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Cox Can't Save Vyyo's Q1

Vyyo Inc. (Nasdaq: VYYO) will get to sell more 3GHz passive equipment to Cox Communications Inc. , but that good news came with some gloomy earnings numbers reported this morning.

Vyyo's first-quarter revenues fell to $600,000, compared with $2.4 million a year earlier, and losses widened to $11 million, versus $8 million. Losses included a one-time charge of $3.3 million related to some debt financing.

"Because we are beginning to enter the commercial deployment phase of our cable solutions, sales for the first half of the year will be light," explained Vyyo chief financial officer Arik Levi during a call today with reporters and analysts, reiterating what the company said in its fourth-quarter earnings call.

Vyyo did not forecast second-quarter results, noting the "lumpy" nature of sales during this phase of the company's plan.

Despite reporting lower revenues and wider losses, Vyyo officials said business for its UltraBand product line is starting to pick up. That "overlay" technology is designed to widen MSO spectrum to 3 GHz from 750 MHz or 860 MHz today. In addition to supplying headroom for more high-definition television services and bandwidth for Docsis 3.0 channel bonding, Vyyo's technology is designed to boost an operator's upstream capacity.

UltraBand represented about $330,000, or 52 percent, of Vyyo's first-quarter revenues, compared with $200,000 in the first quarter of 2006.

Cox and StarHub of Singapore are Vyyo's primary, announced customers for UltraBand, and the companies relationships with the two "and other cable operators" are "expanding," Vyyo CEO Wayne Davis said during the conference call. (See Vyyo Wins Cox, Points to Others and StarHub Goes Out-of-Band With Vyyo.)

Davis said Cox has extended its commitment for 3GHz passive devices to 10 markets, up from just one. That's good for $2 million in orders from Cox for passive devices, he said, adding that the introduction of the active elements of the 3GHz system are part of "longer-term deployments."

Davis noted that StarHub still plans to begin 3GHz installations in new builds later this year.

He also expressed Vyyo's interest in pursuing agreements with other vendors, but didn't mention possible partners. Several companies, including Aurora Networks Inc. , C-COR Corp. (Nasdaq: CCBL), and Scientific Atlanta , already offer 1GHz overlay technology

"We've recently increased the pace of our discussion with larger vendors who are interested in working with us to help operators speed the deployment of 3GHz UltraBand," said Davis.

Vyyo officials also addressed how the technology stacks up against the "mid-split," a little-used technique that increases the amount of usable cable upstream spectrum.

In most cable systems, the 5MHz to 42MHz swath of spectrum is allocated for the upstream path, but, because of noise and other issues, only about 25 MHz of that is typically usable. A mid-split lets operators use the spectrum in the 42MHz to 108MHz range. But what is gained in terms of clean upstream spectrum is lost in the return path. Because of that tradeoff, operators could couple mid-splits in conjunction with an expansion to 1 GHz or more.

Vyyo argues that its overlay addresses the downstream needs while also expanding the upstream with 200 MHz of usable spectrum.

Because that would require the operator to touch all the active devices on the network, the mid-split "is a very invasive approach," Davis said told Cable Digital News in a briefing at last week's The Cable Show in Las Vegas.

Davis said Vyyo estimates a mid-split to costs 150 percent more than the 3GHz approach, which costs roughly $125 per home passed.

Vyyo stock was down 10 cents (1.4%) at $6.84 in late afternoon trading.

— Jeff Baumgartner, Site Editor, Cable Digital News

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