Analysts and investors punished BigBand Networks Inc. (Nasdaq: BBND - message board) and its stock the day after the switched digital video (SDV) pioneer cut third quarter revenue guidance as much as 40 percent. (See BigBand Falls out of Tune .)

    After BigBand shares took a big hit in after-hours trading Thursday, the bleeding continued the day after. Shares reached $6.42 each, down 29.22 percent or $2.65, in mid-day trading Friday. That's in stark contrast to its strong debut as a public company in mid-March, and early May when the stock closed as high as $21.43. (See BigBand IPO: Boing!.)

    Jefferies & Co. Inc. downgraded BigBand to "Hold," reducing 2007 revenue estimates to $181.7 million, from $224.6 million.

    "We recommend that investors stay on the sidelines," Jefferies analyst George Notter said, in a research note.

    Morgan Keegan & Company Inc. analyst Simon Leopold downgraded the stock to "Market Perform, forecasting that the stock will settle to a potential fair value range of $7.54 to $8.90.

    "BigBandhasbeena big disappointment for us. We think the company has a cool product in a great market segment, but executing in an increasingly competitive and demanding environment has proven a greater challenge than we appreciated," he wrote.

    BigBand Chairman and CEO Amir Bassan-Eskenazi addressed the confluence of factors leading to slashed revenues for the third quarter on a conference call with reporters and analysts late Thursday afternoon.

    He reiterated two root causes: "transition issues" with BigBand's video business, and "softness" of its data business, which is led by the Cuda cable modem termination system (CMTS), a product BigBand picked up in 2004 from ADC Telecommunications Inc. (Nasdaq: ADCT - message board). (See BigBand Buys ADC's IP Cable Unit.)

    As for the video business, "telco TV revenue is slowing down as a major customer works through normal cycle of inventory depletion," Bassan-Eskenazi said, likely referencing Verizon Communications Inc. (NYSE: VZ - message board), which uses BigBand's Broadband Multimedia-Service Router (BMR) to convert RF- and IP-based video traffic, and represented more than 40 percent of sales in the first half of 2007.

    Thisg reater than expected slow down "may take more than a few quarters to work through," he said.

    Although BigBand is considered the deployment leader of SDV technologies in the cable arena, the company had slower than expected revenue growth in the third quarter, citing "integration challenges" and unexpected, higher levels of software customization work.

    Think Equity Partners analyst Anton Wahlman said unrecognized SDV revenue may be tied to delays in receiving the final 20 percent that comes in after full customer acceptance.

    Bassan-Eskenazi cast asidea suggestion that his company has had trouble integrating on the Motorola Inc. (NYSE: MOT - message board) cable platform. Save for a recent SDV installation with Cox Communications Inc. , the vast majority of BigBand's deployments have been on Scientific Atlanta -based cable systems. (See Cox Flips BigBand's DV Switch .)

    Whatever the case, the issues won't be ironed out overnight. "We expect these integration challenges to persist for a few quarters," Bassan-Eskenazi said.

    Analysts also peppered BigBand with questions about the fate of its CMTS, asking whether it made financial sense to shut it down and cut the losses. Last month, the company confirmed it was not mothballing the CMTS, but acknowledged it experienced a "slight reduction" in headcount at its Westborough, Mass., unit. However, it hired about the same number for its China operation. (See BigBand Reduces CMTS Staff and BigBand Not Abandoning CMTS .)