Harmonic chief declined to pinpoint company's acquisition plans, but said more video tech would offer the best strategic fit

Jeff Baumgartner, Senior Editor

January 30, 2008

3 Min Read
Harmonic to Tune Up Video Strategy?

Harmonic Inc. (Nasdaq: HLIT) president and CEO Patrick Harshman didn't completely take the bait Tuesday afternoon when he was asked to elaborate on what might be in the company's M&A crosshairs.

The subject came to light after Harmonic, following a successful $142 million stock offering in the fourth quarter, referenced a desire to pursue "selective acquisitions." (See Harmonic Hints at Acquisition Strategy .)

Responding during his company's earnings conference call to an analyst's question about Harmonic's acquisition strategy, Harshman would only reference the company's "positive experience" with its purchases of transcoding specialist Rhozet Corp., acquired last year, and the video-on-demand assets of Entone Technologies, which Harmonic picked up in 2006. (See Harmonic's Mobile Video Marriage and Harmonic Spends $45M on Entone VOD-Ware.)

Harshman said those deals have provided technology that has been accepted by Harmonic's existing customers, "but in both cases... have also opened doors to new customers and markets for us." Entone, for example, has given Harmonic an entrée into IPTV, while Rhozet has given the company a foothold in the Internet video sector and with more established purveyors of broadcast video content.

As for other possible additions to Harmonic's portfolio, Harshman would only say that the company would pursue "best-in-class technology that really fits who we are, and how we want to define ourselves in this market... obviously around video delivery. We probably won't be more specific than that, in terms of pinpointing exact technologies."

One company believed to be open to takeover offers is Concurrent Computer Corp. (Nasdaq: CCUR), which has made some significant deployment announcements as it tries to avoid a Nasdaq de-listing. Although Concurrent partly overlaps with the Entone portion of Harmonic's portfolio, such a deal would greatly expand Harmonic's VOD footprint with customers such as Time Warner Cable Inc. (NYSE: TWC), Vidéotron Telecom Ltd. , and Cox Communications Inc. . (See Bright House Starts Over in Tampa and Videotron Plans VOD Upgrade .)

Although acquisition rumors involving Concurrent have cooled significantly of late, they have equally heated up on BigBand Networks Inc. (Nasdaq: BBND). Like Harmonic, BigBand markets edge QAMs, including a new "universal" version, but it also happens to be the deployment leader for cable switched digital video (SDV). (See BigBand OKs 'Change of Control' Exec Packages and BigBand Edge QAM Goes 'Universal'.)

Adding fourth quarter details
During the analyst conference call, Harmonic also revealed its largest customers for the fourth quarter. Dish Network LLC (Nasdaq: DISH), at 18 percent, was the largest, followed by Comcast Corp. (Nasdaq: CMCSA, CMCSK) (13 percent) and Cox (11 percent). And Harmonic's customer base remained diverse. By market, cable accounted for 54 percent of total revenue, satellite represented 24 percent, with telcos and "others" making up the balance.

In a research note, Jefferies & Company Inc. analyst George Notter said Harmonic's Dish Network account jumped 29 percent quarter-to-quarter, to about $15.9 million, attributing that in part to EchoStar's recent expansion of local HD channels and the launch of its ViP-TV IPTV service last fall.

Harmonic offered little new information regarding its selection as one of Comcast's edge QAM vendors. (Arris also scored a chunk of that business.) Harmonic CFO Robin Dickson would only say that shipments to Comcast began in the fourth quarter.

Notter suggested that Harmonic's piece of the Comcast edge QAM rollout could generate $30 million to $40 million in revenues in 2008, adding that the MSO is looking to purchase about 1 million edge QAM devices during the 2008-to-2009 timeframe. He also expects Comcast to select a third edge QAM vendor.

— Jeff Baumgartner, Site Editor, Cable Digital News

About the Author(s)

Jeff Baumgartner

Senior Editor, Light Reading

Jeff Baumgartner is a Senior Editor for Light Reading and is responsible for the day-to-day news coverage and analysis of the cable and video sectors. Follow him on X and LinkedIn.

Baumgartner also served as Site Editor for Light Reading Cable from 2007-2013. In between his two stints at Light Reading, he led tech coverage for Multichannel News and was a regular contributor to Broadcasting + Cable. Baumgartner was named to the 2018 class of the Cable TV Pioneers.

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like