Calix IPO Talk Resurfaces

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paolo.franzoi 12/5/2012 | 3:10:05 PM

re: Calix IPO Talk Resurfaces
My guess at $250 is based on the AFC revenues and those early revenues had only a small contribution by Embarq. Embarq itself spends over $50M in Acess per annum.

221K does not even equal Adtran's or Tellabs numbers. So, if they are number 2 they need to be over 500K DSL ports.

DSL generally is considered good when you get a 30% take rate compared to POTS. So, please figure that in when you do your calculation. They will take the revenue from the cabinet - no matter who is bending the metal. And tho, Ted Lord is with us no more (may he rest in peace) - they still design their own cabinets.

seven

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paolo.franzoi 12/5/2012 | 3:10:04 PM

re: Calix IPO Talk Resurfaces
OSX,

For Occam, they are best served in the smallest of carriers. They have potentially a nice little business there, but have limited upside. They have no FTTH story and face stiff competition from Calix and others on the IPTV over DSL front. So, they will eat away at the smaller carrier side of Calix's business, but I don't see them exploding into the market.

They have little to no shot at Embarq except as an adjunct to existing Tellabs systems. Embarq did an RFP won by Calix and Entresphere. There seems to be no opportunity for them to force another one.

From my perspective, AFCs GMs were mid-40s, DSCs were mid-20s so that is why I peg Calix's in the middle of that range. Opex supporting all 3 platforms is non-trivial. Remember OSI actually had more customers (not larger ones but more if you count them) than Calix did. So, there is a very diverse installed base. They have to invest some in all those products, because their is no convergence story between them. That leads me to my guesses at their numbers.

seven

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MorningWd 12/5/2012 | 3:10:02 PM

re: Calix IPO Talk Resurfaces I would be very surprised to see Calix's revenues north of $125M. I do, however, now recall the infamous coffee holder patent and agree that they design their own cabinets, so I guess they would at least claim the associated revenue even if the margins on the cabinets are low.

AFC in '97 was raking in big orders from customers like GTE. They were the perfect fit for a niche market, providing an economical small-line size DLC. They were really the only company in this market that had what they offered (hence, they are the only one to have survived from that space). There were huge demands for removing analog carrier in the rural market, as well as CLEC co-locations at that time. Remember Winstar? I don't see Calix in a similar situation at all. They are getting new DSL growth from Tier 2 providers, as well as mom and pop IOC deployments. I don't see entire network upgrades like AFC enjoyed from larger carriers.

If you figure a combo price per port of POTS / DSL around $100, then Calix would have to be selling 2.5M lines per year (do they even make a POTS only card? I'm not sure). If the take rate for DSL is 30%, then why upgrade the existing ~70% POTS-only customers to Calix provided POTS? That seems like a huge waste of existing investment.

If they are managing to pull off $250M+, then congrats to them. I just don't believe it adds up.

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paolo.franzoi 12/5/2012 | 3:10:01 PM

re: Calix IPO Talk Resurfaces
Winstar did not start placing orders with AFC until 1999.

Calix's products do have the full complement of DLC services. Your are quite far off on the price of POTS+DSL in this market.

I believe I am significantly more accurate than you are about these revenues. No way to prove it until they come out with an S-1.

The Access Market in the IOCs has not shrunk. AFC faced competition from Marconi and Nortel. This kept them out of Centurytel, Embarq, Frontier and what is now Windstream. This changed around 2000 as Marconi and Nortel basically abandoned the business. Calix has a major share with all of these customers (Tellabs has most of the rest).

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paolo.franzoi 12/5/2012 | 3:09:44 PM

re: Calix IPO Talk Resurfaces
wanna,

Both Alcatel and Tellabs have such platforms.

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wannadrive 12/5/2012 | 3:09:44 PM

re: Calix IPO Talk Resurfaces Calix passed the $100M revenue mark in 2005. Sources tell me that current revenues are well past $200M. Their press releases would bear this out.

I further believe that IPTV will wash away the typical limits to access revenue that we've seen in the past resulting in continued growth for Calix. Are there any other platforms out there offering a 200GB backplane like the C7? I'm not aware of any at this time and face it, every telco out there is going to be doing IPTV (or selling out). You can't scale IPTV without significant amounts of bandwidth and Calix has got it.

As far as an IPO, Carl Russo will stay private as long as he possibly can seeing no advantage to going public. If he does, he'll have a pretty good reason.

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mocelet 12/5/2012 | 3:09:40 PM

re: Calix IPO Talk Resurfaces
I'm not so sure about the 200G backplane. I've heard that they have some system bottlenecks that limits the full utilization of the backplane.

I agree with the comment on the reason for IPO. Russo wouldn't go public, if he doesn't need $$$ either to further expand product line (or geographic coverage) or to do acquisition. In the latter case, I'd love to hear your thoughts on who would be a good target for Calix:

- Occam: Cheap and non-overlapping customer base.

- Some broadband wireless access company?

- any others?

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3milelake 12/5/2012 | 3:09:14 PM

re: Calix IPO Talk Resurfaces As I work in the BLC business I can tell you all that NO ONE is going to survive selling just DSL or POTS at $100 per port. We see it as low as $30 per port for DSL and $50-60 for POTS. At a combo port level yes...possibly even higher, but not longer term. There will be preessure from some of the Asian shops that will pull combo/dsl ports below $100US. You have to ask, if port prices are falling it means Calix, like the rest of the other vendors, have to sell more ports just to stay flat and sell a huge number to get ahead. It appears Calix makes it's gravy today, selling the C7 as a TDM DLC....an analog GR303 voice only loop carrier and as a DSLAM. NOT as a BLC. But who knows...they aren't that specific...they aren't public....they can say what they like without challenge.

Not sure who posted that Alcatel-Lucent makes a BLC with big 200mg backplane in it...they don't. They make a very fast DSLAM only, but they don't make a box with combo packet voice/data at the port level on it. They have the Lucent Anymedia which is a TDM DLC that has an IP Gateway on it but that is all sunset technology. And more than just Tellabs has a 200mg or bigger backplane...several in fact. And here is the best part...yes the C7 is a 200 mg backplane...but it's a SONET back plane...not pure ethernet. They do Ethernet over SONET complete with overheads. But who gets down to those details at an analyst level?

What I find the most amusing about the dailog on Calix is no one asks "how is it built" and this where most would be shocked to know that the Calix C7 is not really a BLC...they say it is, but they do not covert voice to packet at the port level, they back haul voice in TDM over ethernet and then into a Host terminal C7, to the their Viper blades, and convert the stream to VoiP in H.248 (They do SIP externally and they don't support MGCP at all) In effect, they are a channel bank with DSL bloted on. That's yestertech. OCCAM, Zhone, ADTRAN, Allied T, Tellabs....these are BLCs. They convert the voice stream from copper to VOIP at the port where it enters the network. Why is that key? Well if you buy into the whole IMS (SIP) based model for converged fully interoperable packet voice, then a box built like Calix C7 is, is not one you want in your network. It still requires that you pull all your traffic to a central point before it's converted to packet then sent out. It's really not good for things like ESA (emergency stand alone) in packet because if you lose the host terminal...you loose the whole show. But at a more fundamental level, it means that it can't switch voice calls on the same card or the same box port to port. Only a box that is packet at the port can do this. And by design, C7 never will. That's why they built the E5 and now still have yet to sell/ship it in volume. If you have doubts about this, look at their web site on the products, it clearly shows that voice traffic only goes to the voice switch via a Host C7. This is the Calix critical design flaw.

So while they rant about share, revenue and ports shipped...be leery of what you read. The devil is in the details and they have some nastys sitting waiting. Then again, count on the RBOCs to buy the coolaid everytime...

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850ci 12/5/2012 | 3:09:12 PM

re: Calix IPO Talk Resurfaces It is amazing after all of these years that people still go on the Calix website and claim to know how the switching and backplane architecture of the C7 works. Almost all of your assumptions are incorrect. The C7 is not a TDM box. There are very few if any BLC access products that have a 200Gbps backplane that can deliver voice, video, and data from a single platform over copper AND fiber like the C7. Calix gets a majority of its business from IOCs that do not have hundreds of millions of dollars to upgrade their copper plant to fiber to deliver video. Copper to fiber migration is the sweet spot for Calix and the reason why companies like Alltel and Sprint are banking their future network on them.

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paolo.franzoi 12/5/2012 | 3:09:11 PM

re: Calix IPO Talk Resurfaces
Given your information 850ci, I am surprised that you used old terms when you mean Embarq and Windstream.

As for Calix, the 200G backplane requires a 10G/slot system. Right now, it is a 2.5G/slot and will require replacement of every card in the system to get to 10G/slot.

You are right about their use as a copper platform, but I would say not as a fiber migration one. More of a, instead of fiber one.

seven

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