Mystery MSO slows Quantenna, Motley Fool suggests it’s Comcast

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 $50.1 million, growing 50% from the previous year on the back of strong shipments of Wave 2 offerings and legacy 802.11n products. 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 10 Gbps wireless chips at a “key service provider.”

Investor site The Motley Fool, which owns shares in Quantenna, reports that this large cable MSO is Comcast, but we know that Comcast uses wireless technology from newcomer Plume and Qualcomm, and has even taken a shareholding in Plume, taking a different approach to mesh networking compared to rival AT&T.

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-AP 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 CES back in January, Comcast promised by the end of this year that it would offer software allowing both the consumer and a remote help desk to control how WiFi is operating to all 15 million Xfinity homes. At three APs per home, that should be some 45 million 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 taking Plume over to become a Comcast subsidiary, triggered by Comcast after a period and based on sales to other networks at that point.

However, Quantenna executives noted this week that more than one vendor is involved in the deployment at this large cable MSO. 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.

Charter is a much more likely fit as the mystery “large cable MSO” in our opinion, as the operator holds shares in set top maker Arris, which in turn has an affection for Quantenna chips – leading us to this possible conclusion. However, Arris is also known to use 3×3 WiFi chips from Broadcom, so nothing is a certainty here.

Quantenna CEO Sam Heidari said in the company’s earnings call this 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 slow-down in the deployment schedule. This accounts for the majority of the estimated Q4 decline.” Either way, someone big enough that when it has slowed down and not stopped a deployment, it is sufficient to take Quantenna from a profit to a loss.

Quantenna 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 $40 million and $42 million.”

Faultline Online Reporter believes that if the large cable enigma turns out to be neither Charter or Comcast, then there is little point shouting the account from the rooftops, unless it makes an unlikely appearance at Liberty Global in Europe, which uses Celeno hardware and software in its home gateways.

Profit at Quantenna also enjoyed a healthy climb in the last quarter, rising 45.4% to $24.5 million.