BigBand Networks Announces Third Quarter Results and Restructuring Plan

Business Wire, Oct 30, 2007

Appoints Chief Operating Officer; Announces Decision to Retire Cuda CMTS Platform

REDWOOD CITY, Calif. -- BigBand Networks, Inc., (NASDAQ:BBND) today announced financial results for the three and nine months ended September 30, 2007.

Revenues for the third quarter of 2007 were $38.5 million, a decrease of 10% from the third quarter of 2006. GAAP net loss for the third quarter of 2007 was $12.2 million, or $(0.21) per diluted share compared to GAAP net income of $1.6 million, or $0.03 per diluted share, in the third quarter of 2006. GAAP gross margins for the third quarter of 2007 were 36% compared to 52% in the third quarter of 2006. In the third quarter of 2007, the Company's GAAP operating loss was $12.9 million, compared to an operating profit of $2.9 million in the third quarter of 2006.

GAAP results for the third quarter of 2007 include $3.2 million in stock-based compensation expense, $143,000 in amortization of intangibles, and $5.8 million in fixed assets and inventory charges associated with the retirement of the Cuda CMTS platform. In the third quarter of 2006, the Company incurred $0.6 million in stock-based compensation expense, $143,000 in amortization of intangibles and $1.2 million in preferred stock warrant expense. Non-GAAP results exclude such elements. A reconciliation of GAAP and non-GAAP results is included as part of this release as well as on the investor relations section of the Company's website.

On a non-GAAP basis, the Company had a net loss of $2.7 million, or $0.05 per diluted share, in the third quarter of 2007, compared to net income of $3.5 million, or $0.06 per diluted share in the third quarter of 2006. Non-GAAP gross margins were 51.1% for the third quarter of 2007 compared to 52.0% in the third quarter of 2006. Non-GAAP operating loss for the third quarter of 2007 was $3.8 million as compared to a profit of $3.6 million in the third quarter of 2006.

In addition, BigBand announced a restructuring plan designed to realign resources and significantly increase its efforts on video networking. As part of this plan, the Company will reduce its workforce by 15% and retire its Cuda CMTS platform.

As part of the Company's restructuring efforts, David Heard has been appointed chief operating officer. Heard was previously general manager of product operations and will now assume combined responsibility for research & development, marketing, sales, services and operations. Heard joined BigBand earlier in 2007, bringing with him experience in leadership positions at a number of data and telecom companies, including Tekelec, Lucent, AT&T and Somera Communications.

"Since our revised guidance announcement, we have re-evaluated our business, reviewed our market opportunities and conferred with our customers," commented Amir Bassan-Eskenazi, president and CEO of BigBand Networks. "We have decided to focus on our unique core competency -- video -- and no longer commit resources to the Cuda CMTS platform. In addition, we will reduce our workforce across the company to more closely align spending with near-term revenue opportunities. While our current operating challenges will take some time to work through, we expect to emerge from the next few quarters as a stronger, more focused company."

Concluded Bassan-Eskenazi, "We believe that switched digital video, edge QAM and Telco TV offer BigBand a significant opportunity for growth over the coming years and that addressable advertising and IPTV will create additional opportunities. We continue to be selected for a broad range of switched digital video deployments by major MSO customers. In the third quarter, two additional MSOs selected us for SDV deployments. These recent wins, as well as our long-term TelcoTV opportunities, give us confidence about our long-term growth prospects."

Business Outlook

Based on current expectations, management provided the following outlook for its business in the fourth quarter of 2007:

* Net revenues are anticipated to be in the range of approximately $27 to $33 million.

* GAAP gross margins are anticipated to be in the range of 45% to 48%, which includes approximately $0.4 million in stock-based compensation.

* GAAP operating expenses are anticipated to be in the range of $25.5 to 26.5 million, which includes approximately $2.5 million in stock-based compensation, $143,000 in amortization of intangibles and approximately $0.8 million in litigation-related expenses.

* Additionally, we expect to incur one-time charges associated with the restructuring of our business in the range of $3 to 5 million, which includes employee severance and lease termination costs.

* GAAP provision for income tax is anticipated to be in the range of approximately $0.5 to $0.7 million, and non-GAAP provision for income tax is anticipated to be in the range of approximately $0.2 to $0.4 million.

* Fully diluted weighted average shares are anticipated to be in the range of 58 to 60 million shares.

* This equates to GAAP loss per share in the range of $0.31 to $0.22 and a non-GAAP loss per share in the range of $0.18 to $0.12.