Cable Tech

Analysts Strike Up BigBand Coverage

Two analyst firms initiated coverage of BigBand Networks Inc. (Nasdaq: BBND) this week, but had differing views on the stock's starting ranking and price target.

Jefferies & Company Inc. started BigBand, fresh off an initial public offering, with a Buy rating and a $22 price target. (See BigBand IPO: Boing!)

Taking a more conservative stance was Think Equity Partners, which initiated the Redwood City, Calif.-based cable and telco technology supplier at Accumulate and a price target of $19.

BigBand shares closed Wednesday at $18.70 apiece, up 3.03 percent (55 cents).

Despite some differences in their initial coverage, both firms believe BigBand will see heavy competition across its product line, which includes gear for switched digital broadcast and video multiplexing, as well as cable modem termination systems (CMTSs), which entered the BigBand lineup in mid-2004 via the aquisition of certain assets of ADC (Nasdaq: ADCT).

Altough BigBand is in the wake of an IPO, questions remain about how things will shake out for the company long-term.

In addition to being faced with rivals on all fronts, "BigBand is a consolidation candidate," either by making acquisitions or perhaps as an acquisition target itself, according to Think Equity's assessment.

Still, both firms like BigBand's product positioning and potential with switched digital video (SDV) as well the emerging modular-CMTS.

SDV, not yet widely deployed, is one of several methods cable operators can use to conserve precious bandwidth. Other options include bandwidth expansion, analog reclamation, node splits, and the use of advanced compression.

"We believe that switched broadcast is the lowest cost, most efficient way of addressing cable operators' bandwidth issues," Jefferies notes in its analysis.

Although the firm acknowledges that SDV deployments are "still in the early innings," it also estimates that BigBand has a 12- to 18-month development lead on competitors. Others in the SDV sector -- through components or fuller systems -- include, but are not limited to, C-COR Corp. (Nasdaq: CCBL), Scientific Atlanta , Tandberg Television , Harmonic Inc. (Nasdaq: HLIT), and Motorola Inc. (NYSE: MOT).

BigBand recently disclosed that three of the top five U.S. cable operators had "selected" its SDV platform, and that its switched broadcast technology, deployed so far by two of those MSOs, passes more than 5 million homes. (See Mulling a Milestone.)

Cablevision Systems Corp. (NYSE: CVC) and Time Warner Cable Inc. (NYSE: TWC) are likely the two to have commercially deployed BigBand's SDV technology. Cablevision has officially announced its relationship with BigBand, and TWC has introduced SDV technology in at least eight divisions so far. (See Cablevision Switches With BigBand.)

Cox Communications Inc. , Comcast Corp. (Nasdaq: CMCSA, CMCSK), and Charter Communications Inc. are trialing or making SDV vendor decisions now, and "we suspect that BigBand has already been selected by one of these three additional operators," Jefferies' report adds. "Over the next 12 months, we project that BigBand will establish itself as the dominant switched broadcast vendor in each of these cable networks."

"We believe SDB will be BigBand's driving theme in 2007," Think Equity says in its report.

Although BigBand is a minor CMTS player today, with a market share of just 3.5 percent (with Cox being its key MSO partner), analysts believe it could exploit opportunities as MSOs migrate toward modular-CMTS architectures that, among other things, allow operators to scale downstream and upstream capacity independently. BigBand's M-CMTS gear has already scored some trials with operators outside the U.S. (See BigBand Goes Dutch With M-CMTS.)

BigBand's first earnings call with reporters and analysts since the vendor became public is set for Thursday, May 3, at 4:00 p.m. Eastern Time.

— Jeff Baumgartner, Site Editor, Cable Digital News

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