Deutsche Bank Alex. Brown downgraded Terayon Communications (TERN) to market perform from buy.
Analyst George Notter says the modem business saw severe price declines and availability issues in the first quarter and that the telecom business also was weak. He says modem pricing declines often impact long term economics of the business, and he's not sure the company can create significant value in the business even after it ships its cost-reduced TJ-715 product in volume.
Notter believes industry-wide customer headend and modem inventories may be a problem as they approach five months vs. the traditional two to three months. He widened his $0.35 2002 loss estimate to a $0.70 loss, and cut the $0.20 2003 EPS to a $0.20 loss. Notter also cut the $17 target to $5.