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Optical/IP

RGB Ramps Up Against Rivals

The video switching market is heating up. As BigBand Networks Inc. (Nasdaq: BBND) reportedly preps for a long-rumored IPO in 2007, upstart RGB Networks Inc. is nipping at its heels, claiming solid sales growth.

In a recent announcement, RGB Networks said that it shipped its one-thousandth video processor product at the end of November. It's a notable milestone for the video switching startup, even more so considering that RGB's shipments have increased 50 percent over the last six months, according to company sources.

During its first six months of volume shipments, RGB moved 400 units out the door, generating approximately $9 million in revenue. Over the next six months, shipments climbed to 600 units. RGB CEO Jef Graham says the company is now on track to post approximately $20 million in revenues this year.

As a result, RGB may be picking up ground on larger, more entrenched video equipment providers. In particular, the startup may be closing some distance on beleaguered Terayon Communication Systems Inc. .

But catching up with such other leading cable gear vendors as BigBand will likely prove much tougher for RGB.

With a headstart of several years in the market, BigBand reportedly will post some $180 million in revenues this year, mostly from its video processing products. BigBand, which has been clocking contract wins consistently in the past few years, has enjoyed notable success in China as well as with major U.S. cable operators.

Indeed, BigBand officials hope that this total will support an IPO sometime soon. The company is reportedly preparing for an IPO on Nasdaq in early 2007 that would raise about $120 million from the flotation of about 25 percent of its stock. Such an IPO would value the company just shy of $500 million. BigBand has raised more than $100 million in VC funding to date. (See BigBand Reportedly Ready to File IPO .)

In its uphill battle against such larger video equipment suppliers as BigBand, Terayon, and Tandberg Television , RGB is counting on a growing lineup of video products.

RGB's Broadcast Network Processor (BNP) product -- which handles video grooming, statistical multiplexing, transrating, and splicing -- accounts for the lion's share of the company's volume to date. The 1RU "pizza box" can process up to 512 concurrent MPEG-2 video streams.

More recently, RGB introduced its new Modular Media Converter (MMC). This product performs ASI-to-Gigabit Ethernet conversion.

Next on the RGB roadmap: a universal edge QAM solution that will support 128 QAMs per RU and be M-CMTS compliant. RGB expects to release this product in the first quarter. All of the company's products run on the same FPGA-programmable hardware and ship in the same 1RU form factor.

RGB is also betting that it will continue to receive benefits from its distribution partnership with cable manufacturing titan Motorola Inc. (NYSE: MOT).

Thanks at least in part to its Motorola connection, RGB's cable customers in the U.S. and Canada now include Comcast Corp. (Nasdaq: CMCSA, CMCSK), Time Warner Cable Inc. (NYSE: TWC), Cox Communications Inc. , Charter Communications Inc. , Shaw Communications Inc. , Bright House Networks , Cogeco Communications (Toronto: CCA), and Vidéotron Telecom Ltd. In South America, Megacable Comunicaciones and VTR Globalcom S.A. are key accounts.

RGB was started by the founder of Imedia, the very same video processing startup acquired by Terayon in 1999 for $100 million. That Imedia solution remains at the heart of Terayon's still-popular CherryPicker product line.

— Michael Harris, Chief Analyst, Cable Digital News

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