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Technology Stocks : Harmonic Lightwaves (HLIT) -- Ignore unavailable to you. Want to Upgrade?

To: BillyG who wrote (3233)	1/20/2000 6:54:00 PM
From: ShenValleyBill	Read Replies (1) \| Respond to of 4134

The Telewest news was reported here yesterday. The following is from Forbes and brings out some interesting points about the lack of adoption of open standards classifications in the U.S. VOD should be the start of some good contract wins for HLIT. Video-on-demand now in sight January 19, 2000 One Week View Video-on-demand now in sight By Charles Dubow NEW YORK. 4:30 PM EST-This time of year, the idea of being able to rent a movie without having to venture outside to the nearest video store in the cold is particularly appealing. But as you sit there by the fire, what if you could rent any movie, from any studio, of any genre, with just a few clicks of your remote control? Would you do it? You bet you would. Video-on-demand (VOD) has the potential to become one of broadband?s killer apps. Who wouldn?t want to download Casablanca or The Godfather whenever you felt like it? That?s the bet U.K. cable company Telewest (nasdaq: TWSTY) is making by announcing today that it will soon be offering VOD capabilities to more than 300,000 homes in Britain. This will be the largest rollout of standards-based VOD in the world and the first time since the late '80s when everyone from Baby Bells to Time Warner (nasdaq: TWX) frittered away billions and failed to deliver any real products. The 300,000 British homes, while on the cutting edge of technology, are a drop in the cable bucket. VOD has yet to be deployed in any meaningful way. The reasons are that it requires not only cable operators to purchase and install expensive equipment in their headends but subscribers to have an expensive digital set-top box. Currently, the cable operators purchase the boxes directly from the producer and then have subscribers pay off the cost of the box over time. Because the new digital boxes that have been introduced so far cost several hundred dollars--much more than analog or existing digital boxes--it means that both the cable companies and the subscribers will incur extra cost to have them. While there are certainly many subscribers who would be interested in being able to access such applications as VOD, because the technology is still so young there are few hard numbers yet to suggest just how many subscribers would actually be willing to pay for it. Moreover, to date there has been considerable hesitation about making such a commitment because of the concern that, like the PC industry, technology is changing so quickly that new equipment and boxes could become obsolete before the cable companies are able to recoup their investments. To help allay these concerns it is critical that the cost of the technology come down or be easily upgradeable. That?s why Telewest turned to Harmonics Inc. (nasdaq: HLIT), a Sunnyvale, Calif.-based digital and fiber optics systems company, to provide open-standards broadband delivery solutions to provide VOD. "We concentrate on giving cable companies the tools to offer a mix of services," says Robin Dickson, CFO at Harmonics. "Because of open standards we can give them exactly what we want and we don?t need to build special proprietary solutions which are more expensive." Harmonics is the first company to apply DWDM (dense wave division multiplexing) solutions to cable instead of telephony. DWDM splits a light wave into separate colors and then sends these separate light waves onto a single strand of fiber optic cable. This allows the cable to dramatically increase the downstream and upstream bandwidth capacity of hybrid fiber-coaxial (HFC) networks for full broadband delivery of two-way communications, such as telephony, Internet access and video-on-demand. In other words, if broadband is a tunnel, DWDM makes traffic flow faster both ways. Harmonics announced its fourth-quarter earnings today with record net sales of $63.3 million, up 134% from $27.1 million for the same period last year. Dickson points out that the UK is in the forefront in digital terrestrial and cable deployment so it?s not surprising to us that demand there should be greater. Most of Europe has adopted the open standards specifications, unlike the two major set-top systems makers in the U.S.--General Instrument (nyse: GIC), now owned by Motorola (nyse: MOT), and Scientific-Atlanta (nyse: SFA). This is not to say that General Iinstrument (GI) or Scientific-Atlanta (SA) don?t want to offer VOD. They do, but the economics of the situation, due to the proprietary nature of their systems, forces them to move more slowly. "It would be possible to create a hybrid solution with these two companies," says Dickson. "But it would not only be as elegant; it would be more expensive." Working on the theory of having the mountain come to Mohammed, it is in the best interest of GI and SA to maintain their independence. They have the dominant marketshare, in the U.S. at least, and the solid relationships with the cable companies to justify this arrogance. The question then becomes how long the cable companies will be willing to work with more expensive solutions providers if everyone else is moving to open standards. The whole point of open standards is that we can supply the cable companies with what they want," says Dickson. "Our standards-based platform works seamlessly with DVB (digital video broadcast)-compliant products from vendors as video servers from nCUBE or SeaChange (nasdaq: SEAC), or conditional access sytems from NagraVision. It allows cable companies to choose best of breed for the best possible price and pass those savings along to their subscribers." top