BigBand Rebounds

Shares in digital video specialist BigBand Networks Inc. (Nasdaq: BBND) gained back some lost ground Tuesday, shooting to a high of $14.99 and closing at $14.75 after an analyst at Merrill Lynch & Co. Inc. upgraded the stock to 'Buy' from 'Neutral.'

While the stock drifted a little Wednesday, down $0.20, or 1.4 percent, to $14.55, that's still a marked improvement on the sub-$14 prices of the past few weeks, and the $13.12 closing price Monday this week.

The recent decline stems in part from nervousness about the vendor's position with two large service providers: Verizon Communications Inc. (NYSE: VZ) and Comcast Corp. (Nasdaq: CMCSA, CMCSK). (See BigBand Shares on Downward Swing.)

But analysts who cover the stock, including Tal Liani at Merrill Lynch, believe those concerns are overblown.

Liani, who has set a $17 price target on BigBand shares, reportedly noted that the company is positioned to generate 30 percent annual revenue growth.

ThinkEquity LLC analyst Anton Wahlman issued a note Monday that reiterated a rating of 'Accumulate,' but lowered the firm's 12-month price target on BigBand from $19 to $16.

ThinkEquity said it expects BigBand to report $54.4 million in revenues and earnings per share of 6 cents for the second quarter, in-line with estimates.

As for the Verizon situation, there is concern that BigBand could lose that account as the telco transitions to IPTV.

"While we agree that this is a concern, and that there is an argument to make that this could happen, we also believe that this transition to IPTV will take at least a year to happen," Wahlman noted, adding that BigBand will also be competing for that business with the likes of Motorola Inc. (NYSE: MOT) and Cisco Systems Inc. (Nasdaq: CSCO). "Being the incumbent, we believe that [BigBand] will be in the running for that next-generation business."

Investor nervousness has also been traced to Comcast's decision to team with Motorola, C-COR Corp. (Nasdaq: CCBL), Scientific Atlanta , and Harmonic Inc. (Nasdaq: HLIT) for the MSO's early trial work with switched digital video technology. (See Comcast Puts SDV Vendors to the Test.)

ThinkEquity believes Comcast may have added BigBand to the mix recently, and that the MSO could make some final decisions as early as the end of 2007, with deployments starting to ramp up in 2008.

— Jeff Baumgartner, Site Editor, Cable Digital News

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