BigBand Slapped With Downgrades On "Multitude of Uncertainties"

As I noted Thursday night, BigBand Networks (BBND) late Thursday issued a huge third quarter revenue mess, triggering a massive after-hours selling spree that continued Friday morning. The company, which supplies hardware to cable and telco video systems, is suffering from a variety of woes, including slower sales from a major customer, which the Street has identified as Verizon (VZ).

Analysts responded with a flurry of downgrades, but I can’t imagine how anyone who owns the stock is applauding them for their insightful analysis.

Merrill Lynch’s Tal Liani takes on this question Friday morning in a research note in which he downgrades his rating on the stock to Hold from Buy.

“We generally refrain from reacting to temporary hiccups of companies, yet in this case, we believe that the pressure on revenues and profits could sustain for a few more quarters, hence our downgrade,” he writes. “Management feels confident that the scope of its business with Verizon will grow in 2008, yet noted that it lacks clarity and visibility over the timing of order recovery, and at a minimum, the order pressure will be sustained for the remainder of 2007. It also said that the deferral of revenue recognition is related to new switched video deployments, and could persist for a few more quarters.”

Liani says he generally has a higher tolerance for business lumpiness in the cable equipment space, given the typical high level of customer concentration. “However, the multitude of uncertainties hitting BigBand, and especially the lack of clarity on the timing of recovery, lead us to take a more cautious view,” he writes.

And then he writes - I love this part - that “the stock may take a breather in the near term, as investors seek further clarity” (emphasis added).

Comments

[Lisa:]

"we believe that the pressure on revenues and profits could *sustain* for a few more quarters..."

Nice grammar. Further increases my faith in the barn-door analyst who the note...

2007 Oct 01 06:25 AM