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BigBand Tunes Up Q3

Jeff Baumgartner
10/31/2008
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BigBand Networks Inc. (Nasdaq: BBND) revenues beat Wall Street's expectations in the third quarter as the company cultivated deployment growth in both the cable and telco segments.

The digital video specialist posted revenues of $48.3 million, up 25 percent from $38.5 million a year ago, and notched a profit of $3.1 million (5 cents per diluted share), improving from a year-ago net loss of $12.2 million (21 cents per share). (See BigBand Plays Q3.)

BigBand again showed that it has righted its ability to provide accurate guidance, as Wall Street expected the company to post third-quarter revenues of $47.1 million. (See BigBand Looks to Resolve BigProblems.)

For the first time in a while, BigBand reported some deployment gains for gear and software tied to switched digital video (SDV), a technique some operators are using to use their existing bandwidth more efficiently and set the stage for targeted advertising. Thanks in part to a recent win at Bright House Networks for large systems serving Tampa and Orlando, Fla., BigBand execs on Thursday said the company's SDV platform is deployed or in the process of being deployed in systems serving more than 17 million homes, up 3 million from the figures BigBand cited in the previous earnings report. (See BigBand Lights Bright House and BigBand Beats the Street.)

Also on Thursday's earnings call, BigBand president and CEO Amir Bassan-Eskenazi noted that the company had won a contract with a new Tier-1 telco carrier that is deploying IPTV services. He didn't name it (AT&T Inc. (NYSE: T), anyone?), but the deal complements its existing business with Verizon Communications Inc. (NYSE: VZ) and is linked to BigBand's new Media Services Platform (MSP) 2000. That product, introduced in September, processes video streams to individual subscribers, opening up opportunities for more "personalized" services and targeted advertising. (See BigBand Plays It Personal .) Although BigBand sees that product playing a role with cable as well, a telco that is using DSL as a video conduit is the first to commit to the MSP.

Bassan-Eskenazi said BigBand also received its first IPTV-over-cable order from an "international service provider," and expects revenues for that deal to start arriving by mid-2009. While U.S. MSOs are generally looking to Docsis 3.0 to produce faster Internet service speed tiers, some European operators (those with older cable plant, anyway) are tapping it to deliver IP video through the wider data pipes generated by the channel-bonding techniques of Docsis 3.0.

BigBand did not address specific expectations for 2009, something both Arris Group Inc. (Nasdaq: ARRS) and Harmonic Inc. (Nasdaq: HLIT) have been cautious to relay until MSOs iron out their capex budgets for next year, but the vendor said it's "comfortable" with four-quarter guidance. (See Harmonic Casts a Cautious Eye on '09 and Arris Tempers Q3 CMTS Sales Surge .)

Looking ahead, BigBand expects four-quarter revenues to be in the range of $48 million to $50 million, with GAAP net earnings of 2 cents to 4 cents per share, a figure that accounts for the sale of its FastFlow provisioning system to Incognito Software Inc. for roughly $1.8 million. Further out, Bassan-Eskenazi believes BigBand can sustain growth as operators expand their menus of high-definition television (HDTV) programming and install more ad-insertion capabilities.

Morgan Keegan & Company Inc. analyst Simon Leopold maintained his "Market Perform" rating on the stock, noting BigBand's "conservative" fourth-quarter guidance "leaves room for upside, but this is offset by our concern that 2009 begins slowly."

— Jeff Baumgartner, Site Editor, Cable Digital News

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