BigBand Beats the Street
About nine months after BigBand took a beating for slashing guidance, the company came back in the second quarter of 2008 with sales of $43 million, besting analyst expectations of $42.2 million, and earnings per share of 7 cents, well ahead of the 1 cent expected by the Street. (See BigBand Plays Q2.)
Although revenues were up versus the $39.9 million posted in the previous quarter, they were down compared to the $54.5 million recorded in the year-ago period, which included $7.1 million from the scuttling of BigBand's "Cuda" cable modem termination system (CMTS). (See BigBand Terminates CMTS.)
Looking ahead, BigBand expects third quarter revenues in the range of $46 million to $48 million, with non-GAAP net income of 2 cents to 5 cents per share.
Although providing sales and guidance in line with expectations "go towards management's improving credibility... we still seek added disclosures to increase our comfort," said Morgan Keegan & Company Inc. analyst Simon Leopold in a note issued Friday. For example, he wants more details about the company's quarterly 10 percent customers or a portion of revenue driven by various applications.
On Thursday's conference call, the company repeated a claim that its SDV platform is deployed or is in the process of being deployed in cable systems passing more than 14 million homes. BigBand has yet to recognize revenue for a good portion of that number, since money does not start coming in until after the customer "accepts" the deployment. That process can take six to nine months, said BigBand chairman and CEO Amir Bassan-Eskenazi.
"We continue to view many aspects of the [BigBand] story positively. Nonetheless, we continue to have concerns around the timing and pace of SDV revenue recognition," Jefferies & Company Inc. analyst George Notter wrote today.
BigBand, which competes in the sector with Cisco Systems Inc. (Nasdaq: CSCO) and Motorola Inc. (NYSE: MOT), has an SDV customer roster that includes Cablevision Systems Corp. (NYSE: CVC), Time Warner Cable Inc. (NYSE: TWC), Charter Communications Inc. , Cox Communications Inc. , and a still-unannounced deal with Vidéotron Telecom Ltd. "We have also heard rumblings that the operator may have some business with Bright House Networks ," Notter said.
Still missing from that group is Comcast Corp. (Nasdaq: CMCSA, CMCSK), which is testing SDV in at least four markets, but is leaning more toward an analog reclamation strategy to free up headroom for high-definition television and other services. (See Comcast Expands SDV Test Pool and Comcast Confirms Digital Dongle Project.) Comcast has approved BigBand as an SDV vendor, but the MSO hasn't deployed the company's technology, opting instead (so far) for Cisco and Motorola. Arris Group Inc. (Nasdaq: ARRS) and Harmonic Inc. (Nasdaq: HLIT), meanwhile, have been among the key suppliers of edge QAMs for Comcast's SDV activity.
Bassan-Eskenazi downplayed Comcast's strategy and its impact on BigBand, believing "it's a matter of when, not if" the operator lops switching fabric on top of its digital platform and migrates toward a more "personalized" video architecture.
Eskenazi also addressed questions about the apparent slowing growth of customers that are signing up for Verizon Communications Inc. (NYSE: VZ) FiOS. BigBand, he noted, supplies the telco with network edge gear, and the vendor's involvement is driven not by the number of customers that sign up but by the number of locations Verizon installs the platform.
Elsewhere, BigBand also disclosed in an 8-K filing Thursday that SVP of sales and marketing Jeffrey Lindholm has retired. David Heard, BigBand's COO, is now heading up all sales activity. Earlier this week, BigBand appointed Susan George to regional vice president of cable sales. George, late of Camiant Inc. and SeaChange International Inc. (Nasdaq: SEAC), will focus her attention on BigBand's activity with Comcast, Cablevision, Cox, and other cable accounts. (See Susan George Joins BigBand.)
— Jeff Baumgartner, Site Editor, Cable Digital News