Harmonic Still Seeking Scale for Its Virtual CCAP
It's early days for a virtualized form of the Converged Cable Access Platform (CCAP), but the latest financial results from Harmonic Inc. (Nasdaq: HLIT) clearly indicate that the emerging approach to next-gen cable access networks has barely inched beyond the starting blocks.
Harmonic, considered a pioneer in this area, announced Monday that CableOS, a virtual CCAP product that can run on off-the-shelf hardware, is being used to deliver broadband service to more than 400,000 cable modems, up about 100% from last quarter. About a quarter of those modems are being served through new distributed architectures that push key electronics toward the edge of the cable access network, Harmonic noted. (See How Harmonic Aims to Disrupt CCAP Market, Cisco Goes Cloud-Native for CCAP and Cable DAA Debuts Worldwide.)
While 400,000 cable modems present a nice round number to the market, it also shows that the virtual CCAP era is still in the very early phases. And some analysts aren't quite as bullish as Harmonic about how rapidly CableOS will help the vendor stoke revenue growth.
CableOS is "grinding along" and is still mired in the "show-me" stage, Jefferies & Company Inc. analyst George Notter explained in a research note.
"The long-term competitiveness of the solution remains the key variable for the business -- it remains too soon to definitively call their success here," Notter wrote. "While we like the customer progress they're making with CableOS, it's not a given that their efforts will translate into meaningful commercial deployments."
Still, the current batch of deployments and trials for CableOS (now at about 20 worldwide, up from 15 at the end of Q1) does indicate that Harmonic has at least gained a foothold.
Harmonic's first announced deployment of the product is with Sweden's Com Hem AB . Harmonic also has a warrants deal with Comcast Corp. (Nasdaq: CMCSA, CMCSK) announced in the fall of 2016 that factors in certain deployment milestones associated with CableOS, but Harmonic has yet to reveal any specific progress that it has made with the MSO. (See Harmonic's New Comcast Deal Oozes Subtext.)
During Q2, "much of our CableOS focus was on working closely with a few global Tier 1 customers, preparing for scale deployment," Patrick Harshman, Harmonic's CEO, said on Monday's earnings call.
He also said that Harmonic's Cable Access segment, aided by CableOS, is "on track" to hit a 2018 revenue target of about $100 million. (Harmonic is now projecting it to be in the range of $92 million to $102 million.)
But Harmonic still has some significant ground to cover, as Cable Access revenue in Q2 was $20.2 million, up from $18.5 million in Q1 2018, and up from $8.9 million in the year-ago quarter.
Harmonic's results also come on the heels of the company receiving what it bills as a "key patent" for its CableOS product. Granted on July 10, that patent (US No. 10,020,962) describes a Virtual Converged Cable Access Platform Core.
The patent could set the stage for Harmonic to mount a legal offensive against rivals that have built or are developing virtual CCAP products or enable Harmonic to set up a licensing model for CableOS. Others pursuing that opportunity include Arris Group Inc. (Nasdaq: ARRS), Cisco Systems Inc. (Nasdaq: CSCO), Casa Systems Inc. , Nokia Corp. (NYSE: NOK) and Huawei Technologies Co. Ltd .
Harshman wouldn't elaborate on Harmonic's plans for the patent or comment when asked by analysts if Harmonic had sensed that others might be violating the patent.
"Exactly how we will use that intellectual property … we have not and are not prepared to communicate our strategy," he said.
Video revenue was a bright spot for Harmonic in Q2, as revenues there rose to $79.2 million, from $71.7 million, thanks in part to growing deployments of over-the-top streaming channels and a surge in Ultra HD/4K services, spurred in part by the soccer World Cup. (See World Cup Kicks Off Live 4K and SES Banks on World Cup for 4K Kick.)
— Jeff Baumgartner, Senior Editor, Light Reading