Harmonic, a provider of video delivery solutions to broadcast, cable, satellite, Internet, mobile and telco video service providers, is hoping it will continue to gain strong business across the board over the next year. New areas of business such as solutions in the on-demand area could prove to be even more lucrative going forward. Harmonic CEO Patrick Harshman discussed the challenges for the company and what will drive Harmonic’s growth.

Harshman: In late 2008, we really began to see a slowdown in customer spending. That was really across the board, so geographically and across different customer segments we serve, including the satellite industry. Early in the first quarter this year, we started to see a rebound, and then we saw a substantial improvement in the second quarter but still not at the level of the 2008 business. I am not sure that our customer businesses were dramatically impacted but from what we have seen, we have some a psychology of caution and conservatism across the board. That has impacted capital spending and plans. As we enter the second part of the year, we are clearly in a much healthier environment than we were six-to-nine months ago. But it has still not recovered by any means.

Harshman: I am not sure about that. I think there is just a fear from international players on what the currency impacts might be as well as consumers who are impacted, etc. Consumers may want to downgrade or discontinue service. There was a concern across the board. I don’t think it has gone. As unemployment levels rise, consumer spending goes down, so management boards have been more conservative. But precautionary measures have been taken in light of this.

 

Harshman: We have been asked for a long time by our traditional encoder customers to bring a contribution and distribution solution to the party. A lot of our satellite customers who are involved with the creation of content, contribution encoding is very important for them as is the distribution of that content. So this was a missing piece of our portfolio. The deal was as simple as filling that hole. We get an R&D team and a product line focused on that contribution and distribution area. We also liked the fact that the Scopus business had a strong footprint in emerging markets. They had strong business in India last year. Russia and the former CIS territories had also been strong markets for the Scopus business. They were present in Africa, also. We are targeting emerging markets, and this acquisition was a good fit with that. We are bringing contribution and distribution to our traditional Harmonic customers and use their sales force and partnerships to bring our products also.
 

Harshman: We still have a somewhat cautious view on the economic recovery in 2010. We have far more questions and answers, but we are bullish on many emerging markets. We are relatively optimistic about growth opportunities here. China is potentially a strong market for us. We have a lot of strategic focus in Latin America, also.
    On a technology front, it might seem to more cynical observers at IBC that the mantra of anytime, anywhere has become somewhat of a cliché, but with the popularity of the iPhone and the investment going into wireless access services, the success of Web services like Hulu, I really do think over the next 12 months you are going to see substantial moves in this area. There will be progress on the technical and commercial side. We are involved in a number of exciting trials which we think will become more substantial contributors to our business over the next 12 months. In the satellite area, we see quite aggressive moves to bring on-demand capability over broadband, leveraging content and consumer relationships, to offer innovative streaming and download services to hybrid set-top boxes. We see some interesting moves in terms of leveraging content relationships and making that more available on other devices.

 

Harshman: I think we are in the midst of a slow evolution. Core encoding is still vital. We are still in the relatively early days in the transition from MPEG-2 to MPEG-4 as well as SD to HD. I had a meeting with a major Asian satellite operator who is at the front edge of both of those markets. But we are in the early days if I look at both of those markets. I think our core encoding business has a lot of legs. That being said, we do expect the on-demand piece of what we do, which is a smaller piece, will see relative growth. We are looking for organic growth in the on-demand segment, but we always have our eye on things. If we found the right technology company with the right positioning, we could look to do something.