Harmonic sees brighter future

Broadband equipment vendor Harmonic, hammered by cable and satellite cutbacks in the third and fourth quarters of last year, sees some hope that business will pick up this year, a company executive said at the Fifth Annual Needham Growth Conference in New York City this morning.

Robin Dickson, Harmonic’s CFO, said the company was blindsided by a combination of third quarter events that dulled the luster of a positive first half last year. Those events, including ongoing cable cutbacks in Europe and the restructuring around financially troubled Adelphia Communications, will impact the fourth quarter results the company plans to announce later this month.

Still, he said, “there are some events in the industry that at least give us some room to be positive next year.”

Harmonic serves the entire telecommunications space--although its biggest customers are cable operators--and Dickson sees shifting fortunes in every area.

The company this week announced a deal with Softbank Broadmedia Corp. to deliver multichannel broadcast television and video-on-demand over DSL to Japanese subscribers, starting in Tokyo this year.

While indicative of a video-over-DSL market that is primarily international, Dickson said there are indications that the market in the U.S. could pick up as telcos face “aggressive cable telephone players.”

“Some telcos are seeing video as a potential competitive strategy that is part of the bundle that they will offer residential customers in order to be able to compete with cable,” Dickson said.

Another area of potential improvement is digital encoding for direct broadcast satellite local channel delivery now that the federal government spiked an EchoStar-DirecTV merger.

“It seems to us that DirecTV and EchoStar will need to get back to business,” he said. “Cable has not been standing still in the last year and they will need to move on topics like local channels, HDTV and so on.”

Finally, he said, he sees cable business picking up as Comcast upgrades the AT&T Broadband systems it acquired.

“Comcast was a 10% customer for us both in Q3 and Q2 of last year, the first time that has happened, and we think that has positioned us very well,” Dickson said. “The completion of Comcast-AT&T Broadband is a very positive thing for us.”

In all, Dickson said, the signs are the most positive that the company has seen since it was blasted in last year’s third quarter.

“The third quarter was a tough one. We don’t promise the fourth one will be much better. We look to our very strong customer base--Adelphia and others notwithstanding--to help us through,” he said.