C-COR Recasts Itself for IP-Based, On-Demand World
Buying Spree Positions Vendor to Provide Optical, OSS and Support Solutions

Fresh off a roughly $100 million shopping spree in 2004, C-COR Inc. is betting on the impending switch by cable and phone companies to all-digital and IP-based networks and services.

C-COR, which first made its mark in the cable industry by installing and repairing TV antennas in the 1950s and later focused on RF (radio frequency) cable plant products, is now repositioning itself for an all-digital, on-demand world. In particular, the company is gearing up for the day when video services migrate over first to all-digital systems and then to IP networks, joining high-speed data and voice services. Under a new five-year strategic plan adopted last year, C-COR aims to offer a vast portfolio of network operating software, products and services that both cable and phone companies can use to make their much-anticipated transition to digital, IP networks.

In an interview with Cable Digital News last month, C-COR Chairman and CEO David Woodle said C-COR is trying to ease that critical transition for network operators and "simplify their infrastructure decisions" by providing "a unique range of complete, interoperable access, transport and OSS (operational support system) products and network services." Its expanded roster of products and services covers such key areas as optical packet transport, bandwidth management, subscriber service activation, back office automation, IP video processing, content management and network health monitoring, among others.

"We don't build cars; we build the infrastructure and management of how they run down the highway," Woodle said. "We're trying to build a very effective highway for optical transport. If cable used to be a three-lane highway only for cars, we're building a 10-lane highway that can handle cars, trucks and buses, plus the traffic management system."

This strategic shift to software, services and optical transport is a dramatic one for C-COR, which made its name in RF technology hardware. As recently as 1998, RF amplifiers accounted for a whopping 88% of the company's annual revenue. Even in its latest fiscal year, RF amplifiers generated 46% of all sales.

But Woodle argued that C-COR now has the expertise, tools and manpower to focus mainly on optical infrastructure, back office software and support for high-value services like IP telephony, high-definition TV (HDTV), video-on-demand (VOD) and the like. That's due in large part to the buying binge that he directed last year. In a flurry of deals since last winter, C-COR purchased two OSS software startups (Alopa Networks and Stargus), two optical infrastructure suppliers (Optinel Systems and Lantern Communications), and a VOD server, software and services player (nCUBE Corp.).

C-COR closed the last of the five deals, involving nCUBE, early last month. Just three weeks later, nCUBE produced its first score for its new parent when Charter Communications chose the vendor's on-demand server and nABLE back office management software for the MSO's flagship system in St. Louis. Thanks to the nCUBE pickup, C-COR now provides VOD servers and software for 17 of Charter's markets.

With those deals completed, C-COR carried out a corporate restructuring earlier this month to consolidate its management team, slice duplicative expenses and realign its service offerings. It cut 100 employees and moved around senior executives as it placed its focus on four core areas --comprehensive broadband OSS, optical packet transport, global expert consulting services and IP video processing.

In doing so, C-COR appeared to be aping one of its far bigger rivals in broadband, Cisco Systems. Cisco, the world's biggest maker of networking gear, has been pushing in the same strategic direction with its own aggressive dealmaking. Most recently, for instance, Cisco swallowed up service control switching startup P-Cube Inc. for $200 million in cash and stock last fall.

But Woodle insists that C-COR, while definitely competing with Cisco in the optical transport, OSS and services market, is not seeking to follow in Cisco's large footsteps. He noted that C-COR now has many different rivals in its various market segments, including Scientific-Atlanta in optical transport, SeaChange International and Concurrent Computer in VOD infrastructure and content management, and SupportSoft in OSS and service management.

"We're not trying to be Cisco," he said. Indeed, with his cash hoard for acquisitions mostly depleted, Woodle has all but ruled out any more buyouts for at least another year. "I really doubt we'll do any acquisitions in 2005," he said.

While it may not want to be another Cisco, C-COR is clearly trying to be bigger. With the company now generating $200 million to $250 million in annual revenues, Woodle sees that as the bare minimum for serving the "very demanding" cable industry.

"If you're not doing $50 million a quarter, you can't support the cable infrastructure," he said. "There's just a fundamental level of infrastructure cost to keep cable happy."

Woodle, whose company's sales have been affected by Adelphia Communications' turmoil, also wants to boost C-COR's business by diversifying beyond the often volatile cable industry. He noted that the IP video business "will be pretty impactful" in five years, thanks in part to the phone industry's embrace of the technology. "You've got a lot of startup telco guys already doing it," he said.

Specifically, Woodle would like to double the company's business over the next five years. He's shooting to produce at least $500 million in annual revenue by 2010.

Woodle aims to make C-COR more of a global force over the next five years as well. The company, which boasts that it has more than 100 software systems deployed around the world, already collects 37% of its revenue from outside the U.S., up from less than 10% in 1998. But he'd like to boost that portion to at least 50% by 2010, with particularly stronger sales in Asia and Latin America.

In its fiscal 2005 second quarter that ended Dec. 24, C-COR reported net sales of $58.5 million, down from $61.5 million in the year-ago period. However, the company posted a loss of $1.7 million, a reversal of its $29.7 million gain a year earlier.

In a business update issued 10 days before its earnings report, the company blamed the reversal largely on delayed orders in its C-COR Solutions business unit. C-COR projected that its net sales for the third quarter ending March 25 will range between $70 million and $75 million.