Arris Expects Rebound In Comcast Business
Despite Drop In Comcast’s Q1 Orders, Company Cites Record Sales To Other Customers
By Todd Spangler -- Multichannel News, 4/29/2008 6:02:00 PM
Arris Group’s first-quarter revenues were hurt by a drop in orders from Comcast, but the cable-technology supplier said it saw record sales to Time Warner Cable and Charter Communications for the period and said it expects Comcast’s business to rebound in the year ahead.
First quarter 2008 revenues were $273.5 million, up 16% compared with the year prior period primarily reflecting the acquisition of C-COR. Arris completed its acquisition of C-COR, a vendor of video-on-demand and operations support systems, on Dec. 14.
But revenues were 16% lower than analysts’ previous consensus revenue estimate of $328 million, according to Thomson Financial, in line with Arris’ revised forecast announced in February. The company posted net income of $5.4 million, an 86% decline from $37.6 million in the year-earlier period. 
Comcast’s business with Arris was down about $62 million in the quarter, particularly with respect to voice modems, Arris chairman and CEO Bob Stanzione said on a conference call Tuesday with analysts.
However, in the first quarter, sales to all other customers from the combined Arris and C-COR were up sequentially by about 11%, or $24 million, Stanzione said.
Specifically, “our sales to Time Warner and Charter were outstanding in the quarter,” notably on cable modem termination systems, on-demand and operations support systems.
All told, the company shipped about 1.64 million cable modems and embedded multimedia terminal adapters (eMTAs) in the period—with more than 30% of those to international customers—compared with about 1.7 million in the fourth quarter of 2007.
In addition, Stanzione said, “we expect much of this business from Comcast to rebound... especially as our DOCSIS 3.0 products are released in their network.”
Arris projects revenues in the second quarter will be in the range of $288 million to $303 million with net income per diluted share in the range of $0.04 to $0.08.
“I remain confident that we are well-positioned to meet the insatiable demand for more bandwidth and speed, driven by accelerating entertainment and information applications," Arris chief financial officer David Potts said on the call.
Comcast has said it expects to be aggressive in deploying DOCSIS 3.0, passing up to 20% of homes in it its territories by the end of 2008. It launched "wideband" service with up to 50-megabit-per-second downloads in Minneapolis/St. Paul earlier this month.
Overall, Stanzione said Arris is ramping up DOCSIS 3.0, with hardware shipments expected to begin in the latter part of this quarter and DOCSIS 3.0 software for CMTSs to ship in Q3. “We expect to be extremely busy” with DOCSIS 3.0, he said.
On the switched digital video front, Stanzione said Arris is seeing “slower SDV deployments” than expected to date and therefore the company did not ship many D5 Universal Edge QAM platforms in the quarter.
“Frankly the growth of this product line was slower than we expected,” he said.
Arris during the quarter repurchased approximately 13 million shares in the open market for $76 million and also redeemed $35 million of convertible debt originally issued by C-COR and paid approximately $12 million to retire various acquisition liabilities. The company ended the first quarter with $293.0 million of cash and equivalents, compared with $391.8 million at the end of the fourth quarter 2007.
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