Harmonic Swings to Profit on HD Demand

SUNNYVALE, CALIF.: Harmonic swung to a profit in the second quarter on demand for high-definition equipment. The company reported net income of $4.4 million on revenues of $95.5 million for the quarter ending July 2. Net loss for the year-ago period was $7.9 million on revenues of $81.3 million. Harmonic’s second-quarter bookings were $104 million, up 28 percent from a year ago.

“Across our customer base, we’ve started to see a whole new encoder upgrade cycle where our latest generation HD and standard-definition encoders are being purchased to replace existing encoders, opening up bandwidth for new HD channels in the process.” Harmonic’s Patrick Harshman said. “This replacement cycle started to play out for us in the second quarter and will be a key opportunity for us going forward.”

International sales represented nearly half of Harmonic’s net revenues; and more than half were attributed to cable customers. Telco, broadcast and other customers accounted for 17 percent of sales.

Non-GAAP net income was $9.1 million or 8 cents a share, exceeding analyst expectations. Non-GAAP was calculated by excluding acquisition and severance costs, among other items. Harmonic agreed in may to acquire Omneon for $190 million in cash plus 17.1 million shares of Harmonic stock at the May 5 closing price.

The deal is expected to close within the next few months. Harshman said 2011 manufacturing cost synergies of $8 million to $10 million had been identified for the combined companies. He said more than 50 meetings had been held with Omneon customers.

“There is no question that our customers are in agreement with our strategic vision that the market is heading towards the convergence of video production, play out and delivery,” he said.

Bookings for Omneon during the first six months of the year were $57.8 million, up 19 percent year-over-year. Omneon is on track to generate full-year revenues of $120 million to $125 million, up about 18 percent from 2009.

Harmonic is on track to generate full-year 2010 revenues of $370 million to $375 million. It finished the second quarter with $188 million in cash and equivalents, and long-term liabilities of nearly $67 million, compared to $152 million and $55 million as of Dec. 31, 2009.

Harmonic reported 2Q10 results July 29, boosting the stock (NASDAQ: HLIT) from $5.97 to more than $7. Shares of Harmonic were trading this morning at $6.80, up 7 percent year-to-date.
-- Deborah D. McAdams