Some equipment vendors are feeling the pinch now that Verizon is winding down the expansion of the FiOS fiber-to-the-home network (see The FiOS Finish Line).
According to BigBand Networks’ 10-K annual report issued this month, most of the video-equipment vendor’s 25% year-to-year revenue decline in 2009 was attributable to a drop-off in spending by Verizon on FiOS TV buildout.
Overall, BigBand’s net revenue decreased 24.7% to $139.5 million for 2009, compared with $185.3 million for 2008 (see BigBand Sales Fall, As SDV Rollouts Hit 33 Million Homes). Video product revenue fell $53.5 million in 2009 — including a $35.1 million drop in telco TV revenue after “a slowdown in the deployment schedule of our largest Telco TV customer,” BigBand said.
“For 2009, Verizon represented slightly less than 20% of our net revenues compared to slightly less than 30% in 2008. Verizon’s percentage revenue contribution declined for 2009 from the prior year due to a decline in order volume associated with a slower deployment schedule in Verizon’s video network,” BigBand said in the 10-K.
Time Warner Cable, by contrast, represented “slightly more than 30% of our net revenues in 2009 compared to slightly less than 30% in 2008, due to Time Warner Cable’s deployment schedule of large Switched Digital Video projects” (see Time Warner Cable To Take Switched Video To NYC, LA, Dallas).
With Verizon, BigBand has a master purchase agreement effective through Dec. 31, 2010. Among other things, according to BigBand’s 10-K, the contract “provides that our TelcoTV solution will be the exclusive edge modulation solution for Verizon, subject to performance against certain previously negotiated service metrics. In addition, the agreement provides for pricing (including previously negotiated annual price reductions), the terms of a five-year hardware and software warranty and the terms of the five-year service commitment.”
As BigBand noted, “In general, our master purchase agreements do not guarantee amounts of purchases by customers. Thus, our business is more dependent on the ordering patterns of our customers, rather than the terms of the master purchase agreements with these customers.”