Casa Systems is aggressively moving ahead on the mobile and wireless front even as its wireline business hits a few speed bumps created by cable operators' infrastructure spending delays as they think over their distributed access architecture (DAA) network strategies.
Casa's big wireless move happened last Thursday (February 21), when it announced a $115 million deal for NetComm Wireless, the fixed wireless networking specialist that has contracts with AT&T, Bell Canada and Australia's NBN Co. Ltd. NetComm, which has about 250 employees, earns approximately 90% of revenue from its fixed wireless business, fiber-to-the-distribution point products and industrial IoT, Scott Bruckner, Casa's senior vice president of strategy and corporate development, said on last week's Q4 2018 earnings call, according to this Seeking Alpha transcript.
In another wireless move, Casa is using this week's Mobile World Congress in Barcelona to introduce a product line that's focused on the emerging, shared 3.5GHz CBRS band, including both Radio Access Network (RAN) and core network components. It partnered with Federated Wireless to use that company's spectrum controller for Spectrum Access System (SAS) services and testing, Casa said. The vendor's CBRS platform is in "active trials," but didn't disclose which service providers are involved, Casa said.
In addition to private LTE services, IoT networks and neutral host set-ups, cable operators also eye CBRS as a way to offload some traffic and offset some of the costs tied to their MVNO deals. Comcast, Altice USA and Charter Communications (one of Casa's top customers), are among the US cable operators conducting CBRS trials.
"This is an important year for Casa in the wireless space, and I am committed to ensuring that we are fully prepared for the very large revenue opportunity in wireless that we see ahead," Jerry Guo, Casa's CEO, said on the call.
Casa doesn't expect its activities involving 5G and CBRS to bring in meaningful revenue from mobile network operator and cable operators until 2020, but does see 2019 being an "active year" with respect to trials and requests for proposal, Guo said. In Q4 Casa had about $20 million in wireless backlog revenue as it awaited final certification and acceptance from customers.
While the NetComm buy and the new CBRS product line-up will help Casa continue its expansion into mobile and wireless, these moves will also enable Casa to put itself on improved competitive footing against the proposed combination of Arris and CommScope. Arris and CommScope, which expect to wrap up their merger by mid-2019, plan to work together to focus on the emerging 5G market and on products and technologies that cover both unlicensed and licensed wireless spectrum. (See Arris Deal 'on Track' to Close by Mid-Year, CommScope CEO Says .)
DAA active, but slower growth than hoped
As Casa shores up its wireless strategy, its cable wireline business hit a rough patch as MSO spending slows while operators pore over DAA migration strategies. The move to DAA will see a more rapid deployment of a new class of remote PHY and remote MACPHY nodes that place more key elements of the network closer to the edge. DAA is designed to reduce some space and power requirements for cable operators and add more capacity to the network.
"The DAA remote PHY business has been very active," Guo said. "However, we believe that the pace of DAA conversions will be slower than originally anticipated."
Following recent years of spending on network and capacity upgrades, several cable operators are "in a digestion period" in the near-term with respect to DAA and other next-steps, Guo said. The move to DAA, "will likely occur as part of a multiyear upgrade process," he added.
Though Casa would like to see more movement in the DAA deployment needle now, it's not standing still. Casa closed and shipped a "major" DAA deal in Q4 that represented almost 17% of revenue, Guo noted. The company is also pushing ahead with a DOCSIS 3.1 rollout in Germany with Vodafone.
The MSO spending slowdown contributed to a 43% drop in Q4 2018 revenue, in line with the Q4 warning Casa issued in mid-January, and a 16% decline for the full year. Casa is likewise taking a conservative view to 2019 guidance as it awaits 5G spending's anticipated climb and MSOs consideration over DAA-related plans; the vendor predicts revenues in the range of $250 million to $300 million. That guidance does not factor in Casa's proposed acquisition of NetComm.
- Casa Systems buys AT&T's fixed wireless equipment supplier for $115M
- How Cable Vendors Could Profit From DAA Upgrades
- Casa Systems Unveils CBRS Line-Up
- Vodafone Germany Taps Casa Systems for DOCSIS 3.1 Network
- Casa's Q4 Sales Come in Light Amid MSO Spending Delays
- CBRS Players Begin to Fret Over Government Shutdown
— Jeff Baumgartner, Senior Editor, Light Reading