SANTA CLARA, Calif. -- Terayon Communication Systems, Inc. (NASDAQ:TERN) , a leading provider of digital video applications and home access solutions, today reported financial results for the quarter and year ended December 31, 2004.

Revenue for the fourth quarter of 2004 was $29.4 million, down 32% compared to $43.0 million for the same quarter a year ago, and a 21% decrease compared to the $37.2 million for the third quarter 2004. Revenue for the 12 months ended December 31, 2004 was $150.5 million, a 12.7% increase compared to $133.5 million for the 12 months ended December 31, 2003.

Net loss for the fourth quarter of 2004 was $7.9 million, or $0.10 per share, compared to a net loss of $6.0 million, or $0.08 per share, for the same quarter a year ago, and a net loss of $13.5 million, or $0.18 per share, for the third quarter of 2004. Net loss for the 12 months ended December 31, 2004 was $36.5 million, or $0.48 per share, compared to a net loss for the 12 months ended December 31, 2003 of $50.4 million, or $0.68 per share.

Digital video networking applications product line revenues were $12.6 million in the fourth quarter of 2004, up 91% compared to $6.6 million in the fourth quarter of 2003 and 17% compared to $10.8 million in the third quarter of 2004. Revenues for the full year 2004 were $37.0 million, up 109% compared to $17.7 million in 2003.

The home access product line had revenues of $13.7 million in the fourth quarter of 2004, compared to $18.5 million in the fourth quarter of 2003 and $19.8 million in the third quarter of 2004. The CMTS product line had revenues of $3.1 million in the fourth quarter of 2004, compared to $17.5 million in the fourth quarter of 2003 and $6.6 million in the third quarter of 2004. As of December 31, 2004, Terayon had $97.7 million in cash, cash equivalents and short-term investments, and $65.1 million in convertible debt due in 2007.

"Our fourth quarter results reflect our decision to focus Terayon on our digital video network applications and home access solutions and to cease investment in future development of our CMTS products. The strong performance of our digital video products during the fourth quarter and 2004 clearly shows why we have moved video to the center of our corporate strategy," said Jerry Chase, Terayon's Chief Executive Officer. "We took big steps in 2004 to strengthen our leadership in digital video networking by working with customers to accelerate their evolution to all-digital networks, expanding the market applicability for our solutions, and launching new and innovative products and functionality. Those actions resulted in a strong financial performance in the fourth quarter and 2004 for digital video networking."

Terayon Communication Systems Inc.