Com21 Cuts Costs, Seeks Alternatives


As the result of a service-operator spending slowdown that began in the final
quarter of last year, Com21 Inc. has instituted a wide range of cost-cutting
measures and hired an investment firm to explore 'strategic alternatives' that
could result in the sale of the company.

In a conference call with analysts Thursday, president and CEO Craig
Soderquist said a spending slowdown that started in the fourth quarter of last
year spread into the first quarter of 2001, marking consecutive quarterly
revenue declines.

Specifically, Com21 recorded first-quarter revenues of $32.8 million, down 21
percent from the fourth quarter. The company also posted a first-quarter pro
forma net loss of $17.8 million, narrowed from a loss of $21.2 million in the
fourth quarter.

Since December, the cable-modem and broadband-equipment vendor has laid off
about 20 percent of its work force, Soderquist said. According to Com21's latest
10-K filing, the company had 525 full-time employees as of Dec. 31.

Soderquist added that the work-force reductions were necessary to get Com21
through the 'temporary' slowdown, but not enough so that the company couldn't
respond when the economic picture brightens.

Earlier this month, Com21 closed its wireless business unit because it was
doubtful that the company could generate cash for that venture in an acceptable
time frame, Soderquist said.

The company also has a letter of intent on the table for its voice-services
division. That deal is expected to close in a few weeks, although Com21 will
maintain a minority interest.

Furthering the cost-cutting, the Milpitas, Calif.-based company has shuttered
its development center in Maryland.

Com21 said it will take a restructuring charge in the second quarter of $80
million to $85 million, about $2.4 million of that cash-related.

Com21's stock price, which hit a 52-week low of $1.04 April 12, is 'grossly
undervalued,' Soderquist said. In attempt to rectify that, Com21 has retained
investment bank Broadview International LLC to seek strategic alternatives that
could result in the sale of the company.

With equipment margins dropping, he acknowledged that achieving scale remains
vitally important and that the company would entertain sale offers if they met
business and shareholder objectives.

Still, the company is committed to 'leverage our success and go it alone,'
Soderquist said, noting that Com21 is among the top six for Data Over Cable
Service Interface Specification-based cable-modem shipments. Com21 sold 161,000
modems in the first quarter, and 87,000 of those were DOCSIS.