Harmonic ‘On Schedule’ for DOCSIS 3.1 Trials in '15

Multiscreen Video/Cable Edge Supplier Posts Mixed Q1
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Harmonic said it is making positive strides with its Converged Cable Access Platform (CCAP) initiative as it nears DOCSIS 3.1 lab trials.

Harmonic is making “meaningful progress” with CCAP and its centralized DOCSIS 3.1 development program, company president and CEO Patrick Harshman said Tuesday during the company’s first quarter earnings call. “[W]e remain on schedule to enter customer labs with a two-way [DOCSIS] 3.1 solution based on our NSG Pro platform later this year."

The NSG Pro (pictured) started out as a downstream-only, high-density edge QAM, but has since become two-way through the addition of routing, upstream and the cable modem termination system (CMTS) components that morph the product into a fully-integrated CCAP. Harmonic has also developed a "distributed" form of a CCAP called the NSG Exo. 

Harmonic is competing in the CCAP sector and the emerging D3.1 market with several suppliers, including Arris, Cisco Systems, Casa Systems and China’s Huawei. Designed for HFC networks, D3.1 is a CableLabs-specified IP platform designed to support multi-gigabit speeds.

Harshman said NSG Pro sales accounted for more than half of its Cable Edge business for the first time in the first quarter of 2015.

But Q1 was a bit of a mixed bag for Harmonic as it posted record Cable Edge sales but softer video-related sales due in part to a global “investment pause” by service providers as they prepare to adopt next-gen technologies and architectures.

Led by improved demand for the NSG Pro, Cable Edge sales were up $13.8 million, to $34.7 million, sequentially, offsetting a decrease in video sales of $17.7 million.

Despite softness in Harmonic’s video business,  Harshman said the company did begin to see “the first real signs of life for Ultra HD channel deployments,” noting that the company sold its first full-frame live Ultra HD encoders to “several tier one service providers” during the quarter.

“Though Ultra HD is coming slower than we had hoped, there is an unmistakable increase in technology evaluation and trial activity that bodes well for future investment,” he added.

Harmonic posted Q1 sales of $104 million, and earnings of $4.5 million (5 cents per share). Analyst were expecting earnings of 4 cents on revenues of $104 million. Comcast was Harmonic’s sole greater-than-10% customer in the period, accounting for about 20% of revenue.

Harmonic expects Q2 sales of $97 million to $107 million, below Wall Street’s expectation of $109.8 million.

Video sales will likely remain soft until the second half of the year, Raymond James analyst Simon Leopold said in a research note issued Wednesday.

“We believe challenges remain for the Video Products segment as service providers transition towards virtualization and software based video encoding solutions,” he said. “Despite expectations for a rebound, as revenue recognition pushes some sales out to 2H15, we believe that it may take some time for customers to become fully comfortable with completely virtualized, software based encoding solutions.”