Time Warner Cable Delays OpenTV Rollout
Mike Hayashi, the MSO's senior vice president of advanced technology and engineering, alluded to such a delay in May during The Cable Show, but OpenTV CEO Alan Guggenheim confirmed the situation last Thursday (Aug. 2) during the vendor's second-quarter conference call. (See OpenTV Loss Widens in Q2.)
Last July, OpenTV said Time Warner Cable would tap the company's Core 2.0 middleware to ensure legacy Motorola digital set-top boxes could run the MSO's in-house guide and navigation system. Although most Time Warner Cable systems are based on the Scientific Atlanta platform, the MSO is looking to OpenTV to help it bridge its smaller legacy Motorola footprint as it migrates to the OpenCable platform. (See Goodbye, OCAP .)
Originally, Time Warner Cable's biggest Motorola market was Houston, but that system has since been swapped to Comcast Corp. (Nasdaq: CMCSA, CMCSK). Today, Time Warner's primary Motorola pocket is in the Los Angeles area, which includes systems acquired from the divvying up of Adelphia Communications. (See Adelphia Acquisition Completes.)
Analysts estimate that Time Warner has 3.5 million to 4 million Motorola boxes deployed. As of June 30, the MSO had 13.4 million basic video subs and 7.7 million digital customers.
OpenTV originally forecast that deployments with Time Warner Cable would begin as early as 2006. At the time of the announcement, the multiyear deal, which covers middleware and other applications yet to be disclosed, was billed as OpenTV's first major foothold in the U.S. cable market.
Guggenheim said the delay will not affect OpenTV's revenue or guidance projections, though the company does acknowledge that about 80 percent of its revenues originate from its middleware business. OpenTV has shipped more than 92 million copes of its middleware.
During the call, Guggenheim said the adjustment in the deployment timeline was due in part to other projects that had a higher priority level at the MSO, including the deployment of switched digital video.
Time Warner Cable did not have an official comment on the matter before our deadline.
"While this gives us an opportunity to deliver additional products to Time Warner, it means that the commercial launch timing will need to be pushed back to 2008," Guggenheim said, but he was not more specific.
In a research note, B. Riley & Co. Inc. analyst Ali Mogharabi said his firm remains confident that Time Warner will begin to launch advanced OpenTV-enabled Motorola set-tops within the next six to 12 months.
Guggenheim further downplayed the significance of the delay by saying it will also give OpenTV more deployment opportunities in international markets that use the Motorola digital set-top platform.
Investors continued to punish OpenTV in the wake of its second-quarter revenue miss. Those shares closed Monday at $1.32 each, down 34 cents (20.48%).
B. Riley reiterated a Buy rating on OpenTV, and set a new price target of $3.30 per share, citing what it believed to be a delay in revenue recognition for the vendor's second quarter.
— Jeff Baumgartner, Site Editor, Cable Digital News