Broadband Week Direct

Today's report from Web Editor Susan Rush

• The Grim Reaper visits telecoms

• DBS to fully disclose SVOD hard drive requirements

• Financials: TiVo up, Concurrent down

• Microtune cheers hearing results as jury trial
with Broadcom nears

• Cable vet Tinberg dead at age 51

• Verizon opens the online floodgates in Watertown

• Wave7 snags funding

• Broadband briefs

The Grim Reaper visits telecoms

What a way to end the week. Riverstone Networks Inc., ADC, Time Warner Telecom and Netro Corp. have announced staff cut plans.

Riverstone cuts deep
Riverstone Networks Inc. plans to reduce its staff by roughly 30 percent. The company expects revenue for the second quarter ending Aug. 31 to be between $10 million and $15 million. In June Riverstone predicted sales would be flat based on the first quarter's $30.1 million revenue number.

The revised estimate falls well below analysts’ on average revenue estimate of $30.08 million, according to Thomson First Call. Riverstone expects the restructuring to save $7 million per quarter beginning in the third quarter of the current fiscal year.

In addition to the job cuts, Riverstone plans to cast a wider net to attract customers. The company will look for business outside of its traditional telecom markets, including federal and cable.

ADC sees future reductions
After watching its year-over-year revenue plummet 57 percent from $547.5 million to $235.1 million in the third quarter, ADC expects to further reduce its work force.

The company has yet to determine the number of employees that it will let go during the fourth quarter, but said during the first three quarters of the year, it has reduced its headcount by 25 percent.

In the third quarter, ADC reported a net loss of $629.1 million, or 71 cents a share. In the year earlier period the broadband company posted a net loss of $57.8 million. ADC's Broadband Infrastructure and Access unit experienced weakened sales during the quarter. The unit posted revenue of $156 million, down from the $329 million recorded in the third quarter 2001.

Looking ahead to the fourth quarter, ADC expects to post revenue of roughly $200 million, but warns that forecasting in this economic environment remains difficult.

Time Warner Telecom eyes profitability
With its eye on profitability, Time Warner Telecom Inc. is cutting its employee roster by 230. The cuts will save between $13 million and $15 million a year beginning in the fourth quarter.

Time Warner Telecom posted free cash flow results for the first six months of 2002, and says the streamlining will help maximize its free cash flow. The company plans to continue to evaluate its operations for ways to further reduce costs and optimize operating efficiencies.

The company had $324 million in cash and equivalents as of June 30.

Netro trims by 250
Fixed broadband wireless systems provider Netro Corp. is taking steps to bring its expenses in line with demand. The company plans to reduce its staff by 250 and write-down certain fixed assets. The moves will reduce operating expenses by roughly 10 percent.

The company will take a one-time restructuring charge related to the staff cuts of between $1 million and $1.5 million in the third quarter.

DBS to fully disclose SVOD hard drive requirements

EchoStar Communications Corp. and DirecTV Inc. will be upfront about how much set-top hard drive space customers will have to give up in order to enjoy forthcoming subscription video-on-demand (SVOD) services offered via satellite.

That full disclosure is important because DBS architecture isn’t capable of offering two-way VOD over a network like cable does, but is reliant on a fixed amount of hard drive storage to offer its version of video-on-demand.

In the case of DirecTV’s upcoming SVOD trial with Starz Encore Media Group, consumers who “opt in” for the service will have to give up about 10 of the 35 hours of storage available on their DirecTV/TiVo receivers, noted Greg DePrez, vice president of SVOD for Starz Encore. DePrez spoke during a National Association of Minorities in Communications (NAMIC)-sponsored event held yesterday in Denver called “Are you OD’d on OD (on-demand)?”

That six-month trial, expected to kick off "very soon," will be available to DirecTV Starz Super Pak subscribers who also own DirecTV receivers with TiVo-based on-board personal video recording functionality. Those who opt in for the free trial will get access to five SVOD titles that will be refreshed on a weekly basis. Those titles are expected to absorb about 28 percent of the hard drive’s 35-hour capacity. DirecTV will download the content to receivers during off peak hours.

DePrez added that those trial customers would also be able to “opt out” as well, and that SVOD content would never copy over shows that subscribers record on their own.

EchoStar, which offers a DishPVR box, is also looking at SVOD as a future service, said Dave Kummer, EchoStar’s senior vice president of engineering and systems. Like DirecTV, EchoStar’s version also won’t push SVOD content to a receiver’s hard drive unless a subscriber asks for it, he said.

Kummer said running out of storage capacity for satellite-based on-demand services won’t present much of a problem for DBS, as hard drive technology continues to ride a curve of denser and cheaper technology. EchoStar’s most massive DishPVR model so far houses a 120 gigabyte hard drive, enough to store about 120 hours of video at its lowest resolution setting.

- Jeff Baumgartner

Related story:
DirecTV, Starz team on free SVOD trial, 8/15/02

Financials: TiVo up, Concurrent down

TiVo Inc.'s stock jumped more than 12 percent following a narrower net loss, while Concurrent Computer Corp.'s dipped after its first-quarter outlook.

TiVo gains on Q2 results
The second quarter was good to TiVo Inc. The digital-recorder-maker posted a net loss of $3 million, or 6 cents a share, compared to a net loss of $34.5 million, or 82 cents a share, in the year earlier period.

Revenue reached $23.9 million, up nearly six fold from the $4.1 million recorded a year ago.

TiVo expects to add up to 50,000 subscribers in the third quarter with total add for the year coming in between 250,000 and 275,000, which is lower than the previously forecast 250,000 to 300,000.

Despite a lowered forecast for subscribers, TiVo upped its revenue guidance for fiscal 2003, citing a better outlook for licensing revenue. The company expects to post revenue between $57 million and $62 million. Previously, the company had provided a forecast of between $50 million and $60 million.

As of 12:23 p.m. EDT, TiVo shares were up 52 cents to $4.69.

Concurrent posts positive results, revises outlook
Concurrent Computer Corp.'s shares were shedding nearly 22 percent of their value at one point in mid-day trading despite the better-than-expected revenue results during the fourth quarter.

The company earned $5 million, or 8 cents a share, during the fourth quarter, up from a year-ago loss of $800,000, or a penny per share. It beat analysts' on average estimates of 4 cents, according to Thomson Financial/First Call.

Revenue from video-on-demand systems was $17.4 million from the quarter, up from $6.2 million in Q4 2001. To date, the company's VOD service has been deployed to more than three million digital subscribers.

Year-over-year revenue jumped from $72.8 million in fiscal 2001 to $89.4 million in fiscal 2002.

Despite positive Q4 results, Concurrent shares were taking a beating. Shares were down 96 cents to $3.41 as of 12:23 p.m. EDT. The drop was fueled by a revised earnings outlook for the first quarter. The company expects to earn between 1 cent and 2 cents a share for its first quarter, which will fall below the First Call consensus of 3 cents a share.

Microtune cheers hearing results as jury trial
with Broadcom nears

Microtune Inc. on Friday applauded the results of a recent Markman hearing that paved the way for a patent infringement case Microtune has brought against rival Broadcom Corp. concerning silicon tuner technology.

In that case, set to go to trial Oct. 7 in Sherman, Texas, Microtune is alleging that Broadcom’s BCM 3415 microchip infringed on Microtune’s “Highly integrated television tuner on a single microcircuit” patent (No. 5,737,035), which Microtune filed on April 21, 1995. Microtune introduced product based on that patent in the following year. Microtune originally filed the suit on Jan. 24, 2001 with the U.S. District Court for the Eastern District of Texas.

The Markman hearing, unique to patent lawsuits, is pre-trial process in which the presiding judge interprets certain definition and patent claims that will be allowed in the trial. United States District Judge Paul Brown oversaw the hearing in May, and issued the results on Aug. 22.

Microtune Chairman and CEO Douglas Bartek said his company was “extremely happy” with the definitions that will be admitted to the case. Of the nine “disputed” definitions, the judge will use Microtune’s wording in six of them, Bartek said. Of the balance, the judge will use Broadcom’s wording in one and his own wording in the final two, he said.

In the trial, Microtune is seeking an injunction that would prevent Broadcom from selling product that allegedly infringes on the Microtune patent. Bartek couldn’t say what financial damages Microtune is seeking in the case, but noted that Microtune is not agreeable to licensing its technology to Broadcom or anybody else.

“We’ve never licensed our technology, and we don’t plan to,” Bartek said.

Broadcom, for its part, filed a suit against Microtune on July 15 in the U.S. District Court for the Eastern District of Texas, claiming Microtune infringed on a Broadcom patent (No. 6,377,315) entitled “System and method for providing a low power receiver design.” Broadcom was awarded the patent on April 23, 2002.

Broadcom originally made a motion to allow information on that patent to be included in Microtune’s lawsuit, but the judge in the case declined that request, forcing Broadcom to file a separate lawsuit against Microtune, Bartek said.

Broadcom officials were not immediately available for comment Friday.

- Jeff Baumgartner

Related story:
Broadcom, Microtune trade punches over silicon tuner tech, 5/10/02

Cable vet Tinberg dead at age 51

John Tinberg, a cable veteran with more than 30 years experience, died on Aug. 20. He was 51.

Tinberg began his cable career 30 years ago. He worked his way up through the ranks, publishing several papers in journals and helping to develop new designs on equalizer circuitry along the way. Most recently held the position of region engineer for Adelphia in Florida.

John is survived by his wife Joy and three children Brian, Linette and Christopher.

In lieu of flowers, donations can be made to the family. Checks should be made payable to the John Tinberg Memorial Trust and sent to Adelphia, c/o John Tinberg Memorial Fund, 2001 W. Blue Heron Blvd., Riviera Beach, FL 33404.

Verizon opens the online floodgates in Watertown

Verizon Online is hoping to lure DSL customers in Watertown, N.Y. with a reduced rate offering of $34.95 a month.

The $15 discount off Verizon's entry-level DSL service package will be offered to residents that order Verizon's Veriations with DSL service pack. The package includes high-speed Internet access, long-distance calling, regional-toll calling and a local package that includes at least one phone line.

To prepare for the launch in the city, Verizon recently completed the deployment of hundreds of miles of fiber-optic cable and installed an ATM switch and a high-speed data transmission system in the region.

Verizon's residential DSL service plans include a self-install DSL modem kit, 10 megabytes of Web storage, 10 megabytes of e-mail storage and four e-mail boxes.

Wave7 snags funding

Fiber-to-the-home start-up Wave7 Optics Inc. has closed $15.5 million in third round financing. Oak Investment Partners led the funding round.

As part of the deal, Dave Walrod, general partner of Oak Investment Partners, will join Wave7’s board of directors.

Other investors in the round include Advanced Technology Ventures, Armada Venture Partners, Mellon Ventures, Morganthaler and Lucent Venture Partners.

The funds will go toward expandingWave7's market base of its Last Mile Link package of optical access products, which provide video, high-speed data and telephony, and is the company's first line of optical access products in a system it's developing to address last-mile connectivity. The first products were introduced in June.

Wave7 makes optical access equipment for the fiber-to-the-home and -office market.
The company has raised a total of $47.5 million thus far, it says.

Related stories:
Wave7 Optics unveils two new gateways, 6/7/02
Wave7 helps Georgia expand base of 'human capital', 4/25/02

Broadband briefs:

• Bankruptcy approves Adelphia's DIP financing

Adelphia Communications Corp. has won approval from a U.S. Bankruptcy Court for the Southern District of New York for its $1.5 billion debtor in possession credit facility.

The facility is led by JPMorgan Chase Bank and Citigroup USA Inc. Three days after Adelphia filed for bankruptcy protection from its creditors, the court approved an initial advance under the facility of up to $500 million.

• Liberty Broadband completes Wink buy

Liberty Broadband Interactive Television Inc. has completed the acquisition of Wink Communications Inc. Each outstanding share of Wink common stock has been converted into the right to receive $3 in cash, the companies said.

Liberty Broadband is a subsidiary of Liberty Media Corp.

• Speakeasy rolls out service in Philadelphia

Speakeasy Inc. is rolling out its DSL service in Philadelphia.

The broadband service provider is offering two plans to entice new subscribers to sign up. For $19.95 a month customers receive one IP address and one Speakeasy e-mail address. If customers are looking for a little more, for $29.95 a month, customers receive two e-mail addresses, 10 MB of Web space and unlimited 56K dial-up. Both packages offer connection speeds of 1.5/128 ADSL. After the first three months, subscribers will pay $59.95 a month and $69.95 a month respectively.

The promotion runs through Sept. 30.