C-COR Divests Outside Plant Unit
Under the deal announced today, C-COR is selling the unit to Source Broadband Services LLC, a closely held Georgia-based firm that provides fulfillment and technical services to cable operators. C-COR says it will transfer certain customer contracts, assets, contractual obligations, and liabilities tied to its Outside Plant division to Source Broadband when the deal is closed sometime in the next 45 days.
The division C-COR is handing over provides technology services, construction, and installation services for the outside plant. The company is keeping its professional integration design services arm, which helps operators tie together video-on-demand (VOD); digital and targeted advertising; and OSS systems.
Oppenheimer & Co. Inc. analyst Alan Bezoza thinks the sale is a good move for C-COR, noting that the low-margin services business had been dilutive to earnings per share for the prior three quarters, dragging nearly 4 cents per share from the bottom line.
"We feel that was a solid move by management as it allows the company (and investors) to focus on its high-margin cable infrastructure equipment and software technology opportunities," Bezoza said, in a research note issued today.
Oppenheimer maintained its "buy" rating on C-COR shares and a target price of $17. C-COR shares were up 26 cents (1.8%) to $14.94 in early trading today.
The sale marks C-COR's latest move to shift or shed assets. In August, Sigma Systems signed on to assume produce development control of some OSS assets, including C-COR's Service Activation Manager (SAM) and Service Provisioning Manager (SPM). The companies also agreed to co-market OSS systems integrated with Sigma's Service Management Platform to cable operators worldwide.
On a conference call today, Woodle said C-COR began to consider options for its Outside Plant division after it became clear that the traditional technology services component of that business evolved into an equipment installation service after MSOs completed their network rebuilds.
As that trend emerged, it became apparent to C-COR that its Outside Plant unit "was not as strategically aligned as in the past," Woodle said. C-COR then began to weigh two options: either "downscale" that portion of the business by not bidding on some jobs, or selling it off. Upon deciding on the latter, Woodle said C-COR attracted four bidders before settling on the offer from Source Broadband Services.
"Source Broadband is a venture backed organization that can focus on this business," he added.
C-COR also said it expects revenue from continuing operations of between $71 million and $74 million for its fiscal fourth quarter, with profits of 15 cents to 19 cents per share. Both figures match the company's prior expectations.
— Jeff Baumgartner, Site Editor, Cable Digital News