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Technology Stocks : Broadcom (BRCM) -- Ignore unavailable to you. Want to Upgrade?

To: jackmore who wrote (2543)	8/26/1999 8:18:00 AM
From: Kenneth Aird	Read Replies (1) \| Respond to of 6531

Here is an excerpt from the TERN 10Q. I especially noticed the part about other companies potentially being able to reverse engineer their S-CDMA implementation and hire away their engineers. Given that Terayon anticipates continued losses for the forseeable future (and this before DOCSIS 1.2 was delayed) and anticipates potential difficulty in reducing the cost of their subscriber modems to competitive levels, it might be cheaper for BRCM to just buy the company, especially if there are key essential aspects of the implementation not covered by patents and thus not disclosed. 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 is essential 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 more competitors 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.