Cable Modem Users Projected to Double by Year End
By Cindy Christ

The number of U.S. Internet users with high-speed cable access will double to 3.6 million by the end of 2000, according to a new study by Cahners In-Stat Group.

The high-tech market research firm also forecasts that there will be more than 9.5 million broadband cable data subscribers worldwide by the end of 2002, up four fold from about 2.2 million at the end of last year.

At the same time, cable data subscription revenues are projected to quadruple to almost $4 billion during the same period.

"As worldwide Internet usage increases, the demand for high- speed Inernet access is also increasing," said Mike Paxton, analyst for In-Stat's Multimedia Service.

"Right now, residential high-speed Internet access via the coaxial cable that provides cable TV services is the primary choice among Internet users for high-speed Net access," he added.

The study also found that more than 110 million homes in North America are passed by a broadband coaxial cable line and more than 77 million of those homes currently subscribe to cable TV services.

The No. 1 vendor of cable modems at the end of last year was Motorola (MOT), which shipped nearly three times as many units as its nearest competitor.

By the end of last year, Motorola had more than quadrupled cable modem sales, shipping more than one million worldwide.

"What's most significant about this milestone is the rapid acceleration for consumer excitement over high-speed cable data access," said Bruce Stone, Motorola Multimedia Group senior vice president and general manager, in a statement.

Motorola's Multimedia Group supplies Time Warner's (TWX) Road Runner cable modem service.

Information from the GartnerGroup's Dataquest shows that five vendors now account for 75 percent of all worldwide cable modem shipments:

Motorola, with a 37.2 percent market share; Arris Interactive/Nortel, (NT) with a 12.6 percent market share; Com21 (CMTO), with a 9.6 percent market share; Terayon Communications Systems (TERN), with an 8.2 percent market share; and General Instrument (GIC), which is being acquired by Motorola, with a 7.1 percent market share.

In a research report released Monday, Merrill Lynch analysts raised their intermediate-term rating on shares of Terayon to "buy" from "accumulate."

In the December quarter, revenues for Santa Clara, Calif.- based Terayon increased 199 percent and the company reported an unexpected profit of 4 cents a share versus consensus forecasts of a loss of 18 cents per share.

On Monday, online investment bank W. R Hambrecht & Co. also issued upbeat comments about Terayon, starting coverage with a "market outperform" rating and $200 price target.

"With growth in services such as high-speed Internet access and integrated voice, video and data services predicted to explode this year, we view broadband access technologies as one of the key drivers of increasing carrier investment in network infrastructure," said Tim Savageaux, eNetwork Infrastructure analyst at WR Hambrecht & Co. in a research note.

"We believe 2000 will be another strong year for carrier spending on network equipment. These ongoing technology discontinuities continue to create tremendous growth opportunities for emerging equipment vendors," he added.

Shares in Terayon closed down Wednesday $0.06, or 0.05 percent, at $116.06, nearly 17 percent off their 52-week high of $135.24.

Industry leader Motorola was off $2.63, or 1.9 percent, at $139.50.