Highlighting cable’s coming shift toward more virtualized, distributed access network architectures, Harmonic’s Cable Edge business dropped 12% year-over-year, and 47% on a sequential basis in Q3.
Harmonic shares were down 21.5%, to $4.20 each, in morning trading Thursday, the day after the company posted Q3 results that missed financial targets.
The dip in that part of Harmonic’s business arrived as MSO’s “pivoted faster than we anticipated” to the vendor’s soon-to-be-released virtual Converged Cable Access Platform, company CEO Patrick Harshman said Wednesday on the company’s Q3 earnings call. That platform, called CableOS, virtualizes the functions of the CMTS and edge QAM in software running on off-the-shelf servers.
“Consequently demand for our legacy Cable Edge products softened significantly during the quarter,” Harshman said. “On the Cable Edge side of our business, the year is turning out to be even more transformational. Entering the year we knew that the traditional edge QAM market was in decline. Instead of deciding to go home, we decided to go big.”
Harmonic introduced CableOS in September, and later announced a warrants agreement with Comcast that will factor in future sales of products, including the vendor’s new vCCAP.
Harmonic is starting CableOS shipments in Q4, with accelerated deployments expected throughout 2017. Harmonic’s competitors in the CCAP sector include Arris, Cisco Systems, Casa Systems, Huawei and Vecima, which have all introduced vCCAP products or have them on their roadmaps.
On the video end of the business, Harshman said the company is on track to achieve synergy targets tied to its acquisition of Thomson Video Networks. He said Harmonic has also locked in a video cloud win with an unnamed tier 1 North American service provider that includes over-the-top streaming, cloud DVR and dynamic ad insertion.
Harshman said Harmonic is also “finally seeing real signs of life” for 4K and high dynamic range channel deployments.
“Despite the late arrival of 4K, Harmonic continue to invest in enabling R&D and ecosystem integration work, and consequently we are well positioned to take advantage of the 4K wave,” he said.
Harmonic posted Q3 sales of $104.4 million, missing consensus of $107.4 million, and guidance for $105 million to $110 million, Raymond James Simon Leopold said in a research note distributed Thursday. Harmonic also posted non-GAAP loss of 1 cent per share, missing consensus of 3 cents per share and guidance of 1 to 3 cents.
The company expects Q4 sales of $106 million to $111 million, versus consensus of $115 million, noted Leopold, who maintained his “underperform” rating on the stock.
“Despite expectations for a loaded 4Q16 driven by the expected ramp of its new CableOS platform, the 4Q16 guidance implies that the uptake for the new cable edge platform may be more gradual than initially hoped,” Leopold wrote.
Weekly digest of streaming and OTT industry news
Thank you for signing up to Multichannel News. You will receive a verification email shortly.
There was a problem. Please refresh the page and try again.