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Technology Stocks : Terayon - S CDMA player (TERN) -- Ignore unavailable to you. Want to Upgrade?

To: Bobo who wrote (147)	7/8/1999 12:39:00 AM
From: Glenn Petersen	Read Replies (1) \| Respond to of 1658

TERN was Online Investor's Stock of the Day: fnews.yahoo.com Stock of the Day Jul 07, 1999 Terayon: Cable Modem Biz Booms As the era of broadband moves toward mainstream reality, companies catering to this leap in Internet access speed are poised to reap a windfall. One such company is Terayon Communication Systems (Nasdaq:TERN - news) , which makes broadband cable infrastructure equipment used for high-speed data and voice communications. The stock has nearly doubled since we first profiled it in February. Terayon's advance has been part of a general market infatuation with anything broadband, but there have also been several recent developments with this company that solidify its opportunity in the blossoming data and voice-over-cable market. Terayon does appear to be parked in front of an explosive market opportunity. The markets for high-speed data (e.g., cable Internet access) and voice (Internet protocol telephony) communications are in their infancy now, but the combined AT&T/TCI (NYSE:T - news) and @Home (Nasdaq:ATHM - news) are leading the industry in rapidly deploying broadband communications services across the country. Accessing the web through regular phone lines is like trying to suck an ocean through a drinking straw. Cable Internet access, one of several broadband technologies, is more like a fire hose. Using the existing coax cable, 50 to 250 times as much data can gush into your PC per second, turning it into a rich multimedia experience instead of what many now complain is the World Wide Wait. A graphic that now takes 30 seconds to download through a dial-up modem could take less than a second with cable modems. A full-motion video clip that might take 5 minutes now could load in just a few seconds. There is almost no doubt broadband Internet access will be a huge hit, and cable appears to have an early lead in competing with other technologies such as DSL (Digital Subscriber Line service, being rolled out by many of the Baby Bells). In addition to cable modems that give PCs Internet access, there are new digital set-top boxes that will not only deliver cable television programming with higher quality video, but also high-speed Internet integration, telephony and a variety of interactive services including on-demand audio and video...in surround sound, if you so desire. Terayon systems include not only the cable modem installed in a subscriber's home, but also the head-end equipment (hardware and software) installed in a cable company's control center. Terayon has an installed base of 650 head-end units, giving it 7.5 million homes passed. The head-end base is obviously a linchpin to future modem sales, so growth in head-end sales is one of the metrics investors can use to gauge Terayon's potential at this early stage of the digital cable era. Terayon went public last August at $13 and topped $50 in January, but a secondary stock offering increased the total shares outstanding by more than 20% and caused Terayon to pull back as low as $25.75. Now the recent awareness of a coming broadband revolution along with some positive events for Terayon have lifted it to $56.88 as of Tuesday's close. In recent months Terayon has won large contracts to supply cable modems and headend equipment to Rogers Cablesystems, Canada's largest cable operator, and UPC, a huge European cable company. Because the market for advanced cable communications is so young, Terayon isn't exactly home free. It is still racking up pretty hefty losses, losing $23 million ($1.68 per share) last year on revenues of $32 million. Revenues are expected to more than double this year, but the consensus is for a loss of $0.77 per share. A break into profitability is anticipated in 2000. Even once the market blossoms and Terayon turns that red ink to black, investors should be aware that this business of cable equipment is driven by big orders from cable system operators, so it tends to be very lumpy from quarter to quarter. Nonetheless, the market for broadband cable equipment offers tremendous opportunity for growth, and Terayon appears well positioned to capitalize. - James Hale The Online Investor