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To: Charlie Smith who wrote (1999)	3/27/2000 6:48:00 PM
From: pat mudge	Respond to of 2347

It's a start: an article in Israel's Business Arena, with a mention of Ultracom and an interesting comment on one of TERN's earlier acquisitions, Internet Telecom: globes.co.il <<<< Wednesday, Mar 15, 2000 Sun-Thu at 18:00 (GMT+2) High Tech News Terayon Buys Fourth Israeli Company, Internet Telecom, for $37 Mln By Efi Landau US group Terayon, set up by Israelis, has signed an agreement to buy the assets of Israeli company Internet Telecom, in a $37 million share swap deal defined as asset acquisition. The deal will take effect in the second quarter of the present year. Internet Telecom provides voice-over-IP (VOIP) technologies and systems. This is the fourth Israeli company purchased by Terayon in the last six months. Brothers Zaki and Shlomo Rakib set up Terayon. "Globes" has learnt that Terayon is negotiating to buy Israeli company Ultracom in a $60-70 million share swap deal. Ultracom develops solutions data and telephony transmission over cable infrastructure. It was set up in 1996 by Orckit and by venture capital funds Jerusalem Venture Partners, Gemini, Star and Mofet. Software engineers who came to Israel from CIS countries set up Internet Telecom. The company assembled a package of VOIP systems and technologies. Prior to its sale to Terayon, the company's ownership structure was as follows: founders Dmitry Goroshevesky and Sofia Bobkof had 40% of the shares between them; company employees had 12%, and the remaining shares were held by about 20 private investors from Israel and the US. Goroshevesky will not continue managing the company within Terayon, but will become a senior executive in the group. According to Goroshevesky, venture capital funds had refused to invest in the company because they had no faith in its technology. In the last three months, Terayon bought three Israeli companies. In October 1999 it paid $100 million for Telegate, which develops cable telephony modems. In the same month, Terayon also bought RADWiz of the RAD group for $50 million. In January Terayon announced it had bought Combox for $100 million, but the deal has yet to be finalized. Internet Telecom developed the VOIP technology used by Israeli company DeltaThree in deploying the first and largest Internet and Internet protocol-based telephony network in the world. At their inception, the two Israeli companies were under joint ownership. Later on, they became two separate companies, software developer Internet Telecom and operator DeltaThree. RSL.com, Ronal Lauder's communications company, acquired full ownership of DeltaThree. Internet Telecom initiated a project with Bezeq for developing a joint double-interface switch that may be used for ordinary telephony and Internet telephony. The switch will be based on STSC/IC, a product developed by Internet Telecom. Internet Telecom is carrying out another project in Israel, together with cable modem company GadLine, Terayon's rival. This project is also the first of its kind, involving the development of VOIP telephony solutions for cable modems. The solutions will enable cable companies to compete with telephony companies without having to deploy costly infrastructure of circuit switches, such as Bezeq's. Prototypes of the new products are already operated by customers, ahead of beta stage tests. The agreement with Terayon includes clauses providing for the continuation of Internet Telecom's joint project with GadLine. The clauses extended the negotiations with Terayon by several months. "We can move ahead on the IP front, but not at GadLine's expense," said Daniel Oleiski, vice-president and general manager of Terayon's broadband voice group. "We're not going to benefit at their expense, and we're not heading in the same direction". Following the acquisition of the Israeli companies, Terayon went through a re-organization process, setting up four separate divisions whose managers also hold the title of vice president. The broadband division headed by Oleiski includes the former Telegate. Following the acquisition of Internet Telecom, Terayon announced: The acquisition of Internet Telecom is a key step in Terayon's strategy to assemble complementary solutions for delivery of broadband voice, data and video over a variety of media - cable, DSL, and satellite. Internet Telecom's voice-over-IP product strength complements Terayon's current broadband voice product line". According to Terayon, Internet Telecom's solutions complement the circuit switching method on which the group's voice products are based. Terayon added that it was expecting the move to expedite delivery of VOIP systems later this year. Published by Israel's Business Arena on 14 March, 2000 >>>>>>

To: Charlie Smith who wrote (1999)	3/31/2000 11:22:00 AM
From: pat mudge	Read Replies (1) \| Respond to of 2347

An update on Terayon's revenue recognition from Q4: freeedgar.com In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 provides guidance on the recognition, presentation and disclosure of revenue in the financial statements of public companies. The accounting profession is currently exploring practical means of implementing the guidelines established by SAB 101. To the extent that SAB 101 is applicable to us, we will be required to change our revenue recognition policy. Changes in our revenue recognition polices will be reported as a change in accounting principle in the second quarter ended June 30, 2000. The change in accounting principle will not result in any restatement of prior periods but will result in a cumulative adjustment in the second quarter to reflect the deferral of revenue previously recognized for shipments that did not meet the revenue recognition criteria established by SAB 101. Any such revenue deferred will be subsequently recognized in the period in which the revenue recognition criteria are met. Revenue for all shipments occurring after April 1, 2000 will be recognized based on the criteria established by SAB 101. We currently cannot determine what effect, if any, that SAB 101 will have on our financial statements. Management believes that SAB 101 will not affect the underlying strength or weakness of our business operations as measured by the dollar value of our product shipments and cash flows.