Cable Operators

3Q: Tech Firms Give Mixed Cues

10/31/2011 12:01 AM Eastern

While Motorola Mobility’s set-top sales to
cable operators contracted in the third quarter, two other
key equipment suppliers — Arris Group and Harmonic —
powered up their video businesses.

Revenue in Motorola Mobility’s cablefocused
Home group fell 10% in the third
quarter, with set-top unit shipments declining
3% year over year. The drop may
partially stem from customer uncertainty
surrounding Google’s pending $12.5 billion
takeover of the company.

Arris, meanwhile, is seeing its video
strategy picking up momentum and expects
IP-based gateways to contribute at
least 10% of 2012 revenue, chairman and
CEO Bob Stanzione said on the vendor’s
earnings call.

The company is now using Moxi as the
new name for its home-gateway product,
based on technology acquired from Paul
Allen’s Digeo. In addition to Shaw Communications
and BendBroadband, Arris
now has six “committed customers” that
are in various stages of lab and fi eld trials,
Stanzione said.

$25 MILLION WORTH OF MOXI

The Moxi product line could generate
sales of $25 million in the fourth quarter,
Arris said.

“Moxi gateway was definitely the bright
spot of the quarter,” Stanzione said. “The
product is performing very well in trials
and in the field, and deployment rates are
on the rise.”

Arris shipped 1.4 million consumerpremises
equipment devices in the third quarter — and
for the fi rst time, more than 50% of the vendor’s CPE devices
(53%) shipped in the quarter included DOCSIS 3.0 capability
versus 36% in Q2.
“We’re getting closer to the day when the current installed
base of DOCSIS 2.0 and earlier modems [will]
become obsolete,” Stanzione said on the earnings call. Operators
are now “willing to spend the extra few dollars to
install DOCSIS 3.0 devices.”
Arris hopes to push even further into the video market
after completing the acquisition of BigBand Networks.
On Oct. 11, Arris announced its intention to purchase the
video-processing equipment vendor for $53 million net of
BigBand’s cash on hand. Arris anticipates closing the transaction
around Nov. 21.

“Customer feedback has been uniformly positive” about
the BigBand deal, Stanzione said.

Arris shipped 73,686 downstream C4
CMTS ports in Q3, down 7% sequentially
after a record 79,000 in the second quarter.
The company’s E6000 converged
edge router is scheduled to ship in the
fourth quarter to a customer for lab
trials, Stanzione said.

HARMONIC REBOUND

For Harmonic, a vendor of videoprocessing
systems and edge QAM devices,
sales in the U.S. rebounded, with
domestic revenue up 24% sequentially,
president and CEO Patrick Harshman said.

On Harmonic’s earnings call, Harshman
said, “The healthier demand during
the third quarter is indicative that many
media, cable, satellite and telco customers
are moving forward on a variety of
new video initiatives.”

Harmonic’s cable edge and access
business also turned in solid results, with
third-quarter revenue up 10% compared
with the year-earlier period. Harshman
said “healthy demand” for EdgeQAM
solutions was driven by the continuing
growth of cable’s video-on-demand and
data services.

Motorola Mobility did not host an
earnings call to discuss its results.

Google on Aug. 15 announced an offer
to acquire Motorola Mobility, with the
Internet giant primarily looking to own
Motorola’s patent portfolio (see “What Will Google Do With
Motorola?” Aug. 22). The deal is expected to close by
the end of this year or early 2012.

Motorola Mobility’s thirdquarter
results
included approximately
$18 million
of expenses
attributable to
the planned
merger. The deal
still requi res
the approval of
Motorola Mobil
it y’s stockholders , who
will vote on the
transaction Nov.
17, as well as regulatory
approvals
in the U.S. and
elsewhere.

Sales in the
company’s Mobile Devices segment have returned with
a vengeance on the strength of Android smartphones,
though the business still reported an operating loss for the
quarter of $41 million.

In the third quarter, Mobile Devices revenue climbed
20%, to $2.4 billion. The company shipped a total of 11.6
million devices — including 4.8 million Android-based
smartphones and about 100,000 Motorola Xoom tablets —
up 27% from the third quarter of 2010.

March