Concurrent Talks Up VOD Opportunities

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Concurrent Computer Corp.-which lost nearly half its stock value in three days after it restated revenue and earnings for the fiscal second quarter-began to circle the wagons last week, holding a conference call and offering some additional detail on customer installations to ease investor fears.

Concurrent plunged between Dec. 28 and Jan. 2, after announcing it would miss revenue targets for its video-on-demand products because of an order delay from a major MSO. As a result of that order delay-pushed back to the fiscal third quarter-Concurrent restated VOD revenue for the period to between $1.7 million and $1.9 million from $7 million to $7.5 million.

Consolidated revenue for the period will be $13.8 million to $14.2 million, versus $18 million to $18.9 million. Its net loss will nearly double, to between 7 cents and 8 cents per share, as opposed to 4 cents per share.

Concurrent stock dropped by about half, or $3.94 per share, on Dec. 27 to close at $4 each. It began to rebound in subsequent trading, climbing to $4.72 and $5.38 on Dec. 28 and Dec. 29, respectively.

The stock lost some ground on Jan. 2, closing at $4.34. In midday trading on Jan. 3, Concurrent was down 22 cents, to $4.13.

Concurrent CEO Jack Bryant provided analysts with a little more detail about the order delay on the conference call, but again refused to divulge the customer's name. Bryant also provided some additional information regarding VOD deployment in two major markets, again declining to reveal the customer's name.

Bryant said the order delay from the major MSO-which most analysts believe to be either Time Warner Cable or Cox Communications Inc., two of Concurrent's largest customers-came as a total surprise to him and was due mainly to delays in the corporate approval process.

Bryant said he was in constant contact with the customer and was assured until Dec. 26 that the shipments would be accepted for delivery before the end of the year.

"Each operator is different, but in this case there was a lot of activity at the local system level and the corporate level that we needed to manage," Bryant said in the conference call. "We had repeated assurances that they desired to have the equipment shipped before the end of the year."

Bryant stressed that despite the order delay, Concurrent is still on track to meet its VOD revenue target for its current fiscal year, between $32 million and $40 million.

"This would have been a great opportunity to reset a more conservative revenue estimate, but we chose not to," Bryant said. "There is a tremendous amount of opportunities that we are pursuing in preparation for new VOD launch plans in 2001."

Concurrent made a point of announcing last week that Time Warner Cable commercially launched VOD service using its "MediaHawk" equipment in the Tampa Bay, Fla., area, expanding the service to 130,000 subscribers.

Bryant tried to illustrate the opportunities by offering a little more detailed information regarding one Concurrent cable customer, which he again said he could not name.

This customer is launching VOD in two markets, the first of which has 300,000 to 325,000 basic subscribers and between 85,000 and 90,000 digital-video subscribers. Bryant said Concurrent had already shipped 29 servers to that market in the first and second quarters.

In the second market, Concurrent had shipped 10 servers in the second quarter and will ship another 14 servers in the third quarter. The market has between 650,000 and 675,000 basic subscribers and between 120,000 and 130,000 digital subscribers.

The system also uses Motorola Broadband Communications Sector "DCT-2000" digital boxes, the first Motorola deployment for Concurrent.

Although there are some fears that cable operators will trim their capital budgets in an effort to keep costs down, Bryant said Concurrent should not be affected. He added that because VOD requires relatively little capital expenditure for deployment-especially compared to other services-and represents a potentially significant revenue stream, operators are likely to keep their VOD spending plans stable.

"The question and concern is, 'What is capex going to look like from the cable operators over the next 12 months?'" said Morgan Keegan Inc. analyst Murray Arenson. "When you listen to cable operators talk about where their growth is going to come from, VOD is always among the top items. It does bring in revenue and it differentiates them from DBS.

"And now to install servers and roll out service after all of the upgrades have been made is a relatively small piece of the [capex] puzzle."

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