BigBand Marches Toward Public Offering
Hopes to Raise $140M In Rare Video Equipment IPO
By Todd Spangler -- Multichannel News, 1/7/2007 7:00:00 PM
After a year of independent cable-gear vendors heading to the altar with bigger suitors, BigBand Networks apparently wants to remain single: It's poised to be the first video-equipment provider in recent years to go public.
The Redwood City, Calif.-based maker of video-processing and data-networking systems filed for an initial public offering on Dec. 22, seeking to raise up to $140 million. The company didn't disclose the number of shares it intends to issue or the price range.
In an S-1 registration statement filing with the Securities and Exchange Commission, BigBand said it has more than 100 customers worldwide, including the top five U.S. multiple-system operators — Cablevision Systems, Charter Communications, Comcast, Cox Communications and Time Warner Cable.
VERIZON BUSINESS
Perhaps the most interesting detail: Verizon Communications was its biggest single customer for the first nine months of 2006, representing 27% of sales, or about $30 million of BigBand's $113.6 million in revenues for the period.
In the filing, BigBand said it is “currently providing Verizon with a solution that allows both digital and analog transmission of video over fiber-optic lines,” a reference to the telco's FiOS TV service. Verizon expects to continue to aggressively expand the TV offerings in multiple markets in 2007.
BigBand, in fact, relies on a handful of customers for the bulk of its sales. Five service providers accounted for 73% of its revenue for the first nine months of 2006. Some of its smaller customers include Bright House Networks, Cable One, RCN and Wide Open West. Among the risk factors detailed in the filing, BigBand said its growth “is dependent on our ability to sell video products to telephone companies that are increasingly reliant on the delivery of video services to their customers.”
Still, BigBand has been climbing a growth curve: In 2003, it had $21.6 million in sales and an $11.7 million loss. For the full year of 2005, revenues had increased more than fourfold, to $98.0 million, though losses increased to $25.5 million. Headcount grew from 156 at the end of 2003 to 507 as of Sept. 30.
Neil Sequeira, a partner with venture-capital firm General Catalyst Partners, said the competition between cable and phone providers to deliver triple-play services has fueled BigBand's growth. “The telco piece is really helping to drive that,” he said. Sequeira previously was head of technology investments for Time Warner, where he led that company's funding in BigBand.
Sequeira said he expected BigBand to launch its offering sometime in the first quarter — unless, he noted, the company is acquired before then.
GOING SOLO
BigBand's IPO route stands out amid a series of recent acquisitions, which have been the more common exit strategy for small vendors demonstrating traction or interesting products. Last year, video-on-demand startup Arroyo Video Solutions was nabbed by Cisco Systems, while Motorola's deals included those for VOD specialist Broadbus Technologies and IPTV equipment vendor Tut Systems.
Founded in December 1998, BigBand makes equipment that handles real-time video processing and switching, and provides features including bandwidth management, digital simulcast and advertising insertion. On the data side, it sells a cable-modem termination system (CMTS) to provide high-speed Internet services, and has developed a modular CMTS it expects to begin commercial deployment in the first half of 2007.
The company has also been a pioneer in the category of switched digital video, which, instead of sending every video channel to subscribers in a network segment, delivers certain channels only when someone requests them.
BigBand has raised more than $100 million from investors that include Cedar Fund, Charles River Ventures, Eastward Capital Partners, Evergreen Venture Partners, Lauder Partners, Meritech Capital Partners, Pilot House Ventures, Redpoint Ventures, STAR Ventures and Time Warner. Another shareholder is ADC Telecommunications; BigBand acquired ADC's high-speed data BAS equipment division in June 2004.
BigBand chalked up its first profitable quarter for the three months ended Sept. 30. For the first nine months of 2006, it had net revenues of $113.6 million and a net loss of $66,000, compared with revenues of $71.2 million and a loss of $19.7 million for the same period a year earlier.
BigBand said it intends to use some of the net proceeds from the IPO to pay off $14 million in debt with Silicon Valley Bank.
The firms underwriting BigBand's IPO are Morgan Stanley, Jefferies & Co., Cowen & Co., ThinkEquity Partners and Merrill Lynch & Co.
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