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Harmonic will apply all its focus on video processing and CCAP as Aurora Networks picks up its lower-margin line of nodes, amps and transmitters

Harmonic Sells Cable Access Unit for $46M

Jeff Baumgartner
LR Cable News Analysis
Jeff Baumgartner
2/19/2013
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Harmonic Inc. is selling off its cable access business to Aurora Networks Inc. for US$46 million, a move that will help Harmonic focus on higher-margin products, including video processing gear, edge QAMs and its budding Converged Cable Access Platform (CCAP). The product line Harmonic is selling off primarily involves outside plant equipment, including optical transmitters, amplifiers, receivers and nodes. Harmonic said cable access was its lowest gross margin product line (30 percent) and generated $52.9 million in net revenues for 2012. Harmonic's board has approved a $35 million share repurchase program that is contingent on the close of the deal, which is expected in the current quarter. It was not immediately known how many Harmonic employees will be joining Aurora. Why this matters
For Harmonic, the sale will let it sharpen its focus on product areas where it believes it has the most sizeable opportunities. During its fourth-quarter earnings call last month, CEO Patrick Harshman identified two key areas for growth: UltraHD encoding and CCAP, a next-generation cable access platform that will combine the edge QAM and cable modem termination system (CMTS) functions and prepare MSOs for an all-IP service transition. Harmonic says its first-generation CCAP product is in tests with at least five Tier 1 customers, with sales expected to start in the second half of 2013. For privately held Aurora, meanwhile, the deal should complement its own product line, and continue a recent string of acquisitions that has helped the company fill in gaps in its broadband access portfolio and expand its stable of customers. (See Aurora Buys Piece of Enablence.) For more



— Jeff Baumgartner, Site Editor, Light Reading Cable



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Jeff Baumgartner
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Jeff Baumgartner,
User Rank: Light Beer
2/20/2013 | 1:47:22 PM
re: Harmonic Sells Cable Access Unit for $46M
Good point. That would certainly explain some of Harmonic's reasoning beyond the product synergy (or lack thereof) that Harshman got into during the call. JB
jtombes
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jtombes,
User Rank: Light Beer
2/19/2013 | 10:34:17 PM
re: Harmonic Sells Cable Access Unit for $46M
Guessing this has been in the works for a while, but it looks as if HLIT's sale of cable access and the buy-back answers some of the concerns raised by large shareholder Voce Capital. Stock buy-back in particular.
Jeff Baumgartner
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Jeff Baumgartner,
User Rank: Light Beer
2/19/2013 | 3:42:39 PM
re: Harmonic Sells Cable Access Unit for $46M
Harmonic President & CEO Patrick Harshman offered some additional details on the conf. call this morning.-á HLIT's access business has about 70 employees.-á

As part of the deal Harmonic has agreed to offer "transition services" to Aurora for up to five months. "You would expect the headcount to be in transition over that period of time," Harshman said. -áHarshman also said HLIT put the unit up for sale about 6 months ago and had multiple suitors interested.-á-á-áWithout the access biz, HLIT expects gross margins to rise 2% to 3%. Cable will-áremain its largest-ámarket. JB
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