Terayon 1Q Revenue Suffers


Terayon Communication Systems Inc. didn't fare much better than its other
cable-vendor peers in the first quarter, posting a 61 percent revenue drop and
widening losses.

The Santa Clara, Calif.-based maker of cable-modem and video gear took in
$22.3 million in revenue for the quarter, down significantly from the $57.2
million posted in the first quarter of 2002.

Fueled by a $3.2 million restructuring charge, its net loss rose to $24
million (33 cents per share) compared with $4.1 million in the prior first

Still, the company's Data Over Cable Service Interface Specification product
lines did add some light to its otherwise gloomy quarter.

Orders from four of the top five U.S. MSOs for Terayon's DOCSIS 2.0-certified
"Terajet 715" modems grew, with 228,000 units shipped the first quarter compared
with 156,000 in the fourth quarter. Total modem shipments were up 20 percent
from the previous quarter, totaling 261,000 units.

On the cable-modem-termination-system front, four of the top five MSOs are
either testing or trailing Terayon's DOCSIS 2.0-qualified "Bluewave 3500," and
one of the cablers has decided to go forward with a full DOCSIS 2.0 deployment,
according to Terayon CEO Zaki Rakib.

"This is a significant achievement for Terayon, and we will provide further
details on this MSO and the deployment in the near future," he said during a
Wednesday conference call.

The picture was not so bright for Terayon's video business. While it gained a
key "CherryPicker" digital-video-controller deployment with Time Warner Cable in
its New York system, overall, the video side of the house pulled in just $2.9
million. That is a 53 percent drop from the fourth quarter's $6.2 million.

Terayon blamed the drop on seasonality, capital-expenditure declines among
cable customers and increased competition.

However, Terayon is "starting to see signs of increased MSO spending," chief
financial officer Art Taylor said.

"We are optimistic that revenues for this product line will increase to
approximately $4 million in the second quarter of 2003, or in line with the
average of the last two quarters," Taylor added.