What happened

Shares of Harmonic (NASDAQ:HLIT) jumped on Wednesday after the company announced in a filing with the Securities and Exchange Commission on Tuesday that an affiliate of Comcast had agreed to enterprise license pricing for its CableOS software. Harmonic stock was up about 23.6% at 11 a.m. EDT.

So what

Comcast Cable Communications Management (CCCM) has elected enterprise license pricing for Harmonic's CableOS software under existing commercial agreements between the two companies. The election is effective as of July 1.

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CCCM has committed to $175 million in software license fees over the four-year term of the enterprise license. That total may be reduced by incentive credits earned by CCCM related to other purchases of CableOS-related products. It will pay an initial $50 million licensing fee in 2019.

Harmonic also provided an update on a warrant to purchase shares issued to Comcast in 2016. The warrant gives Comcast the right to purchase up to approximately 7.8 million shares of Harmonic's common stock at an exercise price of $4.76, subject to Comcast's achievements of certain milestones and thresholds.

Comcast had already vested in approximately 1.95 million shares prior to the effective date of the licensing agreement. Following the licensing agreement, Harmonic has deemed that all remaining thresholds to fulfill the vesting requirements have been satisfied.

Now what

One thing that isn't clear from this announcement is whether these licensing fees from Comcast are replacing other revenue derived from it. In 2018, Comcast accounted for 15% of Harmonic's total revenue, which works out to about $60 million.

Harmonic is scheduled to report its second-quarter results on July 29. Investors should get more clarity on this announcement from management at that time.

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