The DAA revolution is coming, Harmonic insists, it’s just being delayed a quarter or two due to some integration issues occurring with the company’s largest clients.
That was the message put forth during Harmonic’s first-quarter earnings call Monday. The technology vendor’s virtualized cable access technology, which it calls CableOS, is one of the most closely watched product lines in the cable industry right now, threatening to upend the hegemony enjoyed by CommScope-owned Arris, Cisco and Casa Systems.
Harmonic said that 670,000 cable customers are getting their network service through CableOS right now in markets mostly in the U.S. and Europe, a 24% uptick over the first quarter of 2018.
However, the company’s Q1 revenue from cable access products was only $12.9 million, down considerably from the $18.5 million generated in the first quarter of last year.
Harmonic’s stock cratered more than 5% following Monday’s call, with investment analysts concerned about the company’s ability to live up to full-year guidance of $100 million - $130 million in cable access revenue.
For his part, Harmonic CEO Patrick Harshman said he expects CableOS revenue to start ramping up quickly starting in the second quarter. Harmonic has loosely identified four Tier 1 clients in North America and Europe as being in various phases of testing CableOS, with one of those customers widely suspected to be Comcast.
“There was a couple of major architectural change decisions made by our lead customers,” Harshman said. “And going into the beginning of the year, frankly, there was a little bit of uncertainty about the exact timeframe that those could be implemented and how we would kind of get back on track. But the good news is all that work is just about done. And we feel as though we're largely currently getting back on track.”
One investment analysts asked, might there be unforeseen competitive forces actually causing these delays?
“We don't know what we don't know,” Harshman conceded. “We have not heard of anything else being demoed in the lab, successfully and competitively. It’s prudent not to be over-confident. But it’s hard to imagine, frankly.”
Numerous operators, including Comcast, are aggressively moving to Distributed Access Architecture (DAA), pushing fiber deeper into the network and moving network functions out of the plant and closer to customers. This process walks hand in hand with virtualization of network functions like Cable Modem Termination System (CMTS). Meanwhile, a number of Tier 2 & 3 clients aren’t necessarily migrating their networks to DAA, Harmonic said, but are rather simply subbing in virtualized components as they swap out DOCSIS 3.0 network infrastructure for the newer DOCSIS 3.1 standard.
