Casa Systems charges into uncharted territory
A new day has dawned at Casa Systems.
Revenues from Casa's fixed telco and wireless business have been inching closer to its bread-and-butter cable business in recent quarters amid the vendor's strategy to diversify its sales channels. In the third quarter of 2020, Casa's fixed telco and wireless sales didn't just match its cable sales – they blew right by them.
In a first for Casa, a vendor that originally focused on hybrid fiber/coax (HFC) network products and technologies, revenues for its fixed telco and wireless business (collectively labeled "carrier sales" by Casa) represented the majority of revenues, at 60%, compared to 40% for cable product sales. The change has been sudden, as cable represented almost 100% of Casa sales just over a year ago, and 51% in Q2 2020.
That revenue shift, aided by Casa's 2019 acquisition of fixed wireless specialist NetComm, validates the strategic direction of the company, according to CEO Jerry Guo. "Q3 marked a very major turning point for us, with carrier sales exceeding cable sales by a good margin," he said.
And turning that corner did not come at the expense of Casa's cable business, which has returned to a degree of stability in recent quarters following a rocky period marked by sluggish MSO spending. Casa pulled down Q3 2020 cable sales of $42.1 million ($32.91 million in hardware, plus $12 million from services)
Guo said much of Casa's cable action continues to center on hardware purchases – primarily chassis and line cards for integrated Converged Cable Access Platform (CCAPs) – as operators fulfill near-term capacity demands during the pandemic using node splits and the deployments of more upstream ports.
"Our belief is there's a lot of upstream bandwidth congestion, and it's hard to just relieve that congestion through license purchases," Guo said.
Casa, like other suppliers, has not yet seen a big uptick in cable operator deployments of distributed access architectures (DAA) or virtual CCAP technologies. "We don't feel confident that they will be doing very large-scale deployment activities in 2021," Guo said. "Right now they are very comfortable with what they have. A lot of [cable operators] are not in a big hurry to make huge capex increase decisions."
Meanwhile, Casa's wireless and telco business has started to ramp up at an accelerated rate, despite the expected run-ins on the mobility side against larger companies such as Ericsson, Huawei, Nokia and Cisco. "It's not a blip," Guo said of this revenue trend.
Casa's wireless revenues rose 40%, to $29.2 million, driven by a mix of 4G and 5G cloud-native core, fixed wireless, CPE, small cell core and small cell radio products. Fixed telco product revenues soared 92%, to $34.5 million.
Network convergence, CBRS action
Casa's revenue shift is also reflective of how the company's original core industry – cable – has changed in recent years. Cable operators are still buying HFC equipment and beefing up the capacity of their DOCSIS networks, but are likewise deploying PON in newbuilds and other targeted situations while also exploring the deployment of fixed wireless and private wireless networks following the recent CBRS spectrum auction. All of that is leading to a grander trend toward network and service convergence.
Casa has also seen CBRS network activity pick up.
"We have engaged with many MSOs that are looking at taking advantage of CBRS spectrum they've got to deploy fixed wireless," Guo said, noting that interest among cable operators and other carriers tends to focus on mobile private networks and enterprise networks. "That seems to be a pretty significant opportunity we are seeing right now."
Casa, which supplies both radios and customer premises equipment for CBRS networks, hasn't identified which operators have come calling. However, Charter Communications, one of the vendor's top customers, was among a group of Tier 1 US cable operators that won CBRS spectrum in the recent FCC auction.
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— Jeff Baumgartner, Senior Editor, Light Reading