News summary for 7/26/07

Thu, 07/26/2007 - 10:28am

Comcast taps Arris, Harmonic eQAMs for switched video
By Mike Robuck

Comcast’s second quarter earnings report served notice that Arris and Harmonic edge QAMs were selected for the MSO’s switched digital broadcast deployments. Comcast notified Arris and Harmonic on Friday that they were the winners in the edge QAM derby, with the first application being switched digital broadcast, otherwise known as switched digital video.

“I was positively surprised by the Arris win,” said Brian Coyne, an analyst with Friedman, Billings, Ramsey Group. “Harmonic is the big incumbent in terms of edge QAMs, so they might get out of the gate a little faster, but given the fact that these edge QAMs are still in field testing, it’s too early to speculate on who will win the market share.”

Edge QAMs allow cable operators to share bandwidth across QAMs for services that will eventually include HD, VOD, Internet access and telephony.

“We are extremely honored to have been selected as a qualified vendor for next- generation edge QAM applications,” said Mike Caldwell, Arris’ senior director product management. “The Arris D5 is a versatile platform that supports QAM sharing for such service extensions as HD, SDV and VOD. Its modular architecture allows scaled deployments in any size system with a cost-effective roadmap to higher densities and performance.”

According to analyst Anton Wahlman, the selection of Arris and Harmonic “suggests that Comcast is moving forward with at least one of its early trial partners, Motorola and C-COR. Our guess would be Motorola, which has the complementary set-top software.”

To date, BigBand Networks has been the early mover and most widely deployed vendor in the switched broadcast arena, but the edge QAM selections could reduce BigBand’s role in Comcast’s overall deployment, according to Needham & Company analyst Anton Wahlman.

Comcast profit surges to 28 percent on sales of telephony, cable
By Mike Robuck

Comcast’s earnings report this morning is sure to raise a few eyebrows on Wall Street as second-quarter profit rose 28 percent.

"We are again reporting double-digit growth in cable revenue, our 28th consecutive quarter of double-digit OCF growth and our fourth consecutive quarter of record-breaking RGU additions,” said Brian Roberts, chairman and CEO of Comcast Corp., in a prepared statement.

Philadelphia-based Comcast added 823,000 new digital-video customers – the highest level of quarterly digital additions in company history – with 59 percent of its video subscribers signed on for digital services by the end of the quarter. The company’s digital penetration rate was 48 percent over the same time frame last year. On the other end, Comcast did lose 95,000 basic cable customers in the quarter for a total of 24.1 million customers.

Pushed along by the FCC’s July 1 deadline for separable security, Comcast also installed a record 2.1 million digital set-top boxes in the second quarter of 2007, which was roughly equal to what it deployed in the previous six months combined.

Video revenue increased 7 percent to $4.5 billion in the second quarter, reflecting growth in digital cable customers and increased demand for digital features including on- demand, digital video recorders (DVR) and high-definition television (HDTV), as well as higher basic cable pricing.

The nation’s largest cable company added 671,000 digital phone customers to surpass the 3 million mark of subscribers for its Comcast Digital Voice service. The telephony service is now marketed to 38 million homes representing 79 percent of Comcast’s footprint.

Comcast’s phone revenue increased 98 percent to $420 million in the second quarter, which is a $264 million increase in CDV revenues from the prior year as a result of the significant growth in subscribers. The increase in phone revenue was somewhat offset by a $56 million, or 46 percent, decline in circuit-switched phone revenues as the number of circuit-switched phone customers continued to decline as Comcast focuses on marketing CDV service in most markets.

Over on the broadband side of the ledger, Comcast added 330,000 high-speed Internet subscribers during the second quarter and its penetration now exceeds 26 percent.

High-speed Internet revenues increased 20 percent to $1.6 billion, reflecting a 1.9 million, or 18 percent, increase in subscribers from the prior year.

Comcast’s triple play bundle also helped its net income increase from $460 million to $588 million. The company’s average monthly revenue per customer went up 11 percent to $101.02  compared to $90.76 in the same quarter a year ago.

Arris cruising on triple play, SMB business 
By Brian Santo

Arris Group reported increased revenue and a modestly lower net profit in its second quarter of 2007, as compared to a year ago. The company has been profiting from product lines that help its cable industry customers provide the triple play and provide services for small and medium businesses. Arris said it anticipates that will be the case “for many years into the future.”

A key element of future success will undoubtedly be Arris’ recent selection by Comcast to provide edge QAMs for Comcast’s imminent rollout of switched digital video (see accompanying story “Comcast taps Arris…”).

Arris reported Q2 revenue of $252.7 million, up 14.9 percent from Q2 2006, and also up 7.4 percent from the immediately preceding quarter. Net profit in the quarter was $23.3 million, compared to $24.8 million a year ago.

Broadband product revenues were down to $77.4 million in the second quarter of 2007 as compared to $98.8 million in the second quarter of 2006, which the company attributed to the previously anticipated and disclosed decline of CBR telephony product sales.

According to analyst Anton Wahlman, Arris’ dependence on VoIP cable modems increased during the quarter, while the CMTS-centric business saw a decline. “We believe this decline was due to what we wrote about three months ago: An expensive swap-out of CMTS equipment at Time Warner Cable and perhaps also another account, Cablevision,” Wahlman wrote. “In other words, Arris is giving up near-term financial benefit for a larger market share in a couple of key accounts. This may just be the right thing to do for the longer term, but it is not helping the EPS right now.”

Bob Stanzione, Arris chairman & CEO, said, “As we enter the second half of 2007, our overall business looks very promising as our customers introduce new bundled service offerings to their customers and prepare to enter the small and medium-sized business markets with ARRIS products.

"Increasing competitive pressure on our customers, demands for more speed driven by new applications and services and demand for higher reliability and service standards for superior user experience are expected to sustain capital spending in the industry,” Stanzione added.

SA, OpenTV to run Dutch interactive HD service 
By Brian Santo

Dutch cable operator Casema will deliver its new high definition, interactive digital television services using Scientific Atlanta’s Explorer 8455DVB, incorporating STMicroelectronics’ 7109 chipset, and running middleware supplied by OpenTV.

The HD PVR, with a dual tuner, is being marketed through retail channels. It will support an advanced HD electronic program guide (EPG) with integrated video-on-demand services. Irdeto conditional access will secure Casema's digital roll out.

"With the aggressive timeline we have put in place for deployment, it is of paramount importance that our key vendors have solid experience in launching complex projects," said Walter Blom, CFO of Casema. "OpenTV has demonstrated this know-how not only in Europe, but around the world."

Casema reports having 1.4 million subscribers in the Netherlands.

Sprint teams with Google to enrich WiMAX experience
By Brian Santo

Sprint’s forthcoming mobile WiMAX service will feature a portal from Google. The two expect to collaborate on developing new mobility and location-assisted services.

The companies said that Sprint network bandwidth, location detection, and presence capabilities will be matched with Google's communications suite, which includes Gmail, Google Calendar and Google Talk services.

Sprint said it will provide open standard application programming interfaces (APIs) to Sprint's partners and the Internet developer community to create customized products for browsable devices, facilitating the delivery of personalized and interactive services to consumer, business, public safety and government customers. These services will be available in a variety of WiMAX embedded devices, including connection cards, stand-alone modems, laptop computers and consumer electronics devices such as personal media players, mobile Internet devices, gaming devices and phones.

Eventually, the WiMAX service will be available in vehicles for navigation information, news and entertainment.

Sprint plans WiMAX test service in the Chicago, Baltimore and Washington D.C. areas by year-end 2007. Commercial service is expected to be available in a number of markets starting April 2008 and cover 100 million people by year-end 2008 in conjunction with a planned partnership with Clearwire.

Helio remains a drag on EarthLink
By Brian Santo

Continuing to shed subscribers, and weighed down by a cellular phone joint venture that is still not performing up to expectations, EarthLink reported second quarter revenue was down 6 percent from a year ago to $312.2 million, which contributed to a Q2 net loss of $16 million, compared to a year-ago gain of $16 million.

The company is now down to 4.1 million total subscribers, from 5.1 million a year ago.

The revenue decrease was driven primarily by declines in the company’s consumer services, partially offset by growth in business services. EarthLink lost 177,000 net subscribers (not including the previously announced removal of 753,000 Embarq subscribers) compared to the first quarter of 2007.

Helio, the company’s cell phone venture with SK Telecom, met its goal of signing up 100,000 subscribers, but Helio alone lost $83 million. Meanwhile, the company said, its New Edge Networks unit, acquired last year, is still not contributing much to the bottom line and won’t be expected to for several more quarters.

Despite that, the company insisted its core data business is providing robust cash generation, and that satisfactory financial results can be achieved by focusing the company’s business strategy and “sizing our cost structure to fit our current business,” according to EarthLink President and CEO Rolla P. Huff.
Harmonic to buy Rhozet; Q2 sales up 34 percent
By Brian Santo

Harmonic Inc. will acquire Rhozet Corp., a privately-held company based in Santa Clara, Calif., that offers software-based universal transcoding solutions that facilitate the creation of multi-format video for Internet, mobile and broadcast applications. The purchase price is $15.5 million.

The move automatically brings Harmonic's presence into the online video service provisioning market, where Rhozet's transcoding solutions are today in use by, MSN and Yahoo!, among others.

Harmonic also expects to use Rhozet’s transcoding technology to enable its current customers to create and deliver Internet and mobile video programming.

The Rhozet product line includes Carbon Coder, a stand-alone software transcoding application, and Carbon Server, an enterprise-level distributed transcoding management application. This scalable solution is designed to allow users to start with a single system that can be expanded to a large transcoding server farm, and includes features such as load balancing and failover protection for maximum reliability.

Separately, the company was selected by Comcast to provide edge QAMs for Comcast’s imminent rollout of switched digital video (see accompanying story, “Comcast taps Arris, Harmonic eQAMs...").

Harmonic said second quarter sales were $71.3 million, up 34 percent from $53.3 million in the second quarter of 2006. The company recorded a profit of $6.2 million, compared to a $2.9 million loss a year ago.

"We are pleased with our sales and earnings growth in the first six months of 2007, as well as our improved gross margins and inventory management, and our strong bookings in the second quarter of 2007," said Patrick Harshman, president and CEO.

AT&T extends agreement with Covad
By Mike Robuck

Covad Communications and AT&T announced they would extend the term of the line sharing agreement between the two companies.

The extension guarantees access to AT&T copper and remote-terminal facilities for new Covad line share customers through May 2009. The agreement also calls for commercial access in the former BellSouth footprint through the same time frame.

Line sharing allows Covad to deploy its suite of broadband services on the same line that customers use for their voice phone services.

“We are pleased to extend and enhance our line sharing agreement with AT&T,” said Charles Hoffman, Covad president and chief executive officer, in a prepared statement. "This agreement highlights the important relationship Covad has with AT&T, our largest customer."

According to a press release, Covad and AT&T also resolved a number of disputes but didn’t provide details on what the disputes were.

Broadband Briefs for 7/26/07

* Vecima passes shipment benchmarks
Vecima Networks said that as of June 30 (the end of its fiscal year), it had sold and delivered more than 100,000 QAM modulator channels and more than 200,000 CMTS upconverter modules. Sumit Kumar, vice president of corporate strategy, said, "Vecima's best in class RF expertise, innovative technological portfolio, and experienced pedigree of high-volume, quality manufacturing is evidenced in the tremendous volume of products we have shipped both under OEM relationships with top tier networking vendors and through Vecima branded sales directly to the world's largest cable MSOs."

* Clearwire promotes Saw to CTO, Kauser to retire
By Mike Robuck

Clearwire announced today that John Saw was promoted to CTO effective Aug. 1. Current CTO Nick Kauser, a co-founder of the company with Chairman Craig McCaw, will retire but will remain on the company’s board of directors. Saw has served as Clearwire’s vice president of engineering since the company’s foundation in 2003.


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