The expected disruption from the emergence of virtualized cable-access technology, along with migration by operators to Distributed Access Architecture, has finally arrived.
Last week, Harmonic said a $50 million deal with an unnamed “European MSO” client for its CableOS software product, which virtualizes the Converged Cable Access Platform (CCAP), is on track to begin volume deployments in the third quarter.
And in July, a “different international operator” signed a five-year contract with Harmonic to supply DAA gear worth $55 million, the the San Jose, California-based technology company said.
This followed Harmonic’s announcement earlier in July that its long-anticipated big CableOS deal with Comcast had finally come through, to the tune of $175 million.
CableOS — which replaces large proprietary appliances, including the cable-modem termination system (CMTS), with off-the-shelf x86 servers — is now commercially deployed by 16 cable operators, Harmonic said, serving 780,000 connected cable modems worldwide.
“It is increasingly clear that the cable access market is beginning to make a major pivot towards these virtualized CMTS distributed access architectures,” Harmonic CEO Patrick Harshman said. “And let me be clear, Harmonic is determined to take advantage of this opportunity not only by leading technologically, but to be the global market-share leader.”
Arris, Cisco Systems and Casa Systems have been the market-share leaders in a cable access business valued by Dell’Oro Group at $1.5 billion in 2018. But the research company, pre-eminent at gauging the cable-access market, has predicted for some time that Harmonic’s bold, prescient move into virtualization and DAA would put a dent in the current market dynamics.
Casa Systems was the first to feel the impact. The company’s stock stabilized, but not before enduring a roller-coaster drop of around 15% on the NASDAQ, initiated when Raymond James analyst Simon Leopold downgraded Casa stock to “underperform.”
James speculated that one of the international operators rendering big recent orders from Harmonic was Liberty Global, a major Casa client.
Happily for Casa, its stock shot up again later in the week, following its own second quarter earnings call. Revenue of $52.1 million was off from the $68.7 million reported for Q2 2018, but it represented a 47% uptick over the moribund first quarter of this year.
Importantly, Casa chairman and CEO Jerry Guo said his company is making progress with visualization and DAA.
“Our cable trials increased in the quarter by 53%, the vast majority of which was driven by existing and new consumer interest in our DAA, virtual CCAP core and new [broadband network module] products,” Guo said.