Description
c-cor.net supplies rf amplifiers for cable networks. they have a high installed base with service providers Time/Warner, ATT, Adelphia, Charter, and Rogers. Amps are a generic class of equipment for powering, converting, conditioning the signal from fiber head-ends to the residential subscribers in the home (in a hybrid fiber coaxial network). competitors include antec, scientific atlanta, and harmonic lightwave. Amp prices are in a range of $1000 and up depending on complexity of the product. the growth story has been the conversion of services among the multiple system operators (MSO or Cable Providers) to digital cable (multiple more channels, digitalization of signals for increase quality, handling, ease manipulation of content), cable internet, video on demand. Amps need to be upgraded in the field for return signals in cable internet access. the estimate from the company is that system operators domestically are halfway through upgrades but are pausing to fill up the capacity they built in these new offerings before resuming spending. Also Time Warner is in the midst of integrating AOL and have frozen spending. ATT is also spitting into 4 companies and have slowed spending. These should be temporary issues and these large MSOs should resume spending if they want to roll out new services to their complete networks. CCBL is also expanding a line of fiber optic products for cable signals which offer more exciting opportunities into "fiber optic space". A third area is a new network management software they are testing for Time Warner which could command ASP's in the $2-3M area. This software manages network elements to detect quality and fault issues. This could be a huge opportunity in 2H 2001. The valuation is very cheap. $122M in cash (after a $20M buyback) on a market cap of $277M with no debt, yields a $156 enterprise value (or 1/2 sales) and ltm ebitda of $36M yields enterprise value/EBITDA ratio of 4.5 (pretty cheap on absolute and relative basis).
Catalyst
1. Return of cable spending
2. Increase fiber optic product sales
3. new network management opportunity.
4. Establish base of customers (not dot coms)
5. Significant cash balance.