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Cable/Video

Vyyo Details Restructuring

In concert with third quarter numbers, Vyyo Inc. (Nasdaq: VYYO) issued more details this week about a plan to close down its Israel operations and consolidate the bulk of its R&D, engineering, and customer support functions in Norcross, Ga.

Vyyo believes the moves will make it more responsive to the needs of its cable customers, the majority of which are based in the U.S. Then again, one MSO that offers some significant potential to Vyyo is StarHub , an operator based in Singapore. (See StarHub Goes Out-of-Band With Vyyo.)

On a conference call this morning with reporters and analysts, Vyyo CEO Wayne Davis said the moves were necessary to accelerate deployments, develop partnerships with other vendors, reduce R&D costs, and position the company to obtain additional funding.

Vyyo ended 2007 with cash, cash equivalents and short-term investments of $12.7 million, compared to $19.2 million as of September 30.

Meanwhile, the company reported losses of $8.5 million, 46 cents per share, for the third quarter, which ended December 31 -- wider than its year-ago losses of $6.5 million (36 cents per share). Its sales for the quarter were $2.3 million, down from $2.6 million in the previous period, but up from $1.7 million a year ago. (See Vyyo Posts Q3.)

Vyyo might need to raise additional funds by the middle of 2008, ThinkEquity LLC analyst Anton Wahlman suggested in a research note issued yesterday.

"We would not at all be surprised if the company puts itself up for sale as a last-resort solution," he wrote.

Last week, details surfaced about Vyyo's restructuring, following the company's decision to shift operations and migrate its manufacturing to contractors in Asia. (See Vyyo Cuts 70+ & Closes Israel Office.)

Yesterday, Vyyo said it expects to reduce roughly 100 management and staff positions, anticipating that the decision will result in annual cost savings of about $20 million. In the end, Vyyo will have 30 to 40 full-time employees.

Davis tells Cable Digital News that the staff reductions and corporate consolidation will let Vyyo reduce its cash burn and position itself for the long haul.

"This allows us to be sustainable as a company so that we match our burn rate to our growth rate," he says. "We're confident that, in time, the industry will have to embrace [UltraBand] to upgrade its HFC. We're very jazzed about the potential that sits in front of us."

Vyyo also confirmed an overarching decision to focus solely on the cable sector and UltraBand, a spectrum overlay system designed to expand an operator's usable spectrum to 3 GHz while roughly doubling the available upstream bandwidth.

Specifically, Davis says Vyyo is in the process of downsizing the wireless and T1 elements of its business and is poring over "strategic alternatives."

As part of its plan, Vyyo hopes to take on a more "consultative sales" approach with cable operators, as it tries to get UltraBand incorporated into future HFC platforms and play a role in cable's next upgrade cycle.

Vyyo noted this week that it's signed a two-year master purchase agreement with a "top five" cable operator for its UltraBand products. Although Vyyo did not name the customer, the most likely candidate is Cox Communications Inc. , which has already approved the use of Vyyo's 3GHz technology in support of business services. Cox declined to comment on the status of its relationship with the spectrum overlay vendor. (See Vyyo Wins Cox, Points to Others .)

Davis acknowledges that there's no minimum purchase commitment tied to the master purchase agreement, but said Vyyo has seen an increase in order for 3GHz passives since the deal was inked. "In our view, this is a significant thing for us," he says.

In November, Vyyo said it was on the cusp of closing on two master purchase agreements. (See Vyyo Seeks 3 GHz Breakthrough.) Davis says the absence of a second deal so far doesn’t mean it won't happen, but that it has taken longer to negotiate and execute.

Vyyo had little new to share regarding its passing of lab testing milestones with Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Charter Communications Inc. . (See Vyyo Gets Foot in Door at Comcast, Charter .) "At this point in time we have not achieved approval," Davis said. "We're continuing to go through the testing process."

As for potential partnerships with other vendors, Davis would only say that those discussions are ongoing and could result in anything from marketing and royalty relationships to strategic investment deals.

Vyyo shares were down 10 cents (5.41%) to $1.75 each in mid-day trading Tuesday.

— Jeff Baumgartner, Site Editor, Cable Digital News

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