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Harmonic Sees Slump in Verizon Sales

Harmonic expects a sales dip as Verizon shifts some video dollars to other suppliers

Phil Harvey

October 28, 2005

2 Min Read
Harmonic Sees Slump in Verizon  Sales

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

About the Author(s)

Phil Harvey

Editor-in-Chief, Light Reading

Phil Harvey has been a Light Reading writer and editor for more than 18 years combined. He began his second tour as the site's chief editor in April 2020.

His interest in speed and scale means he often covers optical networking and the foundational technologies powering the modern Internet.

Harvey covered networking, Internet infrastructure and dot-com mania in the late 90s for Silicon Valley magazines like UPSIDE and Red Herring before joining Light Reading (for the first time) in late 2000.

After moving to the Republic of Texas, Harvey spent eight years as a contributing tech writer for D CEO magazine, producing columns about tech advances in everything from supercomputing to cellphone recycling.

Harvey is an avid photographer and camera collector – if you accept that compulsive shopping and "collecting" are the same.

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