C-COR Back in Black ... Kind Of

It's been a tough stretch for C-COR (Nasdaq: CCBL  ) , a small-cap supplier of equipment and software to cable TV operators like Comcast (Nasdaq: CMCSA  ) and Time Warner (NYSE: TWX  ) . Although growth and earnings quality isn't quite fully back up to snuff, the company has done a lot to reposition its product portfolio and there's at least a fighting chance that this could translate into renewed growth and vigor.

There were signs of improvement in this quarter's release, but it wasn't exactly a slam-dunk. Revenue was up 5% from last year and though gross margins did improve, the company reported an operating loss even when restructuring costs are excluded. So while the company did report a net profit both according to GAAP and non-GAAP measures, we're not yet talking about high-quality profitable growth.

I'm also not entirely sure what to make of the company's booking data. Bookings were up about 11% from last year, but close to flat on a sequential basis. What's more, Cox Communications (a privately-owned cable company) was a larger-than-expected contributor to revenue this quarter and it's fair to ask if that'll be repeatable business in the near term.

That's the negative news. On a more positive note, the company has a pretty clean balance sheet, a product suite that seems well-positioned given customer needs, and a better outlook for orders from the Adelphia business. With Comcast and Time Warner having finished the acquisition of Adelphia, it stands to reason that the new owners will be resuming capital spending and upgrading the infrastructure. As Adelphia was a big customer for C-COR, this would clearly be a good thing (assuming the business goes to them).

When it comes to the stock, I don't have an especially firm conviction one way or another. I do believe the stock is fundamentally undervalued and I'm a believer in the long-term story. So I want to be bullish ... but I also am a stickler for adhering to my margin of safety rules and I'd need to see another dip into the $6's to get really excited about a potential purchase.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).


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