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Cable/Video

Path 1 Takes a Public Chance

While some high-tech companies are struggling to stay on the Nasdaq Stock Exchange, one little company -- Path 1 Network Technologies Inc. (OTC: PNWK; Frankfurt: PNT) -- is aiming to move up the stock market hierarchy.

Right now, the manufacturer of video-over-IP gateways is listed on the OTC Bulletin Board and on the Frankfurt Stock Exchange. But shareholders of the company, which has just 27 on staff, are planning a secondary public offering of equity, based on a split of existing shares and issuance of new ones. Their goal is to get listed on the bigger American Stock Exchange as the first step of an expansion plan.

"Frankly, we want to get the company to the next level, to accelerate our roadmap and build our channels," says CFO John Zavoli.

Turning to the public markets at a time like this will test two things: First, whether the appetite for tech stocks is really solid. While a rally has clearly been underway, some say it's a dead-cat bounce and not a sign of real renewal (see LR Index Led Rally in 1H 2003 and Poll: Optimists Reign).

Path 1's also testing the strength of the IP video market. While most say the segment's growing, its direction is still open to question. One thing: Path 1 specializes in the kind of video transmission that supports broadcast television as well as video-on-demand, putting it in a good position to take advantage of both kinds of service.

Although Path 1 is small, it has a number of partnerships -- including one with Scientific-Atlanta Inc. (NYSE: SFA) -- that have helped it make a name for itself in big MSOs like Cablevision Systems Corp. (NYSE: CVC) and Time Warner Inc. (NYSE: TWX), as well as with movie distributor Dreamworks SKG.

Path 1 has been expanding its roster of channel partners recently, with additions such as Aurora Networks Inc. and Internet Photonics Inc. (see Path 1, Internet Photonics Team Up, and Path 1, Aurora Team on Cable Platform). All of this will need careful management, particularly as behemoth Scientific Atlanta is a competitor as well as a partner.

Path 1's got other competitors of note, including Harmonic Inc. (Nasdaq: HLIT) and Tandberg Television. It faces a raft of smaller companies as well, as it aims at the long-haul, cable MSO, and DSL video sectors.

But with a growing list of impressive customers, sales of $661,000 last quarter (representing 300 percent year-over-year growth), and gross margins that have doubled this year to 46 percent, Path 1 seems ready to take its chances.

— Mary Jander, Senior Editor, Light Reading

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