BigBand Rocks in Q4, But Cuts Jobs
BigBand Networks Inc. (Nasdaq: BBND) turned in a solid fourth quarter but issued cautious guidance for the first quarter of 2009, taking it so far as enlisting a "proactive" layoff of 46 employees. (See Arris: Solid Q4, But Slow Start to '09.)
The digital video specialist posted fourth-quarter sales of $54.1 million, or 15 cents a share, blowing out Wall Street's estimate of $48.9 million, or 6 cents a share. However, BigBand was soft with first-quarter guidance, forecasting sales of $43 million to $45 million and EPS of 3 cents to 5 cents, versus the Street's expectation of $46.6 million and 5 cents. Time Warner Cable Inc. (NYSE: TWC) and Verizon Communications Inc. (NYSE: VZ) each accounted for more than 10 percent of BigBand's fourth-quarter revenues. (See BigBand Reports Q4.)
BigBand says it expects lower contribution from video software, which will trim margins. "We do not believe that we will have as rich a product mix, especially software content in the orders in our first quarter as compared to Q4," BigBand CFO Moe Castonguay said on Thursday's earnings call.
But BigBand's big fourth quarter and soft forecast for the first quarter has sent mixed signals to analysts.
Jefferies & Company Inc. reduced its 2009 revenue and EPS estimates for BigBand from $209.3 million and 25 cents, to $194.0 million and 20 cents.
"Although we are pleased with the impressive [fourth quarter] performance, whenever we observe a company beating its own forecasts by a wide margin, we wonder what happens when the 'error' goes the other way," wrote Morgan Keegan & Company Inc. analyst Simon Leopold. [Ed. note: No pleasing some people.]
BigBand reported growth in its cable and telco TV segments. Verizon, for example, video-enabled more of its central offices with the vendor's Broadband Multimedia-Service Router (BMR). As for cable, MSOs tapped BigBand's broadcast gear for hi-def television expansions and ad-insertion. Although Comcast Corp. (Nasdaq: CMCSA, CMCSK) has largely remained on the switched digital video (SDV) sidelines in favor of a massive analog reclamation project, BigBand still grew its SDV footprint in the fourth quarter.
BigBand CEO and president Amir Bassan-Eskenazi said BigBand's SDV platform had been deployed, or was in the process of being deployed, in systems covering 20 million households worldwide at the end of 2008. It ended the third quarter with a committed SDV footprint of 17 million homes. (See BigBand Tunes Up Q3.)
Driven by SDV expansion, BigBand shipped a record number of edge QAMs in the fourth quarter, said the CEO. As of the end of 2008, BigBand had shipped more than 470,000 QAM "channels."
Despite solid gains, not all was sunshine and lollipops in the quarter. BigBand also eliminated 46 jobs tied to a "minor restructuring" that will result in a $1.25 million charge in the first quarter. A company official said the layoffs represent "less than 10 percent" of its workforce.
Bassan-Eskenazi said the pink slips did not hit any particular area of the company, but were issued to reduce operating expenses. The company believes the restructuring will produce annual cost savings of $5 million.
— Jeff Baumgartner, Site Editor, Cable Digital News