BigBand for Sale?
Was BigBand Networks Inc. (Nasdaq: BBND)'s decision to "retire" its cable modem termination system (CMTS) product line a move made to dress it up for a possible acquisition?
The industry says at least one company is looking at acquiring BigBand, but only if it shed its CMTS portfolio and the headcount that goes along with it.
If that's the case, BigBand all but removed that barrier on Tuesday when it announced it would stop development of CMTS hardware and software immediately, but will continue to support existing "Cuda" customers through 2010. The company coupled that with a restructuring that resulted in the laying off of roughly 100 employees, or about 15 percent of its workforce. (See BigBand Terminates CMTS.)
Speaking to Cable Digital News Wednesday, BigBand CEO Amir Bassan-Eskenazi declined to comment on the rumor. "We're very focused on executing our business plan," he said, reiterating that BigBand will place a stronger emphasis on its core digital video technologies and services.
If BigBand does go on the block, however, the first in line for a deal could be Arris Group Inc. (Nasdaq: ARRS), followed by Harmonic Inc. (Nasdaq: HLIT), which might be looking to shore up and expand its digital video portfolio.
Arris, which is in the process of buying C-COR Corp. (Nasdaq: CCBL), already has a performing line of CMTS gear. In September, Arris chairman and CEO Bob Stanzione noted the company had its hands full with the C-COR deal, "but I wouldn't rule anything out beyond that period of time," when asked about the possibility of making more acquisitions. (See What's Next for Arris?)
Cable Digital News chief analyst Michael Harris suggested recently that BigBand's video encoding and stat-muxing gear would fill a gap in Arris's video product line, even after Arris absorbs C-COR. (See Next for Arris: Why Not BigBand?)
Bassan-Eskenazi said BigBand did not attempt to find a buyer for its CMTS product line. BigBand bought those assets from ADC (Nasdaq: ADCT) in 2004 but had trouble grabbing more than 4 percent of a market dominated by Cisco Systems Inc. (Nasdaq: CSCO), Motorola Inc. (NYSE: MOT), and Arris.
Terayon Communication Systems Inc. (now part of Motorola) came to a similar conclusion when it failed to gain much ground with a Docsis 2.0-centric strategy and subsequently exited the CMTS business in 2004.
BigBand's inability to unseat incumbents or gain share in a mature market presents a situation that may not bode well for a smaller CMTS startup such as Casa Systems Inc. , which is betting heavily on a platform tailored for cable's next-gen Docsis 3.0 platform. (See profile.)
As for other BigBand-related news to emerge this week, the company did confirm that Comcast Corp. (Nasdaq: CMCSA, CMCSK) had selected the company's management software for the MSO's switched digital video (SDV) efforts, which so far comprise technical trials in Cherry Hill, N.J., and Denver. The MSO has already selected edge QAMs, another element of the SDV architecture, from Arris and Harmonic. (See Comcast Puts SDV Vendors to the Test, Comcast Reveals SDV Test Beds, and Comcast Taps Arris for Edge QAM Initiative .)
But at least one analyst wasn't all that impressed.
"We are skeptical that an approval by [Comcast] corporate will translate into material revenue in 2008, if ever," wrote ThinkEquity LLC analyst Anton Wahlman in a research note. "We would need to see more evidence about the possibility of such a broad-based rollout before getting more positive on the stock." Wahlman maintained his 12-month price target of $7.
Also on Tuesday afternoon, BigBand said it had won deployment deals with two more MSOs (not counting the ongoing work with Comcast), including one outside the U.S. BigBand already has announced SDV deployments with Time Warner Cable Inc. (NYSE: TWC), Cablevision Systems Corp. (NYSE: CVC), and Cox Communications Inc. .
— Jeff Baumgartner, Site Editor, Cable Digital News