Aside from not seeing any significance in your use of the term "non-standard S-CDMA," since there is no DOCIS standard for S-CDMA as I write, and TERN's S-CDMA is the only S-CDMA for cable I know of, I'd point out that these acquisitions plainly are apparently intended to work with and enhance their proprietary S-CDMA. I can't see a shift away from the focus TERN has had from it's inception. Cherry is to be incorporated with S-CDMA and the cable telephony technology acquired with acquisition of Telegate is already CDMA. No case, IMHO.
When discussing issues regarding telecommunications, the term "standard" is generally accepted to mean: "something set up and established by authority as a rule for the measure of quantity, weight, extent, value, or quality. . ." (Webster's Ninth Collegiate Dictionary.) It is not a term used by any one manufacturer to lure the public into believing its products have been deemed a standard by themselves. In other words, when referring to S-CDMA as "non-standard" I am saying it does not adhere to the industry standard as set up by CableLabs, the only authority in question when debating what is "standard" or "non-standard."
To your defense of Gilder's credibility, I asked, "The same Gilder who just wrote that TERN's S-CDMA had become an industry standard?"
To which you replied:
Here you've misinterpreted Gilders statement much as you did mine. He indicated S-CDMA has become an industry standard in Asia, nothing more. I think that is largely true.
For the record, let's look at Gilder's exact phrasing:
Every GTR subscriber knows a company that developed CDMA technology that others first claimed was unnecessary and unworkable. The technology proved itself with better handling of data and greater capacity. It excelled in Asia, and was finally adopted as an industry standard. The name of that company, of course, is...Terayon (TERN), now poised to repeat Qualcomm's (QCOM) remarkable success.
When Gilder refers to S-CDMA as an industry standard he may mean a standard somewhere in Asia (and I'd like to know what and where) but the average reader will assume he's referring to a meaningful standard, and most likely one recognized by them, not the National Board of Guangdong Province or some other equally inappropriate body. By publishing the above excerpts on its homepage, Terayon is endorsing the inference that they 1) "developed CDMA technology that others claimed was uncnecessary and unworkable", 2) that "the technology proved itself with better handling of data and greater capacity," 3) that it "excelled in Asia," and 4) "was finally adopted as an industry standard." Combined with Gilder's ending, "...If you failed to place your bets on Qualcomm, you, too, have another chance for a CDMA star, Terayon," it's easy to see how readers would assume this "industry standard" would be one with such significance Terayon could well become another Qualcomm. If I were their lawyers, I'd insist Terayon publish either the entire article or take it down altogether. Frankly, to be on the safe side, I'd insist they take it down. If I were Gilder's advisors, I'd sit him down and run through this article sentence by sentence and explain how he might be considered a first-rate jerk in the face of all the evidence indicating S-CDMA is not going to propel Terayon or anyone else into stardom.
You quote me saying: "If the SEC filings list the company as being focused on S-CDMA products, then that, indeed, has to be their focus. If they've changed directions and haven't changed their story, it's fraud. If the CEO is saying they'll have an S-CDMA-based DOCSIS product by the end of the year and they've not submitted one for testing, it's fraud."
And you responded:
"If they intend to submit a S-CDMA modem for testing by a date, and they fail despite best efforts and/or other extenuating circumstances, it would not be fraud, IMO.
I can only quote TERN's CEO from the CC:
Q: Clarify issue of DOCSIS and S-CDMA being accepted, time line, and how it's limiting US customer base.
A: Refer to CableLabs letter --- proto-type by mid-year and approved by end of year. Make no mistake this is advanced certification that includes S-CDMA. The US is in transition. Penetration is a function of how fast you have DOCSIS. Once we have 1.1, we have opportunity for accelerated penetration. Some cases need proprietary and will move to DOCSIS.
Rakib's recorded words say they'll submit a proto-type by mid-year and receive approval by the end of the year. If there's any chance they will not have a product ready for submission, he needs to make this clear whenever he stands before an audience or is quoted in the press. If you have any questions about Rakib's meaning, please replay the conference call and listen to his tone. He was pounding-the-table serious.
The cold truth is they don't have an S-CDMA product ready for DOCSIS approval. They hope to have it ready by mid-year and based on historical averages in terms of times needed to submit before receiving approval, it could be another year before this happens. It may be never.
I wrote, "If their DOCSIS sales are tied to an OEM model, they need to make that clear."
And you responded:
It seems clear. In short, they say so.
May I refer you back to the CNBC interview with Rakib the day they announced they'd received DOCSIS approval? The anchor asked if the model approved was based on Terayon's own technology and Rakib said it was. This was a blatant lie. If those clips were submitted as evidence in a court of law, he would have some serious explaining to do.
Turning now to your remarks regarding CherryPicker revenues:
I think you've mistaken my meaning here...I'm not breaking out cherrypicker...I'm talking about TERN overall(I got the .19 estimate from Gilders letter, though I suspect analysts estimates were available elsewhere). Nothing new here. Unless otherwise shown, I have to presume the numbers I reported do nothing to break Cherrypicker out as you suggest.
Let me re-post your exact words:
"Reading the press on the competition you provided(thank-you), I'd have to say it is not at all clear that this competition does any more than scratch the surface of what cherrypicker provides...and cherrypicker is already beyond the initial development stage, it's in use and helping to cause Tern's revenues to soar, and their pro-forma profits to become .04 last Q vs an expected pro-forma loss of $.19. Value of SOME kind is causing this to happen, that's for pretty sure I'd say. "
If a loss of .19 was expected and CherryPicker helped bring in a plus .04, what other products might have helped besides CherryPicker? Clearly the expected deficit was based on slowing sales of their proprietary S-CDMA products and whatever "helped" would have to be new products. What besides Imedia's were there?
Responses on the Jan 18 CC indicate Imedia was the only accretive acquisition :
<<<
Q: Sales from Imedia?
A: Not going to report break-down of products. Momentum of CherryPicker picking up.
Q: Top line upside? What drove it? One time vs. on-going customers? New vs. existing?
A: Sales across board were strong. Head-ends are data. Expect to keep this momentum. Use total revenue numbers as reference for future. We won't disclose break-downs. Cherrypickers not broken out. . . .
Q: Sequentially --- Imedia --- is being accretive sooner than you thought, will the others also be earlier than expected?
A: No. Radwiz and Telegate (?) have less synergies. They're in Israel --- dilutive effect not a factor b/c closed in January. By middle of year ---- when we have idea how sales growth in Telegate goes, will know more. We're excited about opportunities (something about VoIP in Europe earlier than expected. . .)
Q: Is it fair to say Imedia will be accretive sooner than expected and it's too early to tell on the others?
A: yes
>>>>
Again, if there wre other products besides CherryPicker that brought TERN's eps from an expected .19 deficit to a plus .04, please let me know.
In one of your posts you quote me saying, " ..but his [Gilder's] analysis would be more credible if he backed it for what it offers and not what he mistakenly thinks it offers."
To which you replied:
Mistaken? Again, nothing has been broken out by me here. Even if it were exactly as you say, fact is, Terayon offers S-CDMA for cable systems and intends to combine some other enabling technologies with it. Gilder backs Terayon for exactly what it offers. He is beating the correct drum of his choosing. There is not a credibility issue in this, IMO- save if he is ultimately wrong about S-CDMA- in which case the man clearly maintains mucho residual credibility in the eyes of countless knowledgeable and intelligent people all of whom would readily admit he was "wrong on that one."
Are you now saying Gilder is backing Terayon for its "enabling technologies" and not for its proprietary S--CDMA products? If so, I need clarity. Is Imedia's CherryPicker an enabling technology for S-CDMA? Does it operate on S-CDMA? If so, does it also operate with other modulation schemes? Who's buying it? Carriers using S-CDMA? If it's the only other product currently shipping --- and S-CDMA proprietary sales are slowing --- is this what Gilder is promoting? If Gilder is indeed promoting Terayon as the next Qualcomm as his newsletter makes patently clear, then how far out is he basing his prediction? To be a success in the North American market, you have to receive DOCSIS approval. We've established Terayon has no DOCSIS products of their own --- and no one challenges the fact they can't make money on the OEM version --- so any DOCSIS hopes hang on what's apparently going to be submitted later in the year. Once submitted, these hopes hang on 1) gaining approval --- no easy task, and 2) having S-CDMA written into future standards. In the meantime, is Gilder hyping Terayon for an "enabling technology", namely CherryPicker? If not, then he's basing his predictions on something he's hoping will materialize at some time in the future. I have no problem with that, but I do have a problem with his insinuations that sales in Asia somehow equate to becoming an "industry standard" and then taking a Kiekegaardian leap by saying Terayon could become the next Qualcomm. It would be much more fair --- and certainly have a grain of credibility --- if he explained the current situation with Terayon's DOCSIS hopes and admitted that in the interim the company would be basing its success on the Imedia acquisition.
I'm trying to address all of your points. You quote me saying, "The same Gilder who admitted TERN couldn't meet Roger's requirements, that Telegate would be their salvation for VoIP --- and yet implied TERN was a CDMA leader?"
To which you respond:
Here you've mixed TDMA with CDMA leaving me feeling you've confused them in an odd way. It's simple. Gilder indicates TERN couldn't supply voice over TDMA for Rodgers. But TERN and TERN alone is putting Telegate S-CDMA together with it's own S-CDMA to create TERN systems offering voice over CDMA modems. Tern is clearly the S-CDMA modem leader- no credibility issue here, IMO- they even make their own chips for them. I don't see how he could correct a thing.
I will have to quote Gilder's exact words as I may have mis-read them. Again, from Terayon's homepage:
...Shaw's success caught the attention of the other great Canadian cable provider, Rogers (RG), which had been using Nortel cable modems from LAN City (Bay). Rogers turned to Terayon for help. Terayon struck two deals: one with Rogers cable for Terayon's cable modem system, and one with Rogers Communications for a joint venture to develop voice over cable technology. Almost immediately, according to Zaki, the Rogers voice partnership confirmed that VoIP for cable was not ready, particularly with TDMA. But Terayon acquired an Israeli cable telephony firm called Telegate that was already using Shlomo's S-CDMA...
I took the above to mean Rogers and Zaki discovered "VoIP for cable was not ready," (pause) "particularly with TDMA." Meaning TDMA wasn't ready since the next phrase leads the reader to assume S-CDMA from Telegate came to the rescue. Gilder continues, "But Terayon acquired an Israeli cable telephony firm called Telegate that was already using Shlomo's S-CDMA. . ." With the implication being that they admitted TDMA wasn't ready and so they turned to Telegate to bring in what was ready: S-CDMA. If Gilder meant to say Terayon didn't have TDMA, wouldn't you assume they (Terayon) would have turned to a company that did have it and not to Telegate, another S-CDMA house? If Gilder is trying to imply Terayon's purchase of Telegate is a solution to Rogers' dilemma, he's definitely not succeeded. Perhaps you could clarify what he's saying.
Moving on, you quote my query, "The same Gilder who crowns TERN the next QCOM without so much as a word about their being knocked out of CableLabs for 1.2 and Adv PHY?"
And you responded:
He DID speak of DOCSIS, but who said TERN has been knocked out of the DOCIS standard, anyway? Gilder indicates they haven't been, and more significantly by far here, I take he's right since a recent post here quoting Cablelabs clearly indicates that they have every intention of including S-CDMA in a future combined DOCIS so long as TERN does build it. You could doubt TERN can build it(maybe they won't!?) and provide evidence relating to the technical possibilities of doing so, but you can't say they are knocked out when Cablelabs itself clearly and plainly is extending the invitation in.
"Who said TERN has been knocked out of DOCSIS?" I've received countless emails from members of the CableLabs community, some whose jobs would be in jeopardy if they lied, saying definitively S-CDMA is not part of 1.2 or DOCSIS HiPHY. If you can find someone who'll go on record saying they're in either, and put it here for all to see, I promise never to bring up the issue again.
My point was that your listed competition for Cherrypicker is in the development stage, while Chrrypicker systems have been in use for some time. Please correct me if I'm wrong.
And for this I apologize. Until your post last night I had no idea it was contributing to revenues with such strength.
. If you'd say Mr. Gilder is a blind pig(I took it you might), then my point is to tell you no, he isn't. But that's your province to decide that issue, I just offered my advice, and unsolicited at that. It's free, take it for what it's worth, but I did mean to steer well.
I would never call Gilder a blind pig --- nor insinuate as much. Blind pigs bump into walls without forethought. Gilder's a bright man and can't use ignorance as an excuse.
To my, "maybe it's Ken Erhart who should be fired for making mistakes no professional journalist would make --- nor a responsible analyst, for that matter. Certainly not someone just named as a consultant to Merrill Lynch and writes for an international publication of Forbes' stature," you responded:
I hope it's clear by now that this needs no further clarification. What mistakes?
I hope I've made it equally clear exactly what mistakes I meant. If I haven't, please tell me where and I'll be happy to respond.
Regards,
Pat |
