CIBC Oppenheimer

has downgraded

Vyyo

(Nasdaq:VYYO) from a Buy to a Hold in the wake of the company's profit warning, released two days ago.

The company announced that it will not meet forecasts for its first quarter of 2001. Revenues are expected to fall below $1 million, compared to more than $6 million in revenues during the fourth quarter of 2000. The company had previously expected its Q1 revenues for 2001 to reach $8 million.

Analysts Dale Dfau, Barry Richards and Earl Lum say that the drop in demand for Vyyo's products is apparent in all of the company's markets. The investment house says that the updated forecasts could delay the company's deployment of equipment based on multi-channel multipoint distribution service (MMDS) technology. But add that this would enable the firm to focus on 3.5-gigahertz frequencies, which are used outside of the United States.

Vyyo had more than $127 million in cash at the end of its fourth quarter of 2000. It is expected to have only $105 million in cash by the end of its first quarter of 2001, due to a projected negative cash flow of $22 million in the current quarter, the analysts write.

Oppenheimer believes that the company will continue suffering from a negative cash flow in the coming three quarters.

The analysts point out that in December 2000 Vyyo announced its plans to buy back four million shares. In light of its low share price, the company now intends to increase its buyback volume to 10 million. So far, Vyyo has repurchased 1.7 million shares. The buy back is expected to negatively affect its cash flow.

The analysts believe that the firm's gross profit rate, which in the fourth quarter of 2000 reached 33%, will significantly drop in the first quarter of 2001. The analysts do not think the company will show a gross profit in the first two quarters of 2001.

In view of Vyyo's profit warning, the analysts slash their 2001 revenue forecast from $60 million, to $14 million. The investment house believes that the company will post a loss of $10.3 million in its first quarter of 2001, and that its annual loss will come to $35.3 million. Earnings per share in 2001 are expected to plunge to $1.09, compared with the previous forecast of a loss per share of 0.36 cents.