Net income nearly tripled and revenue increased by more
than 200 percent in the fourth quarter at General Instrument Corp., fueled mainly by the
rollout of digital set-top boxes.
Net income for the quarter ended Dec. 31 was $46 million,
or 26 cents per share, compared with $15 million (10 cents) during the same period in
However, the company is taking measures to reduce its
overhead costs and continuing to consolidate its manufacturing operations in Horsham, Pa.,
and San Diego. As a result of the consolidation, GI will take a one-time charge of between
$10 million and $15 million.
"This [overhead reduction] will not interfere with our
plans for growth," GI CEO Ed Breen said.
Revenue for the quarter was $564 million, a 28 percent
increase from the prior year.
Fueling the growth was increased deployment of the
company's DCT-2000 interactive digital set-tops in several areas during the quarter.
Although PrimeStar Inc.'s recent announcement that it
would sell its medium-power direct-broadcast satellite business to DirecTV Inc. is
expected to have an impact on GI's sales, the company did not expect it to be a major
"While the potential loss of this customer could have
a negative impact on 1999 sales, we are confident with the earnings consensus of 93 cents
per share," Breen said in a conference call with analysts last Tuesday.
GI shipped 730,000 interactive digital terminals in the
fourth quarter, bringing its total number shipped since 1996 to 2.7 million units. The
company also launched 61 digital headends -- bringing that total to more than 700 during
1998 -- and it shipped 2 million digital set-tops. The company said it expects the number
of digital set-tops shipped to increase by 50 percent during 1999.
"Digital penetration is growing, and it's
becoming broader in scope," Breen said.
That broad scope is exemplified by GI's lessening
dependence on sales to Tele-Communications Inc., which accounted for about 75 percent of
GI's digital saleslast year.During the fourth quarter, GI shipped 365
DCT-2000 digital set-tops, and TCI accounted for between 60 percent and 62 percent of
Breen said he expects TCI's sales impact to continue
to decline as the company rolls out more product to other MSOs.
"That will continue to come down through the year
because we will be launching the rest of our customer base," Breen said.
Sales for the year ended Dec. 31 were $2 billion, an
increase of more than 12.5 percent from 1997.
Excluding the 1998 and 1997 restructuring and other
charges, operating income was $219.7 million in 1998 compared with pro forma operating
income of $108.3 million in 1997. Net income was $134.9 million (80 cents per share) in
1998, compared with pro forma net income of $67 million (45 cents per pro forma share) in
The company is also ramping up the rollout of its new
DCT-5000 digital set-tops, and it expects to begin deploying its first units later this