BigBand Networks Reports First Quarter 2008 Results

Company executes well in its first quarter as a pure-play digital video business; reports solid progress in Switched Digital Video

May 1, 2008

REDWOOD CITY, Calif., May 1, 2008—BigBand Networks, Inc., (NASDAQ: BBND) today reported financial results for the first quarter ended March 31, 2008.

For the first quarter of 2008, total revenues were $39.9 million as compared to $30.7 million reported in the fourth quarter of 2007 and $52.8 million reported in the first quarter of 2007. 

GAAP net loss for the first quarter of 2008 was $1.9 million, or $(0.03) per share. These results compare to a net loss of $13.8 million or $(0.23) per share reported in the fourth quarter of 2007 and a net loss of $1.0 million, or $(0.05) per share, reported in the first quarter of 2007.

On a non-GAAP basis, the Company reported a net income of $1.4 million, or $0.02 per diluted share, in the first quarter of 2008.  These numbers exclude $3.2 million in stock-based compensation expense, $143,000 in amortization of intangibles, $335,000 in restructuring expense and income tax expense of $95,000, offset by a $468,000 benefit from the sale of CMTS platform inventory previously reserved for in a prior period. This compares to a non-GAAP net loss of $7.4 million, or $(0.12) per share reported in the fourth quarter of 2007 and non-GAAP net income of $5.8 million, or $0.09 per diluted share, reported in the first quarter of 2007.  These previous quarters’ results also reflect adjustments for stock-based compensation expense, amortization of intangibles, restructuring expense, preferred stock warrant expense and related tax expense.

At March 31, 2008, deferred revenue was $63.7 million, down slightly from the prior quarter’s balance of $67.3 million.  The Company ended the first quarter with $150.0 million in cash, cash equivalents and marketable securities as compared to $154.5 million as of December 31, 2007.

“We executed well in the quarter, particularly in the area of switched digital video,” commented Amir Bassan-Eskenazi, chairman and CEO of BigBand Networks.  “Our significantly improved operating results, in the quarter, benefited from high software content in our product sales as well as higher margin expansion orders,” concluded Bassan-Eskenazi.

Second Quarter 2008 Business Outlook

For the second quarter of 2008 management provides the following outlook:

• Net revenues are expected to be in the range of $40 to $43 million.
• GAAP gross margins are expected to be in the range of 52% to 55%.
• Non-GAAP gross margins are expected to be in the range of 53% to 56%.
• GAAP operating expenses are expected to be in the range of $28.5 to $29 million.
• Non-GAAP operating expenses are expected to be in the range of $24.5 to $25 million.
• GAAP net loss per share is expected to be in the range of $(0.10) to $(0.07).
• Non-GAAP net loss per share is expected to be in the range of $(0.03) to $0.00.

Earlier this week the Company initiated a minor restructuring program to redeploy resources. The Company will take a charge of approximately $0.4 million for employee severance and $0.8 million charge for facility related expenses. The non-GAAP expenses provided in the Company’s second quarter guidance do not include the $1.2 million total restructuring charges.

The following table shows our non-GAAP anticipated results for the quarter ending June 30, 2008, reconciled to the GAAP anticipated results. Our non-GAAP anticipated results exclude (i) amortization of intangible assets, (ii) stock-based compensation (iii) restructuring-related expenses and (iv) related income taxes.

Non-GAAP Financial Measures

BigBand reports all financial information required in accordance with generally accepted accounting principles (GAAP), but it believes that evaluating its ongoing operating results may be difficult to understand if limited to reviewing only GAAP financial measures. Many of our investors have requested that we disclose this non-GAAP information because it is useful in understanding our performance as it excludes non-cash and other one-time charges that many investors feel may obscure our true operating costs. Likewise, management uses these non-GAAP measures to manage and assess the profitability of its business going forward and does not consider amortization of intangible assets, preferred stock warrant expense or stock-based compensation expense, which are non-cash charges, as well as restructuring charges in managing its operations. Specifically, we do not consider stock-based compensation expense when developing and monitoring budgets and spending. The economic substance behind our decision to exclude preferred stock warrant expense, stock-based compensation and amortization of intangible assets relates to these charges being non-cash in nature and restructuring being one time charges.  As a result, BigBand uses calculations of non-GAAP operating income, net income, net income per share and gross margin, which exclude, net of tax, amortization of intangible assets, preferred stock warrant expense, stock-based compensation and restructuring charges , to evaluate its ongoing operations and to allocate resources within the organization.

As a result, BigBand’s management believes it is useful for itself and investors to review both GAAP information that includes such charges and non-GAAP financial measures that exclude these charges to have a better understanding of the overall performance of BigBand’s ongoing business operations and its performance in the periods presented.

Whenever BigBand uses such a non-GAAP financial measure, it provides a reconciliation of non-GAAP financial measures to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure.

Conference Call Details for May 1, 2008

BigBand Networks will host a corresponding conference call and live webcast at 2:00 p.m. Pacific Standard Time today. To access the conference call, dial +1.800.257.2101 for the U.S. or Canada and +1.303.205.0044 for international callers. The webcast will be available live on the Investor Relations section of the Company’s corporate website at www.bigbandnet.com and via replay beginning approximately two hours after the completion of the call until the Company's announcement of its financial results for the next quarter. An audio replay of the call will also be available to investors beginning at approximately 4:00 p.m. Pacific Daylight Time on Thursday May 1, 2008 until 11:59 p.m. Pacific Daylight Time on May 8, 2008, by dialing +1.800.405.2236 (+1.303.590.3000 for callers outside the U.S. and Canada) and entering pass code 11111370#. 

Cautionary Statement

The statements in this release regarding our business outlook with respect to the quarter ending June 30, 2008 (including revenues, gross margins, operating expenses, one-time charges, GAAP and non-GAAP tax provision, anticipated shares outstanding, and GAAP and non-GAAP earnings per share) are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause our actual results to differ materially, including, but not limited to: changes in demand for video services, the market acceptance of our products; the fluctuations in our gross margins; the concentration of our customer base; competitive developments including pricing pressures; the timing of recognition of a significant portion of our net revenues given the complex systems integration involved; our ability to manage operating expenses effectively; the level of orders that are received and can be shipped in a given quarter; and the general economic, industry or political conditions in the United States or internationally.

For a detailed discussion of these and other risk factors, please refer to BigBand’s Report on Form 10-K (“Form 10-K”) dated March 12, 2008. You can obtain a copy of the Form 10-K on the SEC's Web site (www.sec.gov).

Stockholders of BigBand Networks are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date such statements are made. BigBand Networks does not undertake any obligation to publicly update any forward-looking statements to reflect events, circumstances or new information after this May 1, 2008 press release, or to reflect the occurrence of unanticipated events.

BigBand Networks, Inc. (NASDAQ:BBND) provides broadband service providers with innovative network solutions designed to make it easier to move, manage and monetize video. These solutions are based on BigBand’s video-networking platforms that are built to enable efficient and reliable delivery across a wide range of services, including digital TV, high definition TV, addressable advertising, video-on-demand and interactive TV. BigBand Networks’ customers include more than 200 service providers—including six of the ten largest service providers in the U.S.—and leading cable and telco service providers in North America, Asia, Europe and Latin America. BigBand Networks is based in Redwood City, Calif., with offices worldwide. For additional information about the company, please call +1.650.995.5000, email info@bigbandnet.com or visit www.bigbandnet.com.

About BigBand Networks

BigBand Networks, Inc. [NASDAQ: BBND] provides broadband service providers with innovative network solutions designed to make it easier to move, manage and monetize video. These solutions are based on BigBand's video-networking platforms that are built to enable efficient and reliable delivery of video, voice and data across a wide range of services, including digital TV, high definition TV, addressable advertising, video-on-demand, interactive TV, Internet TV, video telephony, high-speed Internet and voice-over-IP. BigBand Networks' customers include more than 100 service providers—including six of the ten largest service providers in the U.S.—and leading cable and telco service providers in North America, Asia, Europe and Latin America. BigBand Networks is based in Redwood City, Calif., with offices worldwide. For additional information about the company, please call +1.650.995.5000, email info@bigbandnet.com or visit www.bigbandnet.com.