Investment banks warn of Vyyo's loose purse strings - TheStreet

The numbers are dismal: Bank of America (NYSE:BAC) estimates Vyyo (Nasdaq:VYYO) sales this year will total $10 million, but its operating loss will come to $11.3 million. Furthermore, the bank predicts Vyyo will burn about $11 million by the end of this year ($2.2 million to $3 million every quarter), when the cash in its till will total $73 million.

What the analysts reports are predicting, a day after their release, is that the company has no short term expectations and no foreseeable business policy, which is why its rating is left at "Market Perform". In addition they warn against the company's high rate of expenses in Q4, predicted to remain high in 2002.

Davidi Gilo, CEO and temporary CFO of Vyyo, said in a conference call the company intended to announce a strategic reform in order to create value for its shareholders. The company may make its move in the fixed wireless communication market, or somewhere outside it. Analysts report low visibility in that regard, and are waiting for more developments.

"We expect stability before we can go back to the share," says a Bank of America analyst. In Q4 2001 the company posted a five cents pro forma loss per share, while the average Wall Street forecast was for a loss of four cents. Sales exceeded forecasts at $3.3 million, and one-time expenses came to $1.3 million for re-structuring and $218,000 for different compensations related to the share.

The company's gross profit margins in the quarter were 41.5%, higher than the bank's forecast of 30%. They were however offset by high operating expenses of $4.2 million. The investment bank is changing its forecast of profit and loss for 2002, following Q3 reports and the apparent look of things. They are replacing their earlier forecast of $15 million revenues and a loss per share of 11 cents with a $10 million revenue forecast and a predicted loss of 20 cents per share.

The forecasts are lowered due to lousy visibility beyond March, and high expenses.

The bank pins the company's low visibility on its revenues from Worldcom (Nasdaq:WCOM), which contributed 67% of its revenues in Q4. They believe the orders from Worldcom will be few and far between.

Vyyo derives its optimism from the Chinese market. The Bank of America updates China Comm is now using Vyyo's system for the GHz 3.5 frequency in five Chinese cities, and is expecting to lay out its systems in another 30 cities soon. The new contracts are delayed due to the harsh wireless communication sector conditions, though the bank has not yet given up on the fixed wireless communication sector.

"We see no possible catalysts for the share's advancement in the near future," say Goldman Sachs analysts Shimon Levy and Elan Zivotofsky, or in other words there is nothing that could lead the share upwards. They reiterate the Market Perform rating for the share and estimate 70% of the company¿s Q1 revenues will come from the Chinese market. They foresee little or no activity in Latin America or the U.S.