Harmonic Leads Tech-Stock Rally

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Cable-technology stocks have been trading like gangbusters
in the past few weeks, led by fiber optic equipment manufacturer Harmonic Inc., which has
seen its shares rise by more than $30 each in the past month.

Harmonic shares rose by more than $6 Aug. 25 to $107 each
-- part of a monthlong run that saw the company's share price increase from $73.44
July 26.

The stock rose another $6 to $113 per share in morning
trading Aug. 26.

CIBC Oppenheimer Corp. analyst James Jungjohann said the
increase in Harmonic shares could be due to several factors, including
better-than-expected earnings, the possibility that it could emerge as an industry
consolidator and the prospect that it could win a large portion of AT&T Broadband
& Internet Services' multiplexer-node business.

Harmonic -- which designs, manufactures and markets digital
and fiber optic systems for delivering video, voice and data over cable, satellite and
wireless networks -- counts AT&T Broadband as one of its largest customers.

"Harmonic has been the rags-to-riches story in the
past nine months," Jungjohann said. "They've gone from little profit to
showing some really good numbers. And they have exposure to AT&T. If consolidation
ever happens, Harmonic has an opportunity to be a player."

In its first quarter ended April 30, Harmonic reported
earnings of $1.3 million, or 10 cents per share, compare with a loss of $18.6 million, or
$1.60 per share, in the same period last year. Sales for the period were up 109 percent to
$37.9 million.

Although Harmonic has seen some of the biggest increases,
other cable-equipment vendors have seen some hefty run-ups in their stock prices in the
past few weeks.

Antec Corp. saw its shares jump $3.50 to $49.69 each Aug.
25, up from $46.25 a day earlier. And cable-box manufacturers like General Instrument
Corp. and Scientific-Atlanta Inc. also have seen their shares rise considerably.

GI stock has risen nearly $10 per share in the past month,
closing at $51.75 Aug. 25, up $1.06. S-A has increased more than $13 since July 26,
closing at $49.81 Aug. 25.

"Everything but ADC [Telecommunications Inc.] and
C-COR.net [Corp.] has been on the rise," Jungjohann said.

Warburg Dillon Read LLC analyst Nikos Theodosopoulos said
another factor in the recent run-up in cable-tech stocks could be that investors are
beginning to look to the equipment sector more carefully as cable operators begin to
deploy new services.

"Investors are becoming more comfortable with
it," he said. "A lot of this stuff is just becoming known."

Theodosopoulos added that fiber optic stocks like Harmonic
have been doing well, so cable-tech stocks may be riding that trend.

"Harmonic is a pure-play company in fiber optic
transmission in cable networks," he said. "If you look at the fiber optic-type
companies in the stock market, all of them are running up very aggressively. It could be
playing into that trend."

He added, "No. 2, there are the fundamentals of the
industry in cable equipment, given the upgrade cycle. There is the argument that the cable
industry will have to invest even more than they planned [to offer new services]."

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