Add BigBand Networks, an IPTV gear maker to the list of technology companies looking to tap the public markets. Morgan Stanley and Merrill Lynch will act as joint book-running managers for the offering. Jefferies, Cowen and ThinkEquity Partners are co-managers of the offering.
Though it lacks the sizzle of some of the social networks, BigBand is part of a growing number of telecom/networking companies that are benefitting from the transition to all-IP networking. This sector’s offerings have done well over past 12 months.
Cbeyond (VoIP) and Optium (Optical Components) are two such examples, getting market valuation of around $850 and $650 million respectively. Cbeyond is up 2.5 times its offering price, while Optium is up over 30 percent since its IPO less than seven weeks ago.
Against such a backdrop, the odds of BigBand being able to tap the public markets look good, though I wonder if they can raise the rumored $120 million they want to get from the IPO market. BigBand makes
a software platform systems that allows service providers to offer triple play services – video, voice and data – over coaxial, fiber and copper networks. A bulk of BigBand’s sales comes from Verizon, Time Warner Cable, Comcast, Cox and Adelphia.
- Time Warner Cable accounted for 12% of revenues in the nine months ended September 30, 2006.
- Verizon accounted for 27% of net revenues in the nine months ended September 30, 2006.
- Comcast accounted for 4% of net revenues in the nine months ended September 30, 2006.
- Cox accounted for 13% of net revenues in the nine months ended September 30, 2006
The Redwood City, Calif.-based company started operations in December 1998. In June 2004, the company acquired the high-speed data equipment BAS division of ADC Telecommunications for around $25 million. For nine months ending September 30, 2006, BigBand had sales of around $113 million and a net loss of about $66,000.
They compete with Motorola, Arris, Harmonic, Motorola, Scientific Atlanta (a division of Cisco Systems), SeaChange, Tandberg Television, Terayon Communication Systems and a plethora of startups. in the video delivery part of the business.
Despite all the good stuff, the big red flag in our opinion is the Chinese operation where things haven’t been precisely pristine.
The investigation, which was completed in December 2006, found numerous instances in which resellers of our product applications in China, with the understanding and approval of our China personnel, agreed to provide technical support, extended warranty terms and potentially other undefined terms without proper documentation and without communicating these arrangements to our legal and finance departments. As a result, we have deferred approximately $4.8 million in revenue from customers in China, which will be recognized in future periods if we satisfy all of the elements of our revenue recognition criteria.
BigBand is not the only company with China-related problems, but the situation warrants monitoring.