BBNC - Broadband Networks Corp. Exec Summary

1. DVD Quality Television Over Your Telephone Network
Executive Summary
BroadBand Networks
Ralph P. Manfredo
President & CEO
BroadBand Networks
990 Richard Avenue
Suite 112
Santa Clara, CA 95050
408-988-2060, Ext. 101
408-988-2188
rmanfredo@bbnc.com
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2. www.bbnc.com
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3. BroadBand Networks Corporation
EXECUTIVE SUMMARY
BroadBand Networks Corporation (BBNC) is dedicated to helping its customers in the
telecommunications industry provide full broadband services to their customers. This enabling
technology allows the incumbent local exchange carriers (ILECs) and international telephone
companies to be competitive with cable television companies’ thereby increasing market share. BBNC
has VIDEO encoders and decoders along with a patented ATM multiplexer for use in the central office/
head-end. BBNC has developed a functional specification for the next generation of codecs and an
intelligent multimedia gateway that will be used to distribute these new services within the residence.
In order to develop these new products, BBNC is seeking $20 million to execute this plan and bring
these products market. Financial estimates reflect profitability by 4th quarter 2001 with BBNC being
cumulatively profitable in 2nd quarter of 2002. BBNC’s profits in the 4th calendar quarter of 2002 will
be in excess of $25 million. By the end of the second year, BBNC will be an excellent target for either
an acquisition or IPO with a market capitalization of $1.2 billion based on projected earnings of $59.3
million at an assumed valuation of 20 times earnings.
The People: its founder, Ralph P. Manfredo has over 25 successful years of product planning and
marketing, strategic planning and product line management of high tech products heads the BBNC
team. His experience includes the development of numerous products for worldwide markets that were
industry firsts. Mr. Manfredo’s was the founder of SPECTRUM NETWORKS CORPORATION, San
Jose, CA, developer of a wireless metropolitan area network product. Jeffrey Kraft - Vice President,
Chief Operating Officer was President of Artificial, Inc., a company specializing in advanced e-
Commerce website development. Prior to those activities, Mr. Kraft was a Vice President of DiagSoft,
Inc., which was acquired by Sykes Enterprises, Inc. Ed De Benedetti – Vice President, Research &
Development. Mr. Manfredo has known Mr. De Benedetti for over 30 years. Mr. De Benedetti has
been involved in research and development of innovative television systems since the introduction of
the first Vidicon sensor in the mid 1950's. Mr. De Benedetti was the founder Scanco, Inc. a developer
of imaging systems used in X-ray inspection equipment. He also developed an extremely low light
level imaging system used for Telescope guiding in astronomy worldwide. Doyle Sturms – Vice
President, Sales has over 35 years experience in the telecommunications industry. As Regional V.P. at
NUKO Information Systems, Mr. Sturms sold digital video products to the RBOCs and Independent
Telcos. He worked for Alcatel Network Systems for thirty years where he was Manager Video Products
Marketing. Along with video, he worked extensively with the Alcatel ATM group during the
development of Cinema of the Future, which used the ATM network to transport movies and live
entertainment. He has worked extensively with PacBell, Bell South, SBC Communications, MCI and
Ameritech. Lynn Wubbels – CFO has a broad background in public accounting practice including tax
and A&A. He has significant experience with start-up companies and has been a key team member of
several successful companies that were either acquired by strategic investors or went public through an
IPO.
The Market: The convergence of television, high-speed Internet access (DSL), and standard telephony
has created a new consumer driven opportunity to bring simultaneous voice phone service, Internet
access, and television to the home over the copper pair. This new and exciting market represents a
$20B per year market opportunity in the USA alone, according to Frost and Sullivan. According to J.P.
Morgan Securities Inc., (“Competitive Telecom Services” – January 21, 2000) the telephony market is
$250B and will grow to $560B by 2007. The report states; “this market is a massive opportunity not
exploited by industry first movers.” BBNC plans to be a major player in this massive market. BBNC
believes there will be significant market to transmit broadcast quality video over xDSL phone networks
serving both intranets and the Internet. BBNC expects to be in a position to capture a significant share
of this multi-billion dollar infrastructure equipment supplier market.
Our Technical Approach: BBNC’s technical approach covers VIDEO encoders, decoders, and ATM
multiplexers for use at the central office/head-end, Intelligent Residential gateways with subscriber
access to interactive services, video streaming to the subscriber. BBNC is the only company that offers
an end-to-end solution using it’s own products. Digital Video Networking – BBNC currently has
VIDEO encoders, decoders and ATM multiplexers that are used to digitize, compress and multiplex
normal television signals onto the broadband telephone network. These products are built to the
stringent criteria required by the carriers relating to redundant systems, automatic switching to
redundant components in the event of failure and hot-swap capability in the event of a failure. BBNC’s
ATM products are covered under patent number 6,088,360 titled “Dynamic Rate Control Technique For
Video Multiplexer”. In addition, there are two more patents pending on BBNC’s ATM technology. This
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4. intellectual property makes BBNC’s ATM technology superior to its competitors. BBNC’s products
have a demonstrated MBTF of over 24 months.
Intelligent Residential Gateway - BBNC's solution for the distribution of these new services is to
develop an intelligent residential gateway function that will allow the distribution of television, Internet,
and telephony at the residence or within the enterprise using existing POTS copper wire or new fiber.
We will accomplish this solution by creating an open architecture product that receives high-speed input
from the xDSL DSLAM and split out the functions for video, Internet, and phone service.
Subscriber Access - BBNC’s solution for how the subscribers access these new services is to develop
software that will allow an interactive set top box to operate for both a streaming video and video on
demand application. With the requirement for encrypted programming to be sent over the network,
BBNC’s products will provide seamless access to programming that is encrypted.
Video Streaming – BBNC’s solution to streaming high quality real time video over copper via IP
protocol is a new MPEG-4 encoder. Such encoding will allow the transmission of high quality, full
screen, and full motion video at data rates as low as 384 Kbps.
Financial Considerations – The financial outlook of the xDSL market is known to be in a high growth
mode as shown in the market section above. BBNC is in a unique position because it either has or will
have an end-to-end solution for its customers. These customers will be incumbent local exchange
carriers (ILECs) and competitive local exchange carriers (CLECs). Current BBNC customers like
Marconi Communications are actively pursuing business on a worldwide scale using their ATM
switches and DSLAMs in conjunction with BBNC video encoders and ATM networking products.
BBNC plans to use the funds for staffing and outfit them with equipment to meet our goals. In addition,
the money will be used for facilities to house the additional employees and for laboratory/manufacturing
space.
The financial projections below are in $000’s. BBNC’s fiscal year runs from July 1 through June 30.
Item FYE 2001 FYE 2002 FYE 2003 FYE 2004 FYE 2005
Sales 606 59,329 238,792 348,379 505,387
Expenses 6,102 49,336 130,565 176,677 245,305
Profit Before Taxes (6,708) 9,993 108,227 171,702 260,082
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