% of our revenues in the first three months of 1998. We believe that a substantial majority of our revenues will continue to be derived from sales to a relatively small number of customers for the foreseeable future. In addition, we believe that sales to these customers will be focused on a small number of projects. The cable industry is undergoing significant consolidation in the United States and internationally, and a limited number of cable operators controls an increasing number of cable systems. As a result, our sales will be largely dependent upon product acceptance by the leading cable operators. Ten cable operators in the United States owned and operated facilities passing approximately 74% of total homes passed in 1997. The timing and size of each customer's order is critical to our operating results. Our major customers are likely to have significant negotiating leverage and may attempt to change the terms, including pricing, on which we do business with them. These customers also may require longer payment terms than we anticipate, which could require us to raise additional capital tomeet our working capital requirements. Our success will depend on our cable modems being widely deployed and our ability to sell to new customers. The Sales Cycle for Our Products Is Lengthy. The sales cycle associated with our products typically is lengthy, often lasting six months to a year. Our customers typically conduct significant technical evaluations of competing technologies prior to the commitment of capital and other resources. In addition, purchasing decisions may be delayed because of our customers'internal budget approval procedures. Sales also generally are subject to customer trials, which typically last three months. Because of the lengthy sales cycle and the large size of customers' orders, if orders forecasted for a specific customer for a particular quarter do not occur in that quarter, our operating results for that quarter could suffer. >>>>> At the end of Q1, Terayon had sold 100,000 cable modems and Com21 had sold over 126,000. TERN doesn't mention head-ends, but CMTO states it's shipped 600 as of the end of March. That's it for tonight. Pat

To: Jay Fisk who wrote (554)	6/14/1999 4:21:00 AM
From: pat mudge	Read Replies (1) \| Respond to of 2347

From the Cisco-@Home tour: home.com

To: Jay Fisk who wrote (554)	6/14/1999 1:31:00 PM
From: pat mudge	Read Replies (1) \| Respond to of 2347

More cable convergence. I'm not sure of CMTO's standing with any of these companies: interactive.wsj.com June 14, 1999 Dow Jones Newswires Telewest Shares Gain On Renewed Three-Way Merger Talk LONDON -- Shares of Telewest Communications PLC (TWSTY) are higher at midday Monday on renewed speculation that it may be one part of a three-way cable merger along with NTL Inc. (NTLI) and Cable & Wireless Communications PLC (CWZ). At around 1130 GMT, Telewest was up 8 pence, or 2.9%, at 28.25 pence, while Cable & Wireless Communications shares were ahead 20 pence, or 3.6%, at 580 pence. U.K. newspaper The Mail on Sunday reported that the three companies are planning to forge a GBP30 billion single cable group to take on British Telecommunications PLC (BTY) and British Sky Broadcasting Group PLC (BSY) in the telephone and pay-TV market. Citing "high ranking officials", the paper also said Deutsche Telekom AG (DT) and France Telecom (FTE) have been invited to take a stake worth up to GBP5.0 billion in the venture. Telewest, Cable & Wireless Communications and NTL declined to comment on the report. But it's already known that Telewest and Cable & Wireless Communications are discussing various corporate options. All three companies are already known to have discussed possible tie-ups. The introduction of international backers could provide the final push needed to get a deal off the ground, the paper said. Such a deal would be the final and biggest step in a series of mergers in the cable industry, which have left the three dominating the business. The move could also involve U.S. software group Microsoft Corp. (MSFT), which has a 29.9% stake in Telewest and 5% of NTL, and is keen to see its software adopted as widely as possible in the emerging digital TV sector, the paper said. The three cable groups are expected to launch digital cable services later this year. These could eventually include interactive services such as Internet access through the TV. The involvement of one or both of the leading European telecoms companies would also mark a new phase in international consolidation in the telephone industry. Deutsche Telekom recently lost out to Olivetti SpA (I.OLV) in a bidding battle to take over Telecom Italia SpA (TI) and is still seeking a route to expand internationally.