BigBand guidance disappoints

Merrill Lynch cut its target price for the share from $6 to $3.50, while reiterating its "Buy" recommendation.

Broadband networking solutions provider BigBand Networks Inc. (Nasdaq:BBND) beat analysts' revenue and profit forecasts for the fourth quarter of 2009, despite a 36% drop in revenue, compared with the corresponding quarter of 2008. The company expects its losses to continue in the first quarter, while revenue will be unchanged. The company published its financial report for the fourth quarter and full year of 2009 on Thursday.

BigBand's revenue fell to $34.4 million for the fourth quarter from $54.1 million for the corresponding quarter of 2008. The company beat the analysts' consensus of $33.5 million.

BigBand posted a GAAP-based net loss $1.2 million ($0.02 per share) for the fourth quarter compared with a net profit of $7.3 million for the corresponding quarter.

Non-GAAP net profit fell two-thirds to $3.1 million ($0.04 per share) for the fourth quarter from $10.4 million for the corresponding quarter. The analysts' consensus was $0.01 in earnings per share.

In its guidance, for the first quarter of 2010, BigBand a non-GAAP net loss per share of $0.03-0.05 on $33-35 million revenue. The analysts' consensus is a non-GAAP earnings per share of $0.00 on $35 million revenue.

Merrill Lynch cut its target price for BigBand's share from $6 to $3.50, while reiterating its "Buy" recommendation. The firm cited the slower than expected demand environment and continued weakness in capital expenditures from key service provider customers. Time Warner Inc. (NYSE: TWX) was BigBand's single largest customer, responsible for about 40% of total fourth quarter revenue.

For 2009 as a whole, BigBand posted $139.5 million revenue, down from $185.3 million revenue in 2008. GAAP-based net loss was 6.7 million ($0.10per share), compared with a net profit of $9.8 million in 2008. Non-GAAP net profit fell to $9.3 million ($0.13 per share) from a non-GAAP net profit of $22.8 million.

BigBand's cash flow from operating activities was $11.3 million in the fourth quarter, and it had $171.9 million in cash and cash equivalents at the end of 2009.

BigBand president and CEO Amir Bassan-Eskenazi said, "Our fourth quarter performance marks the positive conclusion to 2009, despite the challenging macroeconomic environment. In 2010, we expect revenues to grow at approximately 10% despite the cautious capital spending indicated by our customers. Video is at the core of our customers’ business strategy, and we believe a larger portion of capital budgets will be allocated to digital video networking over time."

BigBand's share rose 3.5% on Friday to $2.93, giving a market cap of $194 million. The share fell 3.4% in after-hours trading, after the company published the financial report.

Published by Globes [online], Israel business news - www.globes-online.com - on February 7, 2010

© Copyright of Globes Publisher Itonut (1983) Ltd. 2010

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