VyyoInc. (Nasdaq:VYYO-messageboard), a maker of T1 emulation and spectrum overlay gear for the cable industry, says it's closing in on two cable deals that could open up a 3 GHz passives market possibly worth $100 million a year in the United States alone.
"We believe we're close to signing master purchase agreements with two large operators covering our UltraBand passive devices and T1 products," Vyyo CEO Wayne Davis said during a call this morning to discuss the company's third-quarter results. (See Vyyo Reports Q3.)
He declined to name those operators but said it's possible they could be announced by the end of the year.
The most likely MSO is Cox Communications Inc. , which is already using Vyyo's gear in 16 of 30 markets via more general "one-off" purchase orders.
Two other possible candidates are Charter Communications Inc. (Nasdaq: CHTR - message board) and Comcast Corp. (Nasdaq: CMCSA, CMCSK). Following up on comments made in August, Davis said Charter has completed its trials with Vyyo, while Comcast is reaching the latter stages of its test activity with the vendor.
Vyyo's passives are considered a precursor to a full, active upgrade that will extend cable operator spectrum to 3 GHz, subsequently doubling downstream capacity and adding four times the amount of upstream bandwidth.
Davis suggested that the master purchase agreements could lead to exclusive deals or at least recurring revenue with cable operators. Those deals, he said, would also enhance Vyyo's ability to raise additional funding, if needed.
Vyyo ended the quarter with $19.2 million of cash, cash equivalents, and short–term investments, down from $26.2 million in the second quarter.
Davis said the U.S. market just for the passive elements could bring in $100 million per year and allow Vyyo to take on Motorola Inc. (NYSE: MOT - message board), Scientific Atlanta , and other companies in that sector.
That's a farcry from where the financial situation stands now. Vyyo had third-quarter sales of $2.6 million compared to $1.7 million a year earlier. Cable revenues in the period were $1 million, versus just $326,000 in the previous quarter. Most of that was linked to sales of 3 GHz passives.
Vyyo also provided an update on its activity with StarHub Pte. Ltd. of Singapore, which is installing the vendor's 3 GHz technology in new builds.
Star Hub could expand its use of Vyyo's passives if it wins a spot in the Singapore government's Next Generation National Broadband Network. But the government has pushed back the bid process as much as four months, according to Davis, meaning winners could be picked in the first half of 2008.
Vyyo is also testing the partnership waters with other equipment manufacturers, hoping that such deals could drive its UltraBand platform toward a more common cable "industry standard."
Vyyo faces competition from vendors suggesting a move to 1 GHz, but Davis said that will not give MSOs the capacity they will eventually require.
"At some point in time it becomes a very widely adopted view that 1 GHz isn't enough," he said, suggesting that other bandwidth-savers such as node splits and switched digital video "are going to run out of steam very quickly."
Vyyo shares were up 29 cents (5.09%) to $5.99 each in late-day trading Thursday.