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Harmonic Earnings Fall Short

Light Reading
News Analysis
Light Reading
7/25/2001

Harmonic Inc. (Nasdaq: HLIT) executives sang a tune of a brighter future during their earnings conference call after Wednesday’s market close. But some folks who invested in the supplier of equipment for high-speed Internet access and video-on-demand may still be singing the blues.

The company’s quarterly loss was a nickel more than the loss predicted by the consensus of Wall Street analysts.

The pro forma loss for the quarter ending June 29 was $30 million, or 52 cents a share, versus the consensus prediction of a $27 million loss, or 47 cents a share. For the quarter a year ago, Harmonic earned $6.6 million, or 14 cents a share. Revenues for the latest quarter were $49 million versus $80 million a year ago.

The net loss, which takes into account charges such as severance payments and excess facility costs, was $34 million, or 59 cents a share, versus a year-ago $87 million loss, or $1.81 a share. Gross profit margins plunged to 17 percent from 39 percent a year ago.

Harmonic officials said profitability is “unlikely” until 2002, but they expect a “meaningful increase in gross margins” in the third quarter and they expect to reduce losses over the next two quarters. The company has been on a cost-cutting campaign and has reduced its headcount from 1,000 to 750 since the beginning of this year.

Harmonic has two divisions: Convergent Systems generated $28 million in sales for the quarter and Broadband Access Networks had $21 million. The Convergent Systems unit is the fastest growing and has been touting deals with giants in the cable and satellite industries.

In an announcement two days before the financial results, Harmonic boasted of a deal to provide its Narrowcast Services Gateway to Cablevision Systems Corp.'s (NYSE: CVC) video-on-demand rollout for the New York metropolitan area. The gateway product handles routing, multiplexing, and modulation for video-on-demand. Harmonic claims the gateway will significantly reduce the cost per-stream for delivering the service.

In May, Harmonic said DirecTV, a provider of digital satellite television service to 9.8 million customers, will use Harmonic’s Media View encoders and multiplexers to expand its offering of local broadcast channels. The encoders compress video, audio, and data channels to improve the quality of audio and video at low data rates.

In after-market trading on Island, Harmonic was at $12.60 a share, up from the day’s close of $11.87.

- Tom Davey, special to Light Reading
http://www.lightreading.com

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