Vendor says pace of rollouts is picking up, but current deployments represent just 5% of the cable modems served by its initial customers.
Harmonic made more progress with "CableOS," its virtualized access network platform for both hybrid fiber/coax (HFC) and fiber-to-the-premises (FTTP) networks, in Q4 2020. But the overall deployment still represents a small fraction of the modems served by those customers.
Harmonic said its cloud native CableOS product was deployed commercially with 44 customers at the end of Q4 2020, up 91% versus the year-ago period, with six more coming on board since the end of Q3 2020. Those deployments covered 2.6 million served cable modems, up roughly 500,000 from the 2.1 million served at the end of Q3 2020.
Deployments of CableOS are expanding, but the current crop represents just 5% of the 50 million-plus modems served by Harmonic's early CableOS customers.
"Regarding customers who have already begun deploying CableOS, we're still at the first inning," Patrick Harshman, Harmonic's CEO, said on Monday's earnings call.
A yet-unnamed tier 1 North American cable operator was among the new CableOS wins in the quarter. Harshman said shipments for that multi-million dollar purchase order are underway. That deal should help Harmonic build what it has established so far in the region with Comcast, Harmonic's marquee CableOS customer in North America.
Harshman said Harmonic generally is seeing the pace of CableOS deployments pick up as the vendor makes improvements to the operationalization of the product and as its customers get more experience under their belts.
"We think they've climbed a tremendous learning curve over the last 12 to 18 months," he said.
The FTTP variant of CableOS is not driving material revenue yet, but several "advanced trials" are underway, Harshman said. Harmonic also believes the product presents some incremental revenue growth opportunities starting in 2022 as some of its cable operator partners in rural parts of the US prepare to move ahead with FTTP deployments linked to Rural Digital Opportunity Fund (RDOF) auction wins.
Financial snapshot
On the financial end, Harmonic posted Q4 cable access revenues of $45.5 million, up 5.8% year-over-year.
Its larger video business pulled in $86 million in Q4, up 8.7% and marking its strongest revenue quarter in the category in two years.
Harmonic added an additional 17 software-as-a-service (SaaS) video customers in Q4, with more than half that are new to the company. Harmonic said it powered more than 50,000 live streaming channels globally at the end of the period, up 15% year-on-year.
For Q1 2021, Harmonic expects cable access segment revenues to be in the range of $36 million to $41 million, outpacing the $24 million generated in Q1 2020. Q1 2021 Video segment revenues are expected to be $61 million to $66 million, ahead of Q1 2020 revenues of $54.4 million.
Update: Harmonic's full year 2021 revenue guidance of $430 million to $465 million was labeled "conservative" by Raymond James analyst Simon Leopold in a research note issued Monday night. For example, he expects Comcast to spend more on CableOS in 2021 than it did in 2020, and for Harmonic to benefit further from a "re-banding" business that includes the reclamation of C-band spectrum for 5G.
He also views Charter Communications as a key prospect for Harmonic this year, with revenue at the operator possibly becoming "meaningful" in 2022. Opportunities at Charter include a potential migration to a virtual Converged Cable Access Platform (vCCAP) to support IP video distribution, using vCCAP for DOCSIS backhaul from mobile cell sites, and tapping into CableOS's FTTP extensions to support Charter's significant RDOF projects, Leopold explained.
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— Jeff Baumgartner, Senior Editor, Light Reading
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