Arris Foresees Softer Sales At Start Of 2009
Cable-Modem Vendor Touts Strong Sales Of DOCSIS 3.0 Equipment In Q4
Todd Spangler -- Multichannel News, 2/12/2009 1:44:02 PM
Arris Group touted strong sales of DOCSIS 3.0 equipment in the fourth quarter -- including record revenue from cable-modem termination systems -- but pointed to broad economic factors in issuing a weak forecast for the first three months of 2009.
Fourth quarter 2008 revenue was $292.4 million, up 17% compared a year earlier, as a result of Arris's acquisition in late 2007 of C-COR. The company posted a quarterly net loss of $134.0 million, versus net income of $9.6 million a year prior, largely attributable to a $175 million goodwill impairment for the period.
Arris chairman and CEO Bob Stanzione said on a call Wednesday with investors the company had a "late surge of orders coming in from Comcast, the Liberty Media companies and a few others and in spite of the overall environment, our business fared well in the second half of 2008, primarily because of the strong DOCSIS 3.0 sales."
Still, when compared to the estimated combined sales of Arris and C-COR, fourth-quarter 2008 sales were down approximately $129 million year-over-year.
For the first quarter of 2009, Arris lowered revenue expectations, to between $245 million and $265 million, compared with an analyst consensus estimate of $280 million.
"We expect Comcast, which accounted for almost 42% of our Q4 revenues, to take a breather in Q1, while they deploy a large amount of equipment that we shipped to them at the end of last year," Stanzione said. "However, the biggest factor affecting our first quarter is the weak economy. In 2008 as the year-ended, we saw diminishing net adds of voice-over-IP and high-speed data subscribers, as well as continued weakness in the infrastructure parts of our business."
ThinkEquity analyst Eric Kainer upgraded his rating on Arris, to "accumulate" from a sell rating, citing solid fourth-quarter results and "outstanding cash-flow results balancing weak 1Q guidance, backlog, and book-to-bill metrics."
However, Kainer added, there's cause for caution give "the intense pressure from investors on cable MSOs," which may restrain capital spending programs to the detriment of vendors like Arris. "In view of a changing telco capital environment, which we believe will almost certainly harbor lower [Verizon] FiOS and [AT&T] U-verse deployments, MSOs may throttle back near-term plans for DOCSIS 3.0, for example," he wrote in a research note.
Jefferies & Co. analyst George Notter maintained his "hold" rating on the stock, citing Arris' expectation that the ramp-up in DOCSIS 3.0 eMTAs won't occur until late in the year. In addition, Notter wrote in a research note, "we're fearful that industry eMTA unit volumes are slowing as cable operators are finding it increasingly difficult to win new VoIP customers."
Arris shares were up 6.8%, to $7.08, in midday trading Thursday.
Also on the call, Stanzione said Arris this summer plans to introduce a smaller version of the C4 CMTS, called the Compact C4, or C4C, designed for smaller cable headends.
"Our flagship C4 addresses a large majority of the operator's network," he said. "However, there is still a substantial footprint that doesn't require the port counts of such a dense product."
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