The right connection.

• Author: Wittebort, Suzanne
• Position: BroadBand Technologies Inc.

How far can BroadBand Technologies ride on the interchange it's built for the information superhighway?

Last summer when BroadBand Technologies tripled its space by moving from its 28,000-square-foot plant on Durham's Miami Boulevard to new quarters in the nearby Triangle Business Center, it left behind a tiny artifact of its tenure: a lone champagne cork lodged in a light fixture.

Today, several libations later, BroadBand President Salim Bhatia has a jeroboam of champagne at the ready on a credenza in his office. "We celebrate our successes," he explains.

Champagne toasts to celebrate good news have become a tradition at BroadBand, and the 5-year-old company has had much to celebrate in its short life. After all, it has set the pace in the race to develop an electronics and software system that translates signals coming in on fiber-optic lines onto coaxial cables compatible with home televisions and telephones.

The biggest celebration came last fall when Bell Atlantic chose BroadBand for a $100 million contract to supply equipment that will allow consumers to get movies, games and all sorts of other information over phone lines. The deal provided the most significant evidence to date of why BroadBand is widely considered among the most promising of North Carolina's hightech companies.

Big money has been flowing BroadBand's way since its inception, but its initial public offering in July blew the top off. Priced at $18, the stock jumped to $28.50 on the first day, when the offering was increased from 2.8 million to 3.5 million shares, netting the company $66.8 million. Investors were obviously buying an idea, not performance. Sales for the first nine months of 1993 totaled only $7 million, up from $5.3 million for all of 1992 and $2.6 million for 1991. BroadBand's market value at the end of 1993 was $409.6 million, more than that of such long-established Tar Heel companies as CCB Financial, Guilford Mills or Public Service Company of North Carolina.

But paving the information superhighway has its bumps. If the company fails to convert its idea into a reliable, widely used product, BroadBand's market value will drop rapidly. "Will |the superhighway~ happen overnight?" Bhatia asks rhetorically. "No, of course not. Lots of things have to happen, but the road has to be paved first, right? And we supply the road."

Like a lot of high-tech start-ups, BroadBand still struggles to turn a profit because nearly half its employees work in research and development. Losses since 1988 have totaled $45.5 million, including $14.4 million during the first nine months of 1993. Its first attempt to go public in 1992 failed when the market for high-tech stocks wavered.

Nor has its stock been for the faint of heart. After rising to $54.50 on news that Bell Atlantic was buying cable giant TCI, it tumbled to $28 late last year, closing 1993 at $31.75. A secondary offering at $40 in November had to be scaled down, though it nevertheless raised about $40 million for the company and $36 million for selling shareholders.

Now BroadBand must contend with a growing army of competitors, including giants AT&T and Raychem. Also, the eventual shape and direction of the telecommunications industry is far from clear as telephone, cable, cellular and satellite communications companies jockey for position amid complex government regulations. Working in a tiny company with huge competitors, "it's like we're living in a cage of elephants," Executive Vice President Rick Jones says. "We don't sleep much. You're constantly on the lookout for a big foot to come around."

Still, many observers think the company is a winner. Its system is "definitely revolutionary," says Deepak Swamy, senior analyst for KMI Corp., a Newport, R.I.-based research firm specializing in fiber-optic telecommunications. "If they can do what they say, they're definitely ahead of everyone else." Concurs George Robertson, telecommunications analyst for Alex. Brown & Sons Inc. in Baltimore, an underwriter of BroadBand's offerings: "They're a market leader in video-on-demand hardware and software. We think they have as much as a two-year lead over other suppliers."

...