News

S-A SNAGS MORE BOX ORDERS, BUT DOESNT SAY HOW MANY

8/09/1998 8:00 PM Eastern

Scientific-Atlanta Inc., buoyed last week by several
plumped-up orders for advanced digital set-tops, will double manufacturing capacity of
that line to a rate of 1.1 million units a year.

That points to a surge of S-A deployments by this year's
holiday season, and to 1999 and 2000 as the high-volume years for S-A's digital video
systems, executives said.

Last week, S-A trotted out news releases every day in
advance of a quarterly earning report on Thursday afternoon. At press time, S-A's
financial performance had not yet been disclosed. But Wall Street was impressed. At the
market's close, S-A's stock had risen to $23 15/16.

S-A's news barrage prior to the earnings release showed new
orders from Tele-Communications Inc. and upped orders from Time Warner Cable, Cox
Communications and Comcast Corp. for S-A's Explorer 2000 line of advanced digital set-tops
and related headend gear.

Just how much more hardware S-A will ship remains unclear
because S-A executives refused to discuss order quantities.

"We've been trying to get away from [discussing order
specifics] -- it's not really the issue," said Allan Ecker, chief technology officer
for the manufacturer. "They've made substantial commitments to us, but we're not
going to play the numbers game."

When asked to elaborate, Ecker pointed to expected
penetration levels for digital video services by all of its MSO takers, saying that
"if our customers get the [penetration] levels they're anticipating, it will be a
good long-term order picture."

He said that on a combined perspective, including
previously announced orders with Rogers Cablesystems Inc., Adelphia Communications Corp.
and Marcus Cable, S-A's orders will feed systems passing 14 million homes, and 10 million
actual customers.

Right now, Ecker said S-A's digital video gear has shipped
to 27 undisclosed MSO locations so far this year, and that "all but seven" of
those systems -- which include extensive headend gear as well as about 200 trial-quantity
set-tops -- are up and running.

Notably, the order from TCI, which will furnish at least
the MSO's Salt Lake City system, is contingent upon S-A making its Explorer 2000 set-top
"essentially the same" as General Instrument Corp.'s DCT-5000 set-top, said
David Beddow, senior vice president of TCI's National Digital Television Center.

TCI earlier this year placed a hard order for 6.9 million
DCT-5000 set-tops, with additional options for up to 15 million units, as part of a
complicated equity arrangement that gives TCI warrants for GI stock upon receipt of the
set-tops it ordered.

Making the Explorer 2000 equal in features to the DCT-5000
means adding a dual-tuner capability, a more powerful microprocessor, additional memory
and perhaps most significantly, a shift to standards-based cable modem technology, Beddow
said.

S-A currently includes a modem based on the European DAVIC
(Digital Audio Video Counsel) standard, but plans to include a DOCSIS (Data Over Cable
Service/Interface Specification) modem in the next generation Explorer set-top, Ecker
explained.

Beddow wouldn't discuss order quantities, except to say
that "it's a very small quantity," likely to number fewer than 50,000 units.

Comcast plans to use the S-A Explorer 2000 line in its
80,000-subscriber system in Charleston, S.C. -- the third Comcast system to use S-A's
gear. The other two are Baltimore and Chamblee, Ga.

Joe Waz, a spokesman for Comcast, described S-A as being
"in the mix" of vendors for its coming digital video equipment rollouts. He said
Comcast hopes to start rolling out digital video services in some of its markets "in
the third quarter."

On Wednesday, Cox also popped for S-A's advanced digital
set-tops, saying it will install the equipment over the next three years in three of its
major markets: Phoenix, San Diego and Oklahoma City.

Those three markets, the biggest of which is Phoenix, total
nearly 1.2 million customers.

Alex Best, senior vice president of engineering for Cox,
called S-A the MSO's "primary supplier" of digital set-tops and network
equipment for those markets, despite Cox's nod last year to GI for an equity/set-top
arrangement.

Time Warner Cable remains S-A's biggest taker for the
Explorer 2000 line, and tests are continuing in the MSO's Austin, Texas, system.

Last week, Time Warner and S-A obliquely said they would
increase their blossoming supplier relationship to include several of Time Warner's major
markets.

So far, no great quantities have been shipped to Time
Warner, however, and the MSO has quietly blamed S-A for its late play on digital video
deployments. That was supposed to happen last fall. Now, the MSO is targeting November for
digital video rollout.

Although order quantities remain private, S-A appears to
consider the orders beefy. As part of its suite of news, Ecker said it will double the
manufacturing capacity of its Juarez, Mexico, plant.

Right now, the 225,000-square-foot Juarez plant is capable
of cranking out about 550,000 digital set-tops per year. By October, Ecker said, S-A plans
to be tooled up to double that number. "There's considerable momentum here," he
said.

In other news, S-A snagged an order from Charter
Communications Inc. for an upgrade of the MSO's 4,200-mile system in St. Louis, bolstering
bandwidth there to 860 MHz. Charter executives said the upgrade will span the next three
years and is underway already.

Charter is in the process of being sold to Paul Allen.

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