For Subscribers

Get the complete article now!

TWST: Could you describe the strategy that Vyyo (Nasdaq:VYYO) is going to follow over the next couple of years?

Mr. Kohavi: Our strategy is one of market leadership. We intend to work with all the leading system integrators. In addition to Nortel and ADC, we expect to work with other leading system integrators. We expect that the United States will account for between a third to about half of the business, and the rest will be international. So on one side we want to secure the major accounts in the United States, but also expand internationally both directly and through our system integrators.

TWST: Is today’s product the right one for the future, or will it continue to change?

Mr. Kohavi: By definition there’s always going to be an evolution of the product. We believe in evolution rather than in a revolution. We think that over time we do have a clear road map that incorporates newer technologies. For example, today the product requires a small antenna mounted to the wall outside a house or building similar to satellite dishes. The future products will be self-installed so you’ll be able to just buy a system from a retailer like CompUSA or Office Depot and install it yourself, and there will be an antennae built in. This is called a non-line-of-sight solution and a self-installed solution, and that’s really the way of the future for mass deployment, and obviously we’re working on products in that direction.

TWST: Where is the risk in the equation?

Mr. Kohavi: We feel confident in our ability to execute our business strategy; however, like all the infrastructure suppliers, we are dependent on the timing of the growth and rollouts of this industry as a whole. You may remember that the digital cellular market in the United States took much longer to happen than anticipated, but once it did happen the magnitude was bigger than anyone expected. So I think that is very characteristic of emerging technology markets. They may take longer to evolve, but once they do evolve, the magnitude is bigger. In order to address that, I think we are trying to be very conservative and realistic in our expectations. We obviously do not want to disappoint people.

TWST: When is the company likely to begin generating earnings?

Mr. Kohavi: We expect that in 2002 the company will be profitable. Our gross margins last quarter were in excess of 31%. So we have the margin that can enable us to deliver earnings even in the nearest term. The company is focusing very heavily on R&D to grow and to develop products for the future. So obviously we do not want to neglect that area. So you will continue to see large operating expenses as part of the business. I think the healthy margins definitely give us the potential to generate earnings in 2002. We expect that if we can do better than our plan, we could maybe become profitable even earlier.

TWST: Is a 31% gross margin where you would like it to be?

Mr. Kohavi: Our target long-term margin is in the low 40s, so it’s actually higher. We do expect to see small improvements even in the short term as our volumes keep increasing, and we expect the margin to improve as well.