Harmonic Sees Slump in Verizon SalesHarmonic Sees Slump in Verizon Sales
Harmonic expects a sales dip as Verizon shifts some video dollars to other suppliers
October 28, 2005
Both Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) and Harmonic Inc. (Nasdaq: HLIT) saw a nice boost in sales this quarter as Harmonic, via its reseller, Tellabs, was a primary supplier of video infrastructure gear for Verizon's fiber-to-the-premises project.
But as Verizon Communications Inc. (NYSE: VZ) starts bringing more Motorola gear into the mix, Harmonic has warned that its business through Tellabs won't likely cause as much of a sales windfall.
"We think our business will be very much less going forward... And you know that's just life," said Harmonic CEO Tony Ley on a conference call with analysts last week.
Harmonic's broadband access networks division saw its net sales jump to $25.2 million during its third quarter, up from $15 million during the year ago quarter. That sales bump, Harmonic says, is because of increased shipments to Tellabs for some of the video infrastructure portion of Verizon's FTTP project.
But Verizon's choice of Motorola to provide the end-to-end access and video solution may be starting to siphon sales from the Tellabs/Harmonic combo.
"This year, in 2005, we were… the sole source for the product that went through Tellabs and onto Verizon," Ley said. But Ley reminded analysts that Verizon has "gone out for other sources" and it selected "at least one other."
For Harmonic's December quarter, analysts are predicting the company will report a 29 percent decline in revenues and a more than 100 percent decline in earnings. Analysts expect Harmonic to report a loss of 2 cents a share on revenues of $61 million in the coming quarter, versus the profit of 17 cents a share on $86 million in revenues it reported last year, according to First Call.
Tellabs was boosted by the Harmonic video equipment sales to Verizon as well. For its third quarter, Tellabs revenues were way up -- it reported revenues of $464 million versus the $284 million it reported in the third quarter of 2004. "This number included $13 million in video equipment pass-through sales (we believe this was Harmonic equipment sold to Verizon), which we did not expect," writes Alex Henderson, an analyst at Citigroup, in a note to clients on Tuesday.
In late afternoon trading on Friday, Harmonic closed up $0.05 (1.15%) to $4.39. But that stock has traded as high as $12.40 in the past 52 weeks. Tellabs shares fell $0.04 (0.42%) to $9.35 in late afternoon trading on Friday.
— Phil Harvey, News Editor, Light Reading
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