The WAN Connection

Yurie Systems, Inc.

A provider of ATM access devices and ATM access concentrators, Yurie Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YURI)") else Response.Write("(Nasdaq: YURI)") end if %> is similar to Cisco and Ascend in frame relay in that it supplies products to companies and telecom carriers. By offering companies the ability to combine all of their data transmission functions into one system, Yurie's ATM network access device offers a compelling value to an enterprise network manager. That sale primes the pump for carrier sales, which are higher-margin items and build an installed base for the company. Of particular note, the company signed an agreement to supply its high-end ATM concentrators and multiplexers to Lucent Technologies, which will market the products under its name.

The Financials

Yurie reported a doubling in Q2 revenues of $10.9 million and EPS of $0.06, which was up 50% from last year's per-share earnings results. Yurie is still spending big dollars on R&D, so it's not so much an earnings story yet as it is a sales building (in terms of dollars and units) story. With over $40 million in liquid assets, the company's cash burn rate is small enough that it probably won't need to dilute shareholders, but a big push on inventory and other working capital needs might bring Yurie back to the market for financing. With a market cap approaching $1 billion, the market will be expecting sequential sales increases well into the 25% range to maintain share appreciation.

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