Published 15th November 2017
By Thomas Flanagan
While the semiconductor world comes to terms with what would be the biggest tech acquisition in history as Broadcom circles Qualcomm, WiFi chip maker Quantenna Communications posted record revenue for the third quarter of $50.1m, growing 50% from the previous year on the back of strong shipments of 802.11ac Wave 2 offerings and legacy 802.11n products.
Profit at Quantenna also enjoyed a healthy climb in the last quarter, rising 45.4% to $24.5m. Yet guidance for the next quarter caused Quantenna’s stock price to tumble as much as 35.4% in trading this week, as the company laid out a grim outlook for the next quarter – triggered by the delayed deployment of 10Gbps wireless chips at a “key service provider”.
The chip provider’s CEO Sam Heidari said on the company’s earnings call last week: “Our primary challenge is that we are facing a headwind in the deployment of our Wave 3 10G product for a large cable MSO. It has been hard to gauge its initial deployment trend on both the upside and downside in early stages. However, we experienced a near-term slowdown in the deployment schedule. This accounts for the majority of the estimated Q4 decline.”
The chip firm’s CFO Sean Sobers added: “During the fourth quarter our cable MSO has slowed its deployment of our Wave 3 products and we are seeing softness in one of our customer deployments in Wave 2. This is coupled with a long expected decline in our legacy 11n product. Taking this into consideration we expect fourth quarter revenue to be between $40m and $42m.”
Investor site The Motley Fool, which owns shares in Quantenna, reported that this large customer is Comcast, although the US cableco is known to use wireless technology from newcomer Plume (in which it has taken a stake) and Qualcomm.
The fact that Quantenna recently licensed mesh software from AirTies, which is a rival to Plume, coupled with the knowledge that Comcast’s Xfinity routers use Qualcomm Atheros chips, makes it hard for us to accept that Comcast is in the process of switching out both its chips and its multi-access point mesh software system in favor of Quantenna. Furthermore, Comcast’s cloud-based control and management solution is fed data by Qualcomm’s Mesh Networking platform.
At the Consumer Electronics Show back in January, Comcast promised that, by the end of this year, it would offer software allowing both the consumer and a remote help desk to control how WiFi is operating to all 15m Xfinity homes. At three APs per home, that should be some 45m chips deployed by Comcast over the coming years and fresh software at all of them this year.
People close to Comcast’s dealings with Plume have suggested that the deal includes a provision for buying Plume and making it a Comcast subsidiary, based on sales to other networks at that point.
Charter is a far more likely fit as the mystery cableco, in our opinion, as the operator holds shares in set-top maker Arris, which in turn has an affection for Quantenna chips. However, Arris is also known to use 3×3 WiFi chips from Broadcom, so nothing is a certainty here.
Quantenna executives noted this week that more than one vendor is involved in the deployment at the cableco in question. Both Quantenna and Comcast have been late arriving to mesh software and are just two of many companies increasingly looking at intelligent multi-AP WiFi, outside of pure hardware improvement, by licensing third party software – one of the key trends of the past two years or so.