Comcast Corporation (CMCSA - Analyst Report) has entered into a share warrant deal with Harmonic Inc. (HLIT - Snapshot Report) . The warrant will allow Comcast to purchase up to a 10% stake in Harmonic at a fixed rate of $4.76 per share, dependent upon the performance of certain operational metrics like product milestones and sales target. This is the third similar warrant agreement Comcast has entered into this year after the deals with ARRIS International plc (ARRS - Analyst Report) and Universal Electronics Inc. These agreements reflect Comcast’s focus on virtualized networking in its cable research and development (R&D).
Traditionally, cable operators like Comcast have been dependent on hardware-based infrastructure for their services. With the increasing demand for new Internet-based services for retail and business customers, it will become tougher for cable operators using hardware infrastructure to meet demand in the future. However, Harmonic’s software-based CableOS solution will help Comcast achieve scalability, agility and operational cost savings.
The Bottom Line
Comcast is striving to push for R&D on its cable based infrastructure. With an aim to seamlessly launch DOCSIS 3.1-based Gigabit Internet services, Comcast is on the lookout for software-based solutions that will allow it to deliver services at a lower cost. Notably, Comcast’s Gigabit Internet services will face serious competition from Alphabet Inc.’s Google Fiber. In the wake of such threats, we believe Comcast’s agreement with Harmonic bodes well for its long-term plans.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>