On-demand video may be a booming market, but apparently it hasn’t been kind to Concurrent Computer Corp. lately.
The on-demand video technology provider warned last week that its upcoming quarterly earnings will not meet projections, and recently handed out pink slips to 7% of its work force as part of a restructuring program now under way.
And during a conference call to discuss the company’s situation, CEO Gary Trimm indicated that, while Concurrent isn’t actively pursuing the option, the sale of the entire company or either of its product units is not out of the question. That added fuel to continued speculation of an impending round of Darwinesque consolidation among on-demand gear vendors.
Atlanta-based Concurrent’s revised financial expectations for its fiscal fourth quarter ending June 30 would not be an improvement on the prior quarter’s $20 million revenue mark — instead, revenues will more likely come in between $15 million and $17 million, resulting in a per-share loss between 5 cents and 7 cents. Concurrent will release its final earnings numbers Aug. 11.
The company is blaming the dimmer quarterly results on dropping on-demand server prices and a shortfall in international revenue.
“Despite solid revenues from the continued expansion of J-Com [cable operator Jupiter Communications Co. Ltd.] in Japan, our overall international orders were lower than forecast,” Trimm said. “This was primarily due to project delays in Europe through our supplier agreement with Alcatel and slower than expected expansion in other Asian markets.”
In contrast, Concurrent’s North American sales for its MediaHawk line of on-demand systems came in at expected levels for the quarter, including a major deployment deal with Cox Communications Inc.
“All indications are that worldwide on-demand spending will increase, and we will be able to gain market share due to the high levels of reliability and increased functionality that our MediaHawk systems continue to demonstrate,” Trimm said.
The expected introduction of the MediaHawk 4500 on-demand server later this year will make it the highest-capacity unit, in terms of cost per stream and reliability, Trimm said. With a Linux-based operating system, the server will be able to field 28,800 simultaneous streams at 3.75 Megabits per second apiece and supply 25,000 hours of content storage. It can also take in as many as 2,500 streams per day to supply video for network-based digital video recorder applications.
Elsewhere, Concurrent’s quarterly sales also took a hit because of a delay in a large order for Everstream, its on-demand advertising measurement and reporting software subsidiary. While Concurrent still expects to receive that order, “revenue may be stretched out over several quarters instead of a single lump sum,” Trimm said.
As part of a longer-term effort to cut costs and reposition the company, Concurrent earlier this month laid off 7% of its employees, and Trimm noted there will be further personnel cuts in Concurrent’s worldwide operations and, in particular, its overseas subsidiaries.
That’s part of a second phase of cost-cutting that also will see Concurrent trim operating expenses and costs for goods and services during the next nine months. The net result will be annual savings between $4 million and $6 million.
Concurrent’s financial struggle does reflect fierce competition among a half-dozen major on-demand video systems suppliers, and in recent months rumors have circulated that several are on the sales block. That includes Concurrent, along with newer entries Arroyo Video Solutions Inc. and Broadbus Technologies Inc.
When asked about the possibility of putting all or part of the company up for sale, Trimm indicated that was an option – but not one the company was actively pursuing. Concurrent also offers a separate line of real-time computing products for government and enterprise markets.
“Our board of directors is looking very actively at any alternatives,” Trimm said. “But we don’t have a strategy in place to either split up or try to sell the entire company.”
Others see that consolidation among on-demand video technology providers is likely.
“From what we’re seeing right now, you can’t be just a VOD company,” said Gary Schultz, principal analyst and president of Multimedia Research Group Inc. “You have to be almost married to some middleware companies, content protection or [digital rights management] companies, because at least on the IPTV side — and this is probably going to be more true on the cable side — the different component parts are just too expensive to keep track of. So there is consolidation on the part of multiple companies.”
Among the rumored companies hunting for on-demand technology are Motorola Inc. and Cisco Systems Inc. Of the two, Motorola may have the greater need, Schultz said.
“You look at how Motorola stacks up against Cisco — particularly with some of [Scientific-Atlanta’s] new offerings — and it just has kind of got to happen,” Schultz said.