Light Reading

Harmonic Grabs CCAP Ring

Alan Breznick
10/29/2013
50%
50%
Repost This

Seeking to play a big role in the emerging market for converged cable access platform (CCAP) gear, Harmonic has snagged its first big MSO equipment order, and it expects to land many more in the next couple of years.

Despite its relatively late start in the market, Patrick Harshman, president and CEO of Harmonic Inc. (Nasdaq: HLIT), laid out this optimistic view of his company's CCAP prospects in its third-quarter earnings call late Monday. He said Harmonic is gearing up to capture significant share of what could be a $2 billion annual market before the end of the decade.

"We're making good progress," Harshman said. "We don't underestimate the challenges" in the CCAP market, but "we're increasingly confident of our ability to be a player and ultimately a category leader."

During the earnings call, Harmonic reported that it had landed its "first multimillion-dollar order" for NSG Pro, a dense, supercharged edge QAM modulator designed to become a full-fledged CCAP device with full cable modem termination system functionality over the next 12-18 months. Harshman said the vendor is conducting "integrated testing with a large North American customer," which he would not name, for commercial deployment of NSG Pro.

One good guess would be that the mystery MSO is Comcast Corp. (Nasdaq: CMCSA, CMCSK), which has been the first one out of the gate with CCAP trials and deployments. Comcast also happens to be Harmonic's biggest customer, accounting for 15 percent of its revenue in the third quarter, versus 11 percent in the second quarter. No other customer produces as much as 10 percent of Harmonic's revenue.

Though vendors such as Arris Group Inc. (Nasdaq: ARRS) and Casa Systems Inc. have already announced CCAP chassis orders from MSOs such as Comcast and Time Warner Cable Inc. (NYSE: TWC), and Cisco Systems Inc. (Nasdaq: CSCO) has already conducted trials with Cox Communications Inc. , Harshman said he's not concerned about entering the market later. He argued that the CCAP market is in the early throes and is still evolving quickly, and that the five major vendors do not have a full-fledged solution available yet.

"There isn't a 100 percent CCAP-compatible product out there," he said in response to analysts' questions. "With real CCAP yet to come, we think we're as well positioned as anyone for the medium to long term."

However, Harmonic officials conceded that its gross profit margins will take a hit on the first CCAP orders shipped to cable customers. CFO Carolyn Aver said the "first batch of units" will generate "much lower margins" as the company gears up production of the devices.

That admission caused Raymond James analyst Simon Leopold to express concern about Harmonic's earnings potential. In a note issued to clients Tuesday, he argued that the gross margin hit "suggests very aggressive pricing" for the initial units. That strategy makes sense, but it indicates that "the competitive landscape for the next generation of cable network equipment will be challenging."

Despite registering slightly better-than-expected results for the third quarter, Harmonic officials fueled that concern further with their financial guidance for the fourth quarter. The company, which produced $122.9 million over the summer months, projects that it will generate $115 million to $125 million of revenue for the fourth quarter, versus analysts' projections of $127 million to $128 million.

In addition to focusing on the developing CCAP market, Harmonic is counting on help from next-generation video compression technology. Harshman said it sees promise in the new High-Efficiency Video Coding (HEVC) standard and for ultra-HD video and some new improvements to the legacy MPEG-2 and MPEG-4 standards. "We're in a number of pretty interesting conversations about work to upgrade MPEG-2 and MPEG-4 before HEVC. There are a lot of MPEG-2 and MPEG-4 boxes out there."

Related posts:

— Alan Breznick, Cable/Video Practice Leader, Light Reading

(1)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
albreznick
50%
50%
albreznick,
User Rank: Blogger
10/29/2013 | 10:23:31 PM
CommScope's turn next
OK. So now we've heard from 4 of the 5 major CCAP vendors about their trials or actual deployments and orders. The only one left is CommScope, which just unveiled its CCAP-enabled chassis at SCTE in Atlanta last week. So now we wait with bated breath for ComScope's first trials, deployments or orders. Think we'll hear something soon?  
Flash Poll
LRTV Custom TV
Wind River Demonstrates Carrier-Grade Software for NFV

4|22|14   |   5:00   |   (0) comments


Wind River VP of Product Management, Glenn Seiler, takes a look the industry's first and only complete NFV software platform designed specifically for the unique carrier-grade and high-performance needs of telecom networks.
LRTV Documentaries
Cable Eyes Big Technology Shifts

4|16|14   |   03:02   |   (4) comments


US cable engineers are facing a lot of heavy lifting in the coming years, notes Light Reading Cable/Video Practice Leader Alan Breznick.
LRTV Custom TV
Maximizing Customer Experience & Assuring Service Delivery in an IP World

4|15|14   |   4:57   |   (0) comments


Steven Shalita, VP of Marketing, NetScout Systems, Inc., discusses the challenges cable/MSO operators face in assuring the delivery of new IP-based services. Key points include the value of proactively managing performance, and using rich analytics and operational intelligence to better understand service and usage trends, make smarter business decisions and ...
LRTV Documentaries
Bye-Bye DVD: Consumers Embrace Digital Video

4|10|14   |   04:17   |   (7) comments


Veteran video analyst Colin Dixon, founder and principal analyst of nScreenMedia, says research shows 56% are using digital video already.
LRTV Documentaries
Video: TW Cable Puts Multicast Gateways to the Test

4|8|14   |   04:13   |   (1) comment


Tom Gonder, a chief architect at Time Warner Cable, explains how its trial of multicast gateways is impacting IP-based video plans.
LRTV Custom TV
Managing & Monetizing Big Data in Operator Environments

4|7|14   |     |   (1) comment


At Mobile World Congress, Gigamon's Director of Service Provider Solutions, Andy Huckridge, and Heavy Reading Analyst Sarah Wallace discuss the 'big data' issues facing carriers and operators today.
LRTV Huawei Video Resource Center
Data Center Energy – Build Your Data Center in a Modular Way

4|7|14   |   2:13   |   (0) comments


Dr. Fang Liangzhou, VP Network Energy Product Line, shared his thoughts about the challenges for data centers during CeBIT 2014.
LRTV Huawei Video Resource Center
Agile Network Solution – An Overview of Huawei's Agile Network Solution

4|7|14   |   2:31   |   (0) comments


Ajay Gupta, Director of Product Marketing, Networking Product Line, gives an overview of the Agile Network Solutions during CeBIT 2014.
LRTV Huawei Video Resource Center
Huawei’s eLTE Voice Trunking, Video and Data Applied for Railways

4|7|14   |   1:38   |   (0) comments


Gottfried Winter is the Sales Director at Funkwerk, a German specialist in GSM-r terminals and a long-time partner of Huawei. At CeBIT 2014, Winter talks to Light Reading about this partnership and the integration of enhanced voice trunking, video and data functions.
LRTV Huawei Video Resource Center
LeaseWeb Speaks Highly of Huawei's Datacenter Products

4|7|14   |   1:37   |   (0) comments


Rene Olde Olthof, Operations Director LeaseWeb, talks about the next data center transformation during CeBIT 2014.
LRTV Documentaries
Comcast: Reshaping the Cable Network Architecture

4|3|14   |   07:11   |   (8) comments


Shamim Akhtar, Comcast's architect and senior director of network strategy, explains why the cable company is moving to a more distributed network architecture.
LRTV Custom TV
VMware CEO Pat Gelsinger at Mobile World Congress

4|1|14   |   3:41   |   (0) comments


VMware CEO Pat Gelsinger speaks to Heavy Reading about the value of virtualization spanning from the data center to service provider networks to mobile devices.
Hot Topics
WhatsApp Threatens Carrier VoLTE
Sarah Reedy, Senior Editor, 4/18/2014
The Hungry, Hungry Cloud
Dan Jones, Mobile Editor, 4/22/2014
Who's Ready to Play Broadband?
Carol Wilson, Editor-at-large, 4/21/2014
Volvo: AT&T HSPA+ Can Drive My Car
Sarah Reedy, Senior Editor, 4/16/2014
Report: NFV/SDN Standards 'Myopic' on Service Management
Carol Wilson, Editor-at-large, 4/16/2014
Like Us on Facebook
Twitter Feed