When Will SDV Rebound?
After hearing BigBand Networks Inc. (Nasdaq: BBND) size up the situation, it's growing clear that new, domestic SDV growth will be hard to come by for a while just as things start to heat up in Asia.
The company is seeing a "temporary pause" in new SDV deployments in North America, BigBand CEO Amir Bassan-Eskenazi confirmed during the company's fourth-quarter call last week. As for a possible rebound, "we don't see it happening in Q1," he said.
Softness in the SDV market is causing BigBand to forecast first-quarter revenues of $17 million to $20 million -- off from the $26 million Wall Street was anticipating -- with the following quarter expected to be "flat to slightly up" from the first quarter. (See BigBand Posts Q4.)
BigBand thinks things will pick up in the second half of the year, anticipating the SDV "footprint will grow in 2011, including in North America," Bassan-Eskenazi tells Light Reading Cable. "And we'll get our fair share, and perhaps more than our fair share," of that business, he adds.
Others aren't as confident about the timing of a turnaround. Morgan Keegan & Company Inc. Communications Equipment Analyst Simon Leopold envisions "a recovery that may still be several quarters away," meaning a bumpy road ahead for the company and its stock.
A break in new deployments obviously isn't great news for BigBand, a company that has become synonymous with SDV. The situation hasn't been as damaging to edge QAM rivals such as Harmonic Inc. (Nasdaq: HLIT), which has also secured a piece of Comcast's SDV business -- whenever that starts to take off.
Harmonic President and CEO Patrick Harshman mostly shrugged off the effects of an SDV slowdown during his company's call on Thursday, emphasizing that "while edge QAMs certainly support switched digital video… far and away the number-one application for edge QAM is around video-on-demand content. And here we just see a lot of growth opportunity."
Bassan-Eskenazi, meanwhile, says the reason for the break in North America varies by operator, though Leopold speculates that Comcast may be holding off until its Converged Multiservice Access Platform (CMAP) initiative is ready to roll. (See Comcast Proposes Its God Box and More MSOs Back Comcast's Big Box Project .)
Regardless, Bassan-Eskenazi believes BigBand will be ready for that as it gets ready to launch the MSP QAM, a denser version of the product that the vendor has developed with CMAP in mind. BigBand says trials are underway, and sees MSP QAM revenues starting to come in by the second half of 2011. (See BigBand Plots Plans for Comcast's CMAP.)
Although there's no certainty on exactly when North American SDV will pick up again, BigBand is starting to get some traction in Asia.
Jiangsu Broadcasting Television Network Corporation Ltd. of China, already a BigBand customer, is using the company's gear and software to deploy SDV to free up capacity for VoD and high-definition television. (See BigBand Deploys SDV in China.)
In addition to marking BigBand's first SDV deployment outside of North America, it also happens to be a big one -- Jiangsu Cable serves about 17 million subscribers. BigBand's total SDV footprint currently stands at 37 million households passed.
BigBand isn't saying how long that deployment will take or when Jiangsu Cable might become a 10 percent customer, though it believes the first wave of "meaningful revenue" from the deal will start to come in late this year and in early 2012.
And how long that revenue runway will extend is hard to see. It took Time Warner Cable Inc. (NYSE: TWC), BigBand's largest customer (TWC represented 20 percent of BigBand revenues in the fourth quarter) several years to get SDV deployed across most of its footprint.
Bassan-Eskenazi also expects other international MSOs to follow suit, though he believes more deals will come out of the Asia/Pacific region before any in Europe come online.
— Jeff Baumgartner, Site Editor, Light Reading Cable