Terayon Communication Systems (Nasdaq:TERN) beat analyst revenue and earnings forecasts for the third quarter.

Revenue rose to $79.6 million, 21% up from the second quarter. UBS Warburg had predicted revenue of $74 million.

Pro forma net loss came to $21.2 million or 31 cents loss per share. Analysts had predicted a 33-cent loss per share.

Including a $6.4 million charge for inventory strike-off and cancelled orders, pro forma net loss comes to $27.6 million, or 41 cents per share.

But including investment write-downs and reorganization costs, one-time charges were $11.7 million.

The upside is that Terayon saw capital gains of $51.8 million this quarter after buying back bonds at attractive prices for the company.

Including all one-time charges and revenue, net profit comes to $13.1 million or 19 cents per share.

The company advised that it expects $80 million to $82 million revenue for the fourth quarter.

Based on expected widening of its profit margin and a drop in operating costs Terayon expects to lose a narrower 22 cents to 25 cents per share in Q4.

UBS estimates a 28-cent per share loss, before Terayon's new guideline, and hasn't updated that estimate yet.