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Cable/Video

Vyyo Gets Foot in Door at Comcast, Charter

Although Cox Communications Inc. and StarHub remain flagship customers for Vyyo Inc. (Nasdaq: VYYO), the vendor has passed important testing milestones with two other MSOs -- Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Charter Communications Inc. .

Vyyo CEO Wayne Davis, the former chief technology officer at Charter, revealed those details Monday morning during the company's second-quarter conference call. (See Vyyo Q2 Revenues Dip, Losses Narrow .)

Comcast, he said, has conducted lab trials of Vyyo's UltraBand system, an overlay that boosts cable bandwidth to 3 GHz. Charter, meanwhile, has conducted tests of UltraBand, as well as Vyyo's T1-over-HFC product for commercial cable services.

Vyyo did not indicate when those tests might turn into field tests or deployments, but the vendor indicated that lab tests are important first steps with those MSOs and mark a "big event" for the Norcross, Ga., company.

"Cable operators don't have the luxury of wasting time in the lab," said Davis. "They will only bring in those [vendors] that are relevant to their strategies."

Davis also confirmed Vyyo has purchase orders in for 3 GHz "passives" from Cox for systems passing a total of 5.5 million homes combined. Vyyo is also starting to receive requests for "node designs," which represent a step toward deployment of the full UltraBand system, according to Davis. The full overlay also requires active components.

UltraBand aims to double a cable operator's downstream capacity and quadruple upstream bandwidth, but Davis said Vyyo's overlay could help MSOs in the nearer-term by building room to accommodate an expanding menu of high-definition television (HDTV) channels, and to meet HD competition being spurred by DirecTV Group Inc. (NYSE: DTV).

In a sense, Vyyo's bandwidth overlay approach competes with other tactics MSOs can tap to get more out of their available bandwidth, including switched digital video, node splits, and a move to MPEG-4 compression. Vyyo also competes with Scientific Atlanta , C-COR Corp. (Nasdaq: CCBL), and other vendors that offer gear that expands spectrum to 1 GHz.

Operators might also consider a "mid-split," a technique that expands upstream capacity by taking some away from the downstream. But that tactic remains merely an "intellectual discussion," according to Davis.

While there remains a significant timeframe gap between product orders and when Vyyo can recognize those revenues -- currently about three to six months -- the company did offer some detail on revenue expectations on a per-node basis for the UltraBand overlay.

When the necessary active and passive elements are factored in, Davis tags the revenue opportunity at $48,750 per node. He said the average selling price for each passive is $35, while active components sell for about $850 each. He also estimated there are 140,000 nodes in the U.S. alone.

"That's a $6.825 billion opportunity in the Unites States," ThinkEquity LLC analyst Anton Wahlman explained in a research note distributed Monday. "Revenue recognition at Cox has just started, however, and it is minimal and could lag several quarters, in our opinion."

Although there are indications that some large operators are looking to adopt Vyyo's technology, with Vyyo possibly seeing a significant revenue ramp in 2008 and beyond, revenue recognition rules contributed to Wahlman's decision to reduce more optimistic 2007 and 2008 revenue estimates from $24 million and $85 million, respectively, to $13 million and $61 million.

However, Wahlman maintained his 12-month price target of $10. Vyyo shares were trading at $5.99 each, down 59 cents or 8.97 percent, in early afternoon trading Monday.

— Jeff Baumgartner, Site Editor, Cable Digital News

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hans1550 12/5/2012 | 3:04:06 PM
re: Vyyo Gets Foot in Door at Comcast, Charter Why is Lightreading covering this small and loss making outfit?

According to Yahoo!Finance:
2006: Revenue 8M$, Net LOSS 29M$
2005: Revenue 2.4M$, net Loss 38M$

How serious do you have to be taken, when making hardly any revenue (they were founeded 8 years ago in 1999) and are still making huge losses? But getting a lot of coverage at Lightreading.

Hans

Jeff Baumgartner 12/5/2012 | 3:04:06 PM
re: Vyyo Gets Foot in Door at Comcast, Charter Can't speak for the sponsorship end, but when a company mentions in a conference call that it has secured trials with the No. 1 and No. 4 cable MSOs in the U.S., then it's worth mentioning. They are also right in the middle of the bandwidth discussion, an important topic for cable if you haven't been paying attention. They also disclosed some layoffs recently, and we covered that, too, so I'd say we've been balanced in reporting the good with the bad.
junkie 12/5/2012 | 3:04:03 PM
re: Vyyo Gets Foot in Door at Comcast, Charter So how much bandwidth can you actually get from 3 giga hz?

Can it beat Fios?

Forget Vyyo. If they can do it, anybody can - the real question is, what can cable do with that increase?
Jeff Baumgartner 12/5/2012 | 3:04:02 PM
re: Vyyo Gets Foot in Door at Comcast, Charter Many cable systems are built to 750 MHz or 860 GHz. While 1 GHz systems tout downstream capacity, Vyyo continues to talk about the upstream implications for a move to 3GHz...handy for upstream channel bonding. Time will tell what ops can do with such an increase, but channels for HDTV and Docsis 3.0 are the first that come to mind.
NetworkMercenary 12/5/2012 | 3:04:00 PM
re: Vyyo Gets Foot in Door at Comcast, Charter There are many things that can be done with that bandwidth, such as symmetrical services (data-based or T1/PRI based). According to their website Vyyo also offers a T1 product that rides on the cable spectrum. Per Vertical Systems Group, the T1/PRI market is 13.7B nationally. This represents a lucrative opportunity for the MSO's if they leverage this new spectrum. With the advent of the MEF, the growth in business Ethernet will drive higher symmetrical speeds, pulling that revenue from the frame and ATM connections in the future. The MSO has much more coax in the business districts than it has fiber, so leveraging that coax like the telco's have leveraged DSL/copper is a smart use of their existing network.

The 1GHz strategy only focuses on one product service...residential data. Even with DOCSIS 3.0 though, symmetrical data services can't be had, as there is such a short supply of upstream bandwidth. The 3GHz product is the product that will be the enable for the MSO to compete with Fios and the like in the future. 1GHz just won't cut it.
NetworkMercenary 12/5/2012 | 3:03:59 PM
re: Vyyo Gets Foot in Door at Comcast, Charter Sorry...not just one product does 1GHz focus, but 2...downstream DOCSIS 3.0 channel bonding and video services with the broadcast nature and downstream bandwidth requirement...my mistake there :)
Jeff Baumgartner 12/5/2012 | 3:03:57 PM
re: Vyyo Gets Foot in Door at Comcast, Charter Hello Hans,
I can tell you that there is no coincidence, as we try to analyze all publicly held companies that we cover when the report earnings. If there is news that emerges from the earnings call beyond the numbers, we'll likely follow up on that. Again, the fact that Comcast and Charter are doing trials would appear to fit the bill. But we'll have to see whether those trials turn into something that help Vyyo become less pathetic, particularly in your eyes. As for those great companies you're speaking of that deserve more attention, I'd be interested to hear who they might be.

hans1550 12/5/2012 | 3:03:57 PM
re: Vyyo Gets Foot in Door at Comcast, Charter Hi Jeff

Have had some time to do research on Vyyo. I understand why they are interesting to the Lightreading audience: Their founders have been very succesful in the past (DSP Communications sold to Intel). Nothing against them.

However, it still seems that Lightreading is getting less and less objective on their coverage. Hope you guys take notice of that.

All the best, Hans

hans1550 12/5/2012 | 3:03:57 PM
re: Vyyo Gets Foot in Door at Comcast, Charter Hi Jeff,

Thanks for your reply. Well, I can speak on the sponsorship end (google): they have sponsored two webinars in the past two years.

Now I want to ask you again: coincidence?

The reason I bring this up is the follwing: Lightreading is seen by many as a good and independent source of news.But lately, that independence seems to have gone. There are many great compaies out there that do not get coverage, whereas a pathetic company like Vyyo (Rev: 8M$, Losses: 29M$; Are they shipping 100$ bills?) get so much attention.

Hans
Michael Harris 12/5/2012 | 3:03:56 PM
re: Vyyo Gets Foot in Door at Comcast, Charter Each 6 MHz can deliver up to 38 Mbps for digital video or data. Do the math. :) 3 GHz would offer a massive pipe.
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