Harmonic Stock Drops on Q1 Results, Q2 Outlook

But company says its making progress with Cable OS, its virtual CCAP
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Harmonic shares were down more than 11% Tuesday morning, the day after the video and access network tech company missed its Q1 numbers and offered lowered guidance for the current quarter.

Harmonic posted  sales of $83.5 million, below Wall Street expectations of $93.2 million, up slightly from $81.8 million in the year-ago quarter. The company, which said Q1 sales were affected by softer-than-expected service provider spending in March, also recorded a GAAP net loss in Q1 of $24 million, or 30 cents per diluted share.

The company also forecasted Q2 sales of $95 million to $103 million, and a loss of between 4 cents to zero cents per share, below consensus estimates of $103.6 million and 2 cents.

Among components of its business, video segment revenue was down 29% sequentially, but up 13% year-over-year, while Cable Edge revenues performance as expected.

Speaking Monday on the earnings call, CEO Patrick Harshman said Harmonic is making progress with CableOS, its virtualized form of the Converged Cable Access Platform, with shipments to the vendor’s first major customer currently underway. Harmonic has a warrants agreement with Comcast that ties into CableOS sales and deployment milestones.  

RELATED: Harmonic Virtualizes the CCAP

Looking beyond Q2, “our CableOS outlook for the remainder of 2017 remains positive,” Harshman said, adding that Harmonic expects volume shipments of the product to start in the second half of 2017.  “On the Cable Edge side of the house, we have the industry's first modern virtualized CMTS on the launch pad.”

Regarding live field trials of CableOS, Harshman later said Harmonic has more than five and less than ten currently underway.

Raymond James analyst Simon Leopold maintained his “Underperform” rating on the stock, noting that, despite weaker than anticipated Q1 results, that Harmonic is optimistic about a back end loaded year.

He also stressed that Harmonic will continue to face strong competition from incumbent CCAP players such as Arris, Casa Systems and Cisco Systems as well as relative newcomers such as Nokia and Huawei as MSOs eye distributed CCAP architectures.

Harmonic shares were down 65 cents (11.21%), to $5.15 each in late-morning trading Tuesday.

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