Terayon Pulls Plug on CMTS Development

Slow cable-modem-termination-system sales have forced Terayon Communication Systems Inc. to announce that it will cease investment in future development of that product line.

The vendor said it remains committed to working with its CMTS customers to ensure that customer-support requirements are met.

"Despite Terayon's undisputed technology leadership in the DOCSIS 2.0 [Data Over Cable Service Interface Specification] CMTS market, we have been unable to successfully translate that into a profitable CMTS market-leadership position," Terayon CEO Jerry Chase said in a prepared statement.

"After careful evaluation of Terayon's overall product portfolio and strategy, we have decided to cease further investment in our CMTS product line and halt development on future hardware upgrades,” he added. “We intend to work with existing customers to create agreeable support plans and minimize disruption."

Chase continued, "These changes do not alter our vision for the company. Terayon continues to provide broadband solutions for video, voice and data through its existing digital-video and subscriber product lines, and we will leverage our headend intellectual property through our advanced technology group as market opportunities arise in the future."

The slow CMTS sales dragged down Terayon’s third-quarter-2004 numbers.

The company posted revenue of $37.2 million, down 1% from $37.6 million in the year-ago period and down 13% from $42.8 million in the second quarter of 2004.

The vendor’s net loss was $13.5 million, or $0.18 per share, versus $7.2 million ($0.10) in the third quarter of 2003 and $4.9 million ($0.06) in the second quarter of 2004.

The third-quarter-2004 results included an inventory charge of $7.3 million, primarily related to a write-down of excess CMTS inventory, and a charge of $1.4 million related to an executive-separation payment.

“We are disappointed by our weak CMTS sales, which reflect slower deployments by existing customers and our ongoing challenge in winning new accounts,” Chase said.