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Terayon Cuts Staff, Launches Chip Division

Declaring that 2001 will be 'a year of transition and rebuilding,' Terayon
Communication Systems Inc. said it had slashed 13 percent of its work force in
the wake of disappointing fourth-quarter numbers, but the vendor acknowledged
that some of those positions could be made up via the launch of a new chip-set
division.

Speaking during a conference call with reporters Tuesday, Terayon CEO Zaki
Rakib said most of the head-count reduction would come from the company's
cable-modem-development division.

Rakib noted that a number of its partners canceled Data Over Cable Service
Interface Specification equipment purchases during the quarter. Still, Terayon
shipped 193,000 DOCSIS and proprietary cable modems and 438 cable headends
during the period.

He added that Terayon has created a new business unit that will create and
sell advanced broadband chip sets based on interoperable DOCSIS standards. Those
chips will be used in Terayon cable modems and also sold to other cable-modem
vendors, he said.

Rakib added that Terayon had submitted its 'advanced physical layer'
cable-modem and headend prototypes to Cable Television Laboratories Inc.,
including FA-TDMA (frequency division/time-division multiple access) and the
combination of FA-TDMA and Terayon's S-CDMA (synchronous code-division multiple
access) modulation scheme.

CableLabs is currently evaluating a number advanced PHY options for possible
inclusion in future DOCSIS specifications.

Although Terayon has scrapped a new line of customer-premises-equipment
DOCSIS cable modems, the company has no current plans to exit that particular
line of business, Rakib said.

A company spokesman confirmed that Terayon plans to continue manufacturing
and shipping its DOCSIS 1.0-certified 'TeraJet' models. Terayon's '110' cable
modem includes an Ethernet port and its '210' model features
universal-serial-bus support.

Terayon reported a higher-than-expected fourth-quarter pro forma loss of
$50.8 million, or 77 cents per share, down from a profit of $1.2 million (2
cents) in the same-year period. Analysts had expected the company to lose 41
cents per share in the fourth quarter. Terayon said fourth-quarter revenues
surged 63 percent to $62.9 million.