Wednesday, January 31, 2007

ECI Reports Q4 Revenues, CFO Steps Aside

ECI Telecom reported Q4 2006 revenues of $154 million, compared with $169 million recorded in the fourth quarter of 2005 and $170 million recorded in the third quarter of 2006. For the entire year 2006 revenues grew 4% compared with 2005 to reach $656 million. Net income (GAAP) for Q4 was $2.3 million, or $0.02 per share on a fully diluted basis, compared with fourth quarter 2005 net income of $7.6 million, or $0.06 per diluted share. Some highlights:

  • Revenues for the Optical Networks Division continued to rise for the 14th consecutive quarter, totaling $103 million for Q4, up from $88 million in the comparable quarter last year and $101 million the third quarter of 2006. The company cited strong demand in emerging markets, primarily for cellular backhaul solutions.

  • Revenues for the Broadband Access Division totaled $40 million for Q4, down from $68 million in the comparable quarter last year and, as anticipated, down from $57 million in the third quarter of 2006. The sequential decline in revenues was attributed to lower revenues from one of the Division's principal customers. For the year, the Division's sales totaled $225 million, compared with $262 in 2005.

  • Revenues for the Data Networking Division (formerly Laurel Networks) were $2.5 million for Q4, up from $1.9 million in the fourth quarter of 2005 and compared with $3.7 million in the third quarter of 2006. On a GAAP basis, the operating loss for the Division totaled $11.2 million, while the pro forma, non GAAP operating loss was $7.3 million, reflecting continued high R&D spending.

  • In January, Veraz Networks filed a second amendment to its S-1 Registration Statement with the SEC as part of its proposed initial public offering. ECI, which holds 33% of Veraz.

  • For 2007, ECI expects its revenues to increase in a range of 4-8% compared with 2006 and net income to grow faster than revenues.

  • ECI's Chief Financial Officer (CFO), Giora Bitan, has decided to step down as CFO in order to resume his venture capital career. ECI has launched an external search to find Bitan's successor.

"Our Optical Networks Division completed another year of exceptional growth and increased market share. Our optical business grew 17% year over year, higher than industry average. Over the past few years, ECI has established itself as a leading provider of innovative optical transport solutions, primarily in emerging markets, where a significant increase in cellular subscribers creates a strong demand for our cellular backhaul solutions. A point in case is our success in India where our revenues more than quadrupled in 2 years from $24 million to over $100 million in 2006. At the same time, the Division also continues to benefit from further deployment of 3G networks by its European customers."
"The growth of our optical business was offset, in the second half of 2006, by the slowdown in our broadband access business. As we previously indicated, sales of our Broadband Access Division declined in the third and fourth quarters due to weaker demand from the Division's two principal customers, but we expect them to gradually recover during 2007, starting already in the 1st quarter. Our two principal broadband customers are in the process of transforming their networks to support advanced triple play services; however, for regulatory and other reasons, deployment is slower than originally anticipated. Despite this slowdown, we expect to continue to play a major role in the build out of these customers' next generation broadband networks," stated Rafi Maor, ECI's President and CEO.

Occam Posts Q4 Revenue of $20 Million, Reaches 200 Customers

Occam Networks reported Q4 2006 revenue of $20.1 million, an increase of 56% over the fourth quarter of 2005 and 11% sequentially over the third quarter of 2006. Annual revenue for 2006 was $68.6 million, representing a 75% increase over annual revenue for 2005. Net income for the fourth quarter of 2006 (GAAP) was $0.9 million or $0.04 per diluted share compared with net income of $0.4 million or $0.03 per diluted share for the fourth quarter of 2005 and net income of $0.2 million or $0.01 per diluted share for the third quarter of 2006.

The company also finished the fiscal year by surpassing one million ports shipped. Occam said its fiscal year end results reflect increasing interest among telecommunications service providers in upgrading their networks to offer IPTV, Triple Play and other new, innovative services. The company has now surpassed the 200 customer mark.

Canada's Videotron Tests Cisco's WideBand for 100 Mbps Cable Access

Videotron, which serves 1,553,000 cable television customers in Québec, will begin testing a cable wideband solution that delivers Internet speeds up to 100 Mbps, which is five times faster than its current Extreme Plus high speed Internet service.

In a joint announcement with Cisco, Videotron reported that its pilot implementation has now been running for more than a month. The companies are projecting they will reach the 100 Mbps objective in the next few months.

"This alliance enables us to stand far ahead of the competition with regards to delivery of Internet services, not only in Quebec, but across Canada. We are committed to offering Internet users the fastest and highest performance network on the market, and today, we are announcing that the technological breakthrough is attainable in the near future," said Robert Dépatie, Videotron President and CEO.

Qwest Opens Data Center in Seattle

Qwest Communications opened a new CyberCenter in the Seattle area -- bringing to 14 the number of such facilities it operates nationwide. Services include collocation, operating systems, application and database monitoring and management, storage management and business protection.

FCC Commissioners Testify before Democratically-controlled Senate Committee

All five FCC Commissioners were called to testify before the Senate Commerce Committee, their first such appearance since the Democrats regained control of Congress. Top issues included the recent acquisition of BellSouth by AT&T, the Universal Service Fund (USF), rural broadband deployment and the Digital Divide.

Questions posed by Senate Commerce Committee Chairman Daniel Inouye, a Democrat from Hawaii, challenged FCC Chairman Martin on whether he would enforce all of the conditions agreed to in the AT&T+BellSouth merger approval. Martin said he stood by his vote, but that this deal could not be used to change FCC policy or commission rules or regulations affecting other companies. In particular, Martin said that AT&T had volunteered to abide by several Net Neutrality principles, and that the FCC would enforce these conditions. However, Martin said these did not change FCC policy overall.

A subsequent appearance by the FCC Commissioners before the House Energy and Commerce Committee is scheduled for later this month.

Some highlights of the opening testimony from the FCC Commissioners:

  • Kevin Martin (Chairman): "I am pleased to report that the state of the communications industry is strong. As you no doubt remember, in the year 2000, the communications industry began a precipitous and far-reaching decline. Capital spending by companies followed this market decline, innovation disappeared and companies went out of business taking jobs with them. What a difference six years make. In 2006, the communications industry experienced record growth and, by most measures, almost all sectors have rebounded remarkably. In 2006, the S&P 500 telecommunications sector was the strongest performing sector, up 32% over the previous year."

  • Michael Copps: "I hope this Congress will push the FCC to be a more proactive participant in developing a strategy and developing solutions. Have us gather better statistics about our country's woeful broadband situation. Set our agency's talented engineers and policy gurus to work writing reports and teeing up options for you to consider about how we can inject life back into our nation's stagnant broadband market."

  • Jonathan Adelstein: "I am concerned that the U.S. is not keeping pace with our global competitors.  Each year we slip further down the regular rankings of broadband penetration.  This is more than a public relations problem.  Citizens of other countries are simply getting more megabits for less money."

Sea Launch Updates Platform Status Following Jan. 30 Failure

Following the unsuccessful launch of the NSS-8 spacecraft from its Odyssey Platform in the equatorial Pacific on January 30, Sea Launch issued a preliminary assessment. The Odyssey Launch Platform has sustained limited damage. The integrity and functionality of essential marine, communications and crew support systems remains intact. The vessel is operating on its own power and is currently manned by the full marine crew. The Commander ship was not damaged during the launch attempt, as it was positioned four miles from the Launch Platform at the time of lift-off.

The Sea Launch partners will be conducting an independent investigation to review relevant data, determine root cause, and develop recommendations for corrective actions. In accordance with established procedures, Sea Launch is establishing a Failure Review Oversight Board (FROB) to review the partners' findings, conclusions and recommendations.

Microsoft Gains Partners for its Network Access Protection

Microsoft said it now has more than 100 networking and security partners for its Network Access Protection (NAP), a policy enforcement platform built into the Windows Vista operating system and the upcoming version of Windows Server, code-named "Longhorn".

NAP is designed to allow IT administrators to better protect network assets by enforcing compliance with system health requirements. Users can create customized policies to validate computer health before allowing access or communication, automatically update compliant computers to help ensure that compliance is ongoing, and optionally confine noncompliant computers to a restricted network until they become compliant.

Comcast Triple Play Powers Record Results

Comcast credited its Triple Play bundles for strong results in Q4 2006, as the company added more revenue generating units (RGUs) than at any other time in its history and reported growth in cable revenue and operating cash flow. Some highlights from the quarter:

  • Comcast Cable reported revenue of $6.9 billion in the fourth quarter of 2006, an increase of 14% from the prior year. For all of 2006, cable revenue increased 12% to $26.3 billion.

  • Video revenue increased 9% reflecting growth in both basic and digital cable customers and increased demand for advanced digital features, such as DVR and HDTV.

  • Comcast Cable added 613,000 digital cable subscribers and 110,000 basic cable subscribers during the fourth quarter of 2006, each representing the highest quarterly additions in more than 10 years.

  • Driven by increasing ON DEMAND movie purchases, pay-per-view revenue increased 24% to $159 million in 2006. Pay- per-view revenue has increased more than 20% on average for the past eight quarters.

  • High-speed Internet revenues increased 23% in the quarter to $1.5 billion. Comcast added 488,000 high-speed Internet subscribers, a 12% increase from the same period last year and relatively stable monthly revenue per subscriber.

  • Cable phone revenue increased 77% in the fourth quarter of 2006 to $302 million reflecting the addition of 508,000 CDV customers offset by the decline of 87,000 circuit-switched customers during the quarter.

  • Revenue generating units (RGUs) for 2006 increased 69%, or a record 5.0 million from prior year net additions of 3.0 million, to end the year at 50.8 million RGUs.

  • Comcast Cable capital expenditures of $1.4 billion for the quarter were 43% higher than the fourth quarter of 2005 driven by the record RGU additions during the period. Comcast added 77% more RGUs in the fourth quarter of 2006 than 2005.

  • Comcast's Board of Directors authorized a 3-for-2 stock split - the 11th stock split in our company's history.

  • For 2007, Comcast is forecasting cable revenue growth of at least 12%, and cable RGU net additions of approximately 6.5 million, 30% above 2006 RGU net additions of 5 million. Cable capital expenditures are expected to be approximately $5.7 billion.

BT to Acquire INS, Expanding its Role in Global IT Consulting

BT announced plans to acquire International Network Services Inc. (INS), a leading global provider of IT consulting and software solutions. Financial terms were not disclosed.

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INS specializes in four major areas -- Enterprise Architecture and Governance, Business Productivity, Information Risk Management, and Infrastructure Transformation. Based in Santa Clara, California, with offices in Europe, Asia and throughout North America, the company builds, implements and secures business technology infrastructures for its customers.

BT said the acquisition adds to its global professional services resources of more than 7,000 people across the globe. The move will see hundreds of consultants join BT, mostly in the U.S. and Canada.

"The INS business is another great services acquisition for us. INS has a proven business model in the Networked IT Services space that we will replicate around the world. At the same time it significantly boosts our ability to supply world class professional services to US-headquartered corporations and increases BT's presence in the key North American market, said Andy Green, chief executive officer of BT Global Services.

Verizon to Hire More Staff to Support Fiber Rollout

Verizon is seeking to hire 100 new consumer sales consultants to handle consumer demand for both Verizon DSL and FiOS Internet and TV service in the Tampa Bay region of Florida. The company also plans to train over 400 additional fiber technicians for the region to add to the strength of the Verizon network and customer support teams.

Ikanos Supplies VDSL2 to Leading Korean Vendors

Korean VDSL equipment manufacturers Millinet Co., Ltd. and Ubiquoss Corp. have selected the Ikanos multi-mode VDSL2 central office (CO) and customer premises equipment (CPE) chipsets. This enables Millinet and Ubiquoss to offer products capable of symmetrical speeds of up to 100 Mbps that support infrastructure upgrades to VDSL2 now underway in Korea.

Ikanos said its FxTM100100-5 VDSL2 CO and FxTM100100S-5 VDSL2 CPE chipsets offer the lowest power consumption per port in the industry. The multi-mode VDSL2 chipsets -- which are optimized for IPTV and triple play offerings -- also are backwards compatible with VDSL1 solutions currently in use in Korea.

Verizon Wireless Launches EV-DO Rev-A

Verizon Wireless is launching its CDMA 1x Evolution-Data Optimized (EV-DO) Revision A (Rev. A) service. The upgrade is available initially in Mass., including Boston and its suburbs, the Richmond and Hampton Roads, Va. areas, Chicago and its suburbs and including Gary, Ind., Salt Lake City and other cities in Utah, as well as in Florida throughout the state's entire existing area of Verizon Wireless' wireless broadband network.

Verizon Wireless said customers with the EVDO Rev. A service should expect average download speeds of 450-800 kbps and average upload speeds of 300-400 kbps.

Verizon Wireless also announced a new compact USB720 wireless modem with a USB interface, enabling Rev. A connectivity for laptops and desktops. The USB720 from Novatel Wireless joins the AirCard 595 PC Card from Verizon Wireless as the first two enhanced wireless broadband network devices from Verizon Wireless. The USB720 is $149.99 with a new two-year customer agreement or $199.99 with a new one-year customer agreement.

AudioCodes Acquires CTI Squared Ltd.

AudioCodes will acquire CTI Squared Ltd. ("CTI2"), a provider of enhanced messaging and communications platforms deployed globally by service providers and enterprises. CTI2's platforms integrate data and voice messaging services over Internet, intranet, PSTN, cellular, cable and enterprise networks. It employs approximately 30 people and they are based in Israel.

"This acquisition further strengthens our strategic initiative to become a key supplier of Converged IP Communication products and solutions to Service Providers worldwide," said Shabtai Adlersberg, Chairman, President and CEO of AudioCodes.

In November of 2006, AudioCodes and CTI2 announced that FASTWEB, Italy's second largest fixed telephony operator, is expanding its use of CTI2's InTouch platform, integrated with AudioCodes IPmedia Media Server, for advanced voicemail and unified messaging services.

In February of 2006, AudioCodes acquired 10% of the outstanding shares of CTI2 for a purchase price of $1 million, which was paid in cash. AudioCodes intends to exercise the option it also obtained to acquire the remaining shares of CTI2 for a total purchase price of $10 million, $5 million in cash payable by February 28, 2007 and $5 million in cash payable by February 28, 2008. The second installment payment may be reduced by certain claims against CTI2 arising prior to the second payment.