Symmetricom Clocks Out of Video Monitoring
That looks to be the case after the company revealed Wednesday that it's put its struggling "Quality of Experience" video-monitoring business on the block, and claims to have a potential buyer lined up. Symmetricom made mention of the decision as it issued second-quarter numbers, noting that the QoE unit is now being classified as a "discontinued operation." (See Symmetricom Posts Q2.)
Company CEO David Cote said that Symmetricom's "currently engaged in active negotiations with the potential buyer," but didn't identify the possible suitor. "We are committed to supporting our customers and employees through any transition period."
He said Symmetricom's exiting QoE so it can focus on strengthening its core business, which centers on atomic clocks, network synchronization gear, and timing systems for wireline and wireless networks. It also makes a key timing interface server for a "modular" cable modem termination system (CMTS) architecture that physically separates the upstream and downstream components. (See Symmetricom Gets Docsis OK.)
The flagship of Symmetricom's QoE unit is V-Factor, a platform that analyzes video service quality and pinpoints problems by probing encoders, transcoders, and set-tops. Symmetricom got into that game in 2007, when it paid $16 million for QoSmetrics. (See Symmetricom Buys QOSmetrics .)
The following debut of V-Factor placed Symmetricom in competition with video-monitoring specialists like IneoQuest Technologies Inc. and Mixed Signals Inc.
But V-Factor and its associated products have been a minor contributor at Symmetricom. The QoE product line brought in just over $1 million during fiscal 2009, versus $220 million for company-wide revenues. Orange (NYSE: FTE) is the only announced V-Factor customer, but Symmetricom's VP of finance and investor relations said more than 20 companies, including "several top cable companies in the US" are using the company's QoE products. A number of others are in active trials, he added. (See Symmetricom Beefs Up Video Monitoring, Symmetricom Buffs Up V-Factor, and Symmetricom Expands Cable Play.)
Morgan Keegan & Company Inc. analyst Simon Leopold says the move to shed the QoE unit was anticipated, calling the impact "modest," given that costs at the QoE unit had previously "been a drag of roughly $0.01 per quarter."
Cote said Symmetricom has been reducing its investment in the QoE segment over the last 12 to 18 months. Madden said there would be no layoffs at Symmetricom as a result of its decision to exit the QoE business.
Leopold welcomes the decision, believing that QoE simply wasn't a good fit for the company. "I was never thrilled with that business," he says, conceding that there's money to be made in video monitoring, but "I didn't believe they [Symmetricom] were the right people to do it."
News of the sales effort came amid solid second-quarter results, with AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) as Symmetricom's largest customers, though neither represented 10 percent or more of the vendor's business.
Symmetricom posted second-quarter sales of $56.9 million, better than the $53.1 million expected by Wall Street. Earnings hit 10 cents per share, versus 6 cents expected by analysts. Symmetricom also raised its revenue forecast for fiscal-year 2010 to the range of $220 million to $235 million, up from $210 million to $230 million.
On the cable front, Symmetricom said sales of its timing gear for Cisco Systems Inc. (Nasdaq: CSCO)'s M-CMTS were particularly strong in Europe.
— Jeff Baumgartner, Site Editor, Cable Digital News