BigBand: SDV Demand Still Strong
The company posted sales of $26.4 million, versus $39 million a year ago, and below Wall Street's expected $26.9 million. That was coupled with a GAAP net loss of $9.6 million or 14 cents per share, compared to net income of $3.1 million or 4 cents per share in the year-ago period. BigBand played a similar tune in the first quarter. (See BigBand Chalks Up Q2 Loss and BigBand Cuts Staff as Orders Dry Up .)
The picture for the third quarter was challenging. The company is expecting sales in the range of $24 million to $27 million, and a loss per share of 6 cents to 9 cents. The Street was expecting sales of $28.6 million with a loss of 6 cents per share.
BigBand attributed the second-quarter misses on continued order sluggishness for switched digital video (SDV) and edge QAMs as some operators take breathers to assess capacity expansion. BigBand ended the quarter with 37 million homes deployed or in the process of being deployed, noting its recent win with SureWest Communications (Nasdaq: SURW) and an expanded commitment from Charter Communications Inc. That's up from 35 million in the previous quarter.
"We believe this is a temporary situation, but it impacts our Q3 outlook," BigBand CEO Amir Bassan-Eskenazi said of the slower sales outlook. "I think some of it might go into Q4 and possibly beyond Q4. It's hard to tell at this point as this planning is still [ongoing]," he added later in response to analyst questions.
"SDV, we continue to believe, is a large market that's far from saturation. We believe that less than a third of the opportunity has been addressed by now," the BigBand chief said. Comcast Corp. (Nasdaq: CMCSA, CMCSK) is expected to ramp up deployment efforts starting later this year. The MSO has selected BigBand as an approved SDV supplier, but hasn't announced any SDV-related purchase orders from the vendor. (See Comcast Getting Ready to Uncork SDV.)
But analysts aren't overly optimistic about how quickly BigBand can turn it around.
"We expect the stock comes under some pressure from guidance that calls for a recovery that may still be several quarters away, longer than some might have expected," wrote Morgan Keegan & Company Inc. analyst Simon Leopold in a research note to clients. He also noted that BigBand's delayed Media Services Platform (MSP) 2000 platform, a device that centers on unicast, personalized video applications and is generally targeted at the telco IPTV market, won't provide BigBand with significant revenues until the vendor's 2011 fiscal year. (See BigBand Plays It Personal .)
Bassan-Eskenazi said the company is gathering "strong interest" in an IPTV platform that works in conjunction with company's underlying SDV system, but so far has announced just two deployments for the vIP PASS product -- Buckeye CableSystem and South Korea's LG Powercom Co. Ltd. (See Koreans Take Cable IPTV for a Spin and Buckeye Tunes Up BigBand for IPTV Trial.)
As for other future opportunities, BigBand is also contributing to a new super-dense product called the Converged Multiservice Access Platform (CMAP) that will combine edge QAM and cable modem termination system (CMTS) functions and offer cable a path to IP video services. Comcast is leading the CMAP effort, but has since gained the backing of several other MSOs. But there's still no telling when BigBand, or other suppliers, will see any CMAP-related revenues. (See More MSOs Back Comcast's Big Box Project .)
"We're very involved in this activity, and we think it's not a near-term proposal and it's in its early stages," Bassan-Eskenazi said.
Even with such possibilities ahead, there are still questions as to whether BigBand can continue to go it alone. "We believe that BigBand’s video networking technology has value, particularly if it were in the hands of a larger company," Jefferies & Co. Inc. analyst George Notter said in a research note issued this morning.
— Jeff Baumgartner, Site Editor, Light Reading Cable