MPEG-4 set-top delays hurt Tut’s second quarter

Delays in the availability of MPEG-4 set-top boxes and their middleware led to the second-quarter revenue shortfall reported by equipment vendor Tut Systems yesterday, Chairman and CEO Sal D'Auria said in a speech at an investor conference.

In a statement issued Tuesday by Tut, D’Auria said the shortfall occurred because “a number of potential new IOC/PTT customers extended their IPTV purchase decisions into later periods.”

But at an investor conference later the same day, he said delays in MPEG-4 set-top boxes and their middleware were to blame for pushing those customer purchase decisions back.

“Relative to [sales of] new video head-ends, we saw a significant slowdown, primarily due to MPEG-4 set-top box and accompanying middleware availability,” D'Auria said. “This has slowed down customers in making their decisions. They will still make those decisions once [the set-tops are] available, and we think they’ll be available in the [third or fourth quarter]. That was probably the biggest impact on us in the quarter and was the major cause of the shortfall.”

“I wouldn't call out the middleware as the root cause,” a Tut spokesman said in an e-mail reply to Telephony. “[Middleware vendors] are making logical business decisions based on the roadmaps and capabilities of [set-top box] players.”

“This is not an issue specific to one [middleware] company in particular,” the spokesman added. “We've seen the issue across multiple set top-box manufacturers and multiple middleware players. We'd be remiss to point the finger at any one company, and we believe all are well on their way to delivering commercial quality solutions in the near term.”

Tut most often uses middleware from Myrio (owned by Siemens), Minerva Networks, and Kasenna.

D'Auria also blamed the second-quarter shortfall on “difficulties” “ramping” Tut’s new T2 product for multitenant broadband systems and a “limited release” of its high-definition (HD) set-top. But he voiced confidence in Tut’s HD product, which he said could bring in $20 million to $30 million in its first year.

“We literally have millions of dollars of backlog waiting for the HD upgrade,” D’Auria said. “The first customer we showed our new HD product to said, ‘Wow, that is really fabulous, and we’ll give you an order in the next 48 hours.’ And they did. We weren’t able to fulfill that in [the second quarter] and will fulfill it in [the third quarter]. And while they were buying that upgrade, they also put in an order for $400,000 of other miscellaneous items.”

“Our funnel is getting bigger,” D'Auria said of Tut’s core video head-end business. “Things have been pushed out, but they have not gone away.”