CommScope reported a 29.3% revenue decline in its network and cloud business to $376.9 million, as operators continue to digest ample capacity build-outs that occurred over the last several years.
“Our network and cloud segment sales were lower driven by combination of factors, including customer-driven M&A, strong capacity additions added in late 2018, and to a lesser extent a temporary pause in spending as the industry aligns around a path toward virtualization,” Alex Pease, CommScope CFO, told investment analysts during the company’s third quarter earnings call Thursday.
Sales for CommScope’s network and cloud unit, acquired at the beginning of the year along with its $7.4 billion purchase of Arris, declined 37% in the second quarter.
“We're starting to see an uptick in CMTS license purchases from a major tier 1 North American cable operator as they begin to exhaust capacity from last year. This is a good indication for continued purchases of current CMTS products to the foreseeable future,” Pease added.
CommScope, meanwhile, said it is in trials with several operators on vCore, a virtual CMTS platform it hopes to launch commercially by the end of next year.
The vendor, long the top cable access tech vendor, finds itself playing catchup in the areas of virtualized network access technology, with Silicon Valley company Harmonic already in the market and deployed with Comcast via a $175 million multi-year licensing deal. Competition-wise, that Comcast deal could prove even more complex if the No. 1 U.S. cable operator moves forward with plans to syndicate the virtualized solution it has cooked up using Harmonic tech.
Also along the lines of next-gen network tech, CommScope said it is working with an unnamed tier 1 cable operator and a chipmaker on a remote PHY device.
But in the here and now, it remains tough sledding for CommScope, with the customer premises equipment business down 12.2% to $826.4 million in the quarter. The vendor attribute the slowdown to reduced spending by cable operators, who are all seeing their video businesses shrink right now. Tariffs from Donald Trump’s trade war with China were also a factor.