Arris Chief McClelland Out as CommScope Reports Slow Q2 Network and CPE Sales

CommScope eliminates COO position less than six months after putting former Arris CEO in the slot
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Bruce McClelland is out at CommScope, with the company eliminating his COO position.

The former Arris CEO was named chief operating officer in February, as CommScope structured its management team following its $7.4 billion acquisition of Arris.

But McClelland has been quickly spun out, his responsibilities dispersed to CommScope CEO Eddie Edwards and other members of the management team, as each of the acquired Arris business sectors continued to struggle in the second quarter. Arris on Thursday evening simultaneously announced McClelland’s departure and its second quarter earnings.

“This decision to flatten our leadership structure expands accountability, which we've been striving to do in virtually every part of our company as part of our transformation,” Edwards told investment analysts. “I am deeply committed to CommScope's continued growth and success and with the board's full support I'm taking a more active day-to-day operational role in leading our company through these challenging times.”

Challenging indeed.

The Arris Network and Cloud division saw sales slide 37% year over year to $344 million. Large cable operator clients are carefully plotting out revolutionary changes to their broadband networks, pushing out functionality closer to the node in the move toward Distributed Access Architecture, while converting the work of proprietary appliances to software virtualization running on commodity-level servers.

Recently, Arris, Cisco and Casa Systems—the leaders of the traditional cable access technology busienss—have sat on the side of the road, as a new insurgent in the business, Harmonic, has carved out huge deals with Comcast and Liberty Global for its virtualized Converged Cable Access Platform product, CableOS.

Meanwhile, in the customer premises equipment (CPE) sector brought over by Arris, sales were down 9% to $890 million, with Donald Trump’s trade war with China forcing CommScope to make tough manufacturing moves in Asia. Arris manufacturing is in the process of being moved out of China and into the Philippines, Vietnam and Indonesia.

Sales were also off 10% for Ruckus Networks, which specializes in such things as Wi-Fi, IoT and CBRS deployments. The unit generated $151 million in the second quarter.

Just four months after CommScope closed on Arris, some analysts questioned the move to fire the head coach.

"The Arris acquisition appears worse than we previously thought, with the [virtual CCAP] transition as the unexpected headwind," wrote Raymond James analyst Simon Leopold in a note to investors. "We can appreciate the possible frustration CommScope management might feel, but we do not understand how this action helps.”

For their part, CommScope managers stuck towhead had been McClelland’s key talking points in recent months. Notably, he had position Arris as having a key advantage over insurgents like Harmonic, having written code for cable access networks dating back decades.

“We believe that the fact that we have been writing this code for the past 20 years supporting it, featuring it and are now importing it to these two ends gives us a unique advantage in having something that is very hardened and something that is very featurish,” said Morgan Kurk, chief technology officer.

Added Edwards: “Despite the challenging year, we remain very excited about the combined CommScope and Arris portfolio. We are now just four months into the ownership of the Arris business.

“As we continue to integrate our teams and processes, our enthusiasm for what we can achieve together grows stronger. Together we have a more compelling and diversified global platform to promote service providers and enterprises. To that end, I want to highlight what we believe were some of the exciting growth opportunities ahead for CommScope.”

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