Terayon Communication Systems (Nasdaq:TERN) yesterday announced 100 layoffs. It also took the opportunity to firmly deny intentions to close down Telgate, a startup it bought in October 2000 for $250 million in stock.
The company fired people from its U.S. facility, and 20 out of the 160 people it employs in its Azrieli Towers offices in Tel Aviv.
A spokesperson said the moves are part of a general streamlining effort, but ¿ apropos Telgate ¿ that there is no intention of closing any divisions.
She said Terayon is streamlining its marketing division, which had burgeoned as the company bought no less than nine startups during the last two years.
Terayon, headed by CEO Zaki Rakib, develops modems for cable communications. It expanded through acquisitions made during Wall Street's heyday, when its share skyrocketed to almost $300. Its goal was to provide connections for broadband networks for all the types of communication, including data, video, and sound through cable modems, DSL and satellite networks.
Telgate was the second company Terayon acquired, and the most expensive. Telgate has developed a solution for voice transport on cable modems.
Terayon points out that in spite of current difficulties in selling voice solutions, Telgate still managed to sign a major contract in Germany. Also, demand for its products in South America, where it is considered a leader in its field, remains very high. Terayon's second-half revenues were $65.7 million and its loss came to $62.5 million.
It would not surprise if Terayon decided to sell some of its divisions after being forced to write down their book value by $0.5 billion.
Disappointing Q1 2001 results and its charges set Terayon stock crashing to $5, 96% below its peak.
Since May its stock has rallied, entering the list of highest leapers of the last six months. Last Friday the share traded at $8.5, 110% above its price as the year began.
The rises are not due to Terayon's recent acquisitions but to its traditional cable modem activity.
A month ago the company announced its technology received the global DOCSIS standard for data transfer via cable modems. This opens the door for Terayon into the American market, where it had not been active so far. Most of its sales were to East Asia, where CDMA transmission is used, as opposed to the U.S. that uses TDMA.
Lehman Brothers (NYSE:LEH) analysts say receiving the standard may increase Terayon's sales in 2002 by 10% to 20%, which translates to revenues of $10 million.