BigBand Shares on Downward Swing
After reaching a recent high water mark of $21.43 per share on May 3, BigBand stock has been trending downward ever since, inching toward the price the shares debuted at in mid-March. BigBand shares got off to a fast start following the company's initial public offering of 10.7 million shares at $13 each. (See BigBand IPO: Boing!)
BigBand shares were down 17 cents, or 1.25 percent, to $13.43 a piece in afternoon trading Thursday.
Some investor nervousness appears to be tied to Comcast's vendor selection for early, technical trials of switched digital video (SDV), a bandwidth-saving technique that delivers the programming of some linear networks only when customers in a particular user group select them for viewing.
Although BigBand has been a leading supplier of SDV technology in the early going, Comcast has opted to go with a vendor lineup that includes C-COR Corp. (Nasdaq: CCBL), Harmonic Inc. (Nasdaq: HLIT), Motorola Inc. (NYSE: MOT), and Scientific Atlanta for some initial SDV testing taking place in the Denver area and in Cherry Hill, N.J. (See Comcast Puts SDV Vendors to the Test.)
Sources familiar with Comcast's SDV plans say the MSO will likely look at BigBand as well, although nothing formal has been announced. In terms of the most recently milestone involving SDV, BigBand said its platform has been deployed commercially by two MSOs over a footprint covering about 6.5 million homes passed. Those operator customers are believed to be Time Warner Cable Inc. (NYSE: TWC) and Cablevision Systems Corp. (NYSE: CVC). Cox Communications Inc. is also said to be teeing up some SDV work with BigBand.
As for Verizon, investors may be worried about speculation that the telco will spend less on capital expenses in the second half of 2007 than it did in the first half.
While those concerns may have caused BigBand shares to fluctuate in recent weeks, analysts do not appear to be overly concerned about the vendor's long-term prospects.
"We remain comfortable with our view on BigBand's ongoing business with Verizon, but as we have written previously, we see a risk with BigBand's lack of involvement in Comcast's trial," wrote Simon Leopold, communications equipment analyst with Morgan Keegan & Company Inc. , in a recently issued research note. Morgan Keegan maintained its Outperform rating on BigBand.
Leopold called any nervousness about Verizon's spending patterns "over-done," believing that the telco's spending levels with BigBand should be fairly consistent throughout the year. More specifically, the firm estimates Verizon spent about $20 million on BigBand gear in the first quarter and will contribute about $75 million to BigBand for all of 2007. At the end of the first quarter, it's believed Verizon had installed BigBand's Multimedia-Service Router (BMR) in about 250 out of a planned 1,200 offices in support of video traffic transport for the telco's FiOS fiber-to-the-premises (FTTP) initiative.
"Video stands as a hot-zone in the telco-cable battle, and spending trends look favorable for BigBand and its unique platform," Leopold says.
— Jeff Baumgartner, Site Editor, Cable Digital News