Revenue at Terayon Communication Systems Inc. increased nearly five times, and the company posted its second consecutive quarter of pro forma net income in the second quarter.
Terayon-which makes cable modems and other communications equipment-reported revenue of $92 million in the second quarter, up from $19.1 million a year ago.
Pro forma net income-excluding charges for in-process research and development, amortization of intangible assets related to acquisitions and the cost of certain warrants to purchase common stock-was $4.7 million, or 7 cents per share, compared with a loss of $3.5 million (8 cents) in the same period last year. Terayon reported pro forma net income of $1.9 million, or 3 cents per share, in the first quarter.
Including those second-quarter charges, Terayon would have lost $34.4 million in the period, or 57 cents per share, compared with a loss of $14.6 million (36 cents) in the second quarter last year.
For the six-month period, revenue increased fourfold to $151.4 million, compared with $35 million in the same period in 1999. Pro forma net income for the first half of the year was $6.6 million, or 10 cents per share, compared with a pro forma net loss of $7.7 million (20 cents) in the 1999 period.
Despite the increases, Terayon's stock took a 6 percent hit last Wednesday, falling $4 per share to close at $67.69.
In a conference call with analysts, Terayon president and CEO Zaki Rakib said strong demand for Terayon products was expected to continue. Terayon shipped 271,000 cable modems and 901 headends during the period, bringing its cumulative shipments to 785,000 cable modems and 3,179 headends.
About 66 percent of second-quarter sales were for customer-premises equipment and 34 percent were for headend and/or central-office equipment, the company said.
Terayon also closed on four acquisitions in the period-Raychem Access Network Electronics, Internet Telecom, ComBox Ltd. and Ultracom Communications Holdings Ltd.-for a total of about $250 million in stock.
Rakib said the company is making significant progress toward integrating those acquisitions into its operations. "We continue to concentrate on a growth strategy," he added. "Customers are embracing our product."
Rakib added that response to the company's latest product-the "CherryPicker Ad Splicer," which allows cable operators to insert advertisements in digital programming-has been strong. The Ad Splicer got its first customer during the period, MediaOne Group Inc. (now part of AT & T Broadband).
While Rakib said it would be difficult to predict the size of the market for the Ad Splicer, he added that it was expected to be very successful.
"It's hard to assume the exact amount of dollars this opportunity presents," he said. "We are very confident that this and the technology that is going to be developed will create new markets."
Rakib added that Terayon has delivered and demonstrated the capabilities of the Ad Splicer to several digital-subscriber-line providers, and he expects field tests of the product to begin in the first half of next year, with deployments in the second half.