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September 21, 2005 Stock Pick: Terayon Communication Systems, Inc. (TERN)

Stock Price: $3.81

Terayon Communication Systems, Inc. is a broadband company that provides digital video networking applications and home access solutions that enable the delivery of advanced digital video, voice and data services. The company is in the VoIP and HDTV space.

Terayon will benefit from the rebuilding efforts on the gulf coast after Hurricane Katrina. Since, old communication systems have been destroyed, there will now be a high demand for more advanced systems to replace the legacy technology. Home access lines have been destroyed and more will be destroyed as Hurricane Rita, a category 5, now heads for the Galveston, Texas region.

The company has improved its bottomline substantially over the last several quarters. Net loss was only $508,000 for the most recent quarter compared to a net loss of $4.9 million for the same period a year ago. Revenue was $29.5 million up from $26.4 million in the first quarter of this year.

TERN has been steadily trending higher over the last twelve months and is now hitting its stride as digital video, VoIP, and HDTV begin to grow more rapidly. TERN will break out much higher over the next few months.

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