Light Reading

Harmonic Grabs CCAP Ring

Alan Breznick
10/29/2013
50%
50%

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        ADD A COMMENT
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?  
From The Founder
Against the odds, Huawei is growing its telecoms networking equipment business in the US -- that should be ringing some alarm bells for domestic vendors.
Flash Poll
Live Streaming Video
CLOUD / MANAGED SERVICES: Prepping Ethernet for the Cloud
Moderator: Ray LeMaistre Panelists: Jeremy Bye, Leonard Sheahan
Between the CEOs
CEO Chat With Jeff Miller, ActiveVideo

8|28|15   |   19:05   |   (0) comments


Jeff Miller, President and CEO of ActiveVideo, talks to Light Reading founder and CEO Steve Saunders about the impact of virtualization on the TV and video distribution market.
LRTV Huawei Video Resource Center
Vodafone: Mobile Money Is About Customer Trust

8|27|15   |   06.36   |   (0) comments


Light Reading spoke with Vodafone's Ian Ravenscroft about the unique responsibilities and opportunities facing operators handling customers' financial transactions over the network.
Telecom Innovators Video Showcase
Palo Alto Networks on Expanding in the Carrier/Service Provider Market

8|26|15   |   07:54   |   (0) comments


Alfred Lee from Palo Alto Networks tells Steve Saunders about their new chassis-based system, the PA-7080, and how it can benefit service providers compared to legacy firewalls.
LRTV Custom TV
Global Services Forum Preview

8|25|15   |   02:36   |   (0) comments


Light Reading's CEO and Founder Steve Saunders talks about Huawei's upcoming Global Services Forum with the help of Heavy Reading's Patrick Donegan and Teresa Mastrangelo.
Telecom Innovators Video Showcase
Infoblox on DNS Threat Index

8|19|15   |   04:39   |   (0) comments


Dilip Pillaipakam from Infoblox talks to Steve Saunders about his company's core network services.
Between the CEOs
CEO Chat With Ihab Tarazi, Equinix

8|14|15   |   20:18   |   (1) comment


Equinix CTO Ihab Tarazi talks to Light Reading founder and CEO Steve Saunders about the dramatic changes in the data center, cloud and interconnect markets and discusses the impact of SDN and NFV in the coming years.
Telecom Innovators Video Showcase
The Netformx Ecosystem

8|14|15   |   09:39   |   (1) comment


Ittai Bareket, CEO of Netformx, talks with Steve Saunders about the Netformx Ecosystem, which employs cutting-edge prescriptive analytics to help solution providers maximize profits.
Telecom Innovators Video Showcase
Versa Networks on Leveraging VNFs

8|12|15   |   07:37   |   (0) comments


Kumar Mehta, founder and CEO of stealth mode startup Versa Networks, talks with Steve Saunders about how providers can best leverage virtualized network functions (VNFs).
LRTV Custom TV
Transforming the Network Through OPNFV

8|5|15   |   7:09   |   (0) comments


Sandra Rivera, VP Data Center Group; GM Network Platforms Group, Intel Corporation, on OPNFV Arno and how the industry is coming together to accelerate the deployment of NFV and transform the network.
LRTV Huawei Video Resource Center
Huawei ONS Product Demo

8|3|15   |   6:01   |   (0) comments


Huawei shows at Open Networking Summit 2015 in Santa Clara how its SDN and NFV solutions embrace openness.
LRTV Custom TV
End-User or Enterprise Benefits to the New IP

7|30|15   |   04:27   |   (1) comment


Andrew Coward discusses what the New IP means to end users or enterprise customers. He explains compelling reasons, including how every customer can get their own network, from the transformation to the New IP.
LRTV Custom TV
Network Visibility & the New IP

7|30|15   |   02:23   |   (0) comments


Mukund Srigopal provides an explanation of what network visibility is and how it is essential as service providers transition to the New IP. In addition, the importance of the network packet broker is discussed.
Upcoming Live Events
September 16-17, 2015, The Westin Galleria Dallas, Dallas, TX
September 16, 2015, The Westin Galleria Dallas, Dallas, TX
September 16, 2015, The Westin Galleria Dallas, Dallas, TX
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 14-15, 2015, New Orleans Ernest N. Morial Convention Center, New Orleans, LA
November 5, 2015, Hilton Santa Clara, Santa Clara, CA
November 17, 2015, Santa Clara, California
December 1, 2015, The Westin Times Square, New York City
December 2, 2015, The Westin Times Square, New York City
All Upcoming Live Events
Infographics
Cisco's cloud and virtualization portfolio can increase business agility and innovation by building a more flexible network architecture.
Hot Topics
Verizon Hums a Driving Tune
Sarah Thomas, Editorial Operations Director, 8/26/2015
Gogo Approved to Speed Up In-Flight WiFi
Sarah Thomas, Editorial Operations Director, 8/24/2015
Could Market Volatility Hurt Tech IPOs?
Dan Jones, Mobile Editor, 8/24/2015
Sprint's Claure: '3 to 5 Years' to Turnaround
Dan Jones, Mobile Editor, 8/25/2015
Like Us on Facebook
Twitter Feed
September 22, 2015
Media Begins With “Me”
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Jeff Miller, President and CEO of ActiveVideo, talks to Light Reading founder and CEO Steve Saunders about the impact of virtualization on the TV and video distribution market.
Equinix CTO Ihab Tarazi talks to Light Reading founder and CEO Steve Saunders about data center, cloud and the impact of virtualization in the coming years.
Cats with Phones
Cats Are a Smartphone's Best Friend Click Here
Whoever said cats didn't live to please their humans?