Arris Revenue Falls On Weaker Sales To Comcast, TWC

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Arris's revenue fell 11.3% in the fourth quarter of 2010, as sales to Comcast and Time Warner Cable -- its two biggest customers -- dropped compared with the year-earlier period.

The vendor, a leading supplier of cable modem and embedded multimedia terminal adapters, posted fourth quarter 2010 revenue of $266.2 million, versus $300.0 million a year earlier, and net income fell by 66%, to $11.3 million for the fourth quarter of 2010 from $33.3 million a year earlier.

Comcast represented 31% of Arris's Q4 2010 revenue, with $83.5 million in sales, down from $89.8 million in the year-earlier quarter. Sales to Time Warner Cable were $45.4 million (17% of total revenue), down from $82.3 million in Q4 2009.

Arris said the Comcast and TWC sales dropped because of the operators' "aggressive initial rollout of DOCSIS 3.0 in 2009 and pull-ins in Q4 2009."

At the same time, sales to other U.S. operators increased 13% for 2010 and the international segment was up 30%. The company also touted the fact that sales to Comcast and TWC were up sequentially from the third quarter ($74.6 million and $35.1 million, respectively).

Looking ahead, the Suwanee, Ga.-based company projects that it can tap into a $4 billion addressable market for advanced set-top boxes by 2013. Arris in 2009 acquired Digeo, a maker of DVRs and related software owned by Paul Allen, for $20 million. 

"Arris continues to invest aggressively in new IP-based video products as the industry moves towards a convergence of conventional TV and IP-based TV," chairman and CEO Bob Stanzione said in announcing the results. "In the meantime, Internet traffic continues to grow, which will create ongoing demand for both our existing and new products as well."

The company's revenue for the full year 2010 was $1.09 billion, down 1.8% from $1.11 billion from 2009. Net income for 2010 was $64.1 million versus $90.8 million in 2009.

For the first quarter of 2011, Arris now projects revenue will be $260 million to $280 million, with net income per diluted share in the range of $0.05 to $0.09.

Gross margin for the fourth quarter of 2010 was 36.2%, compared with 44.8% in the year-earlier period. Arris attributed the year-over-year margin decline to a shift in product mix.

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