S-A Hammered After Profit Warning

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Scientific-Atlanta Inc.'s international-market
problems caught up with the cable-equipment supplier in a big way last Friday.

S-A warned investors and analysts after markets closed last
Thursday that its profit in the fiscal first quarter, which ended Friday, would be in the
range of 2 cents to 5 cents per share. According to Zacks Investment Research, analysts
had figured that S-A's first-quarter profit would be about 22 cents per share.
S-A's earnings report will be released Oct. 22.

S-A shares got pummeled Friday. After a delayed opening,
S-A's share price was down about $7.38, or 36 percent, to $13 at about 12:30 p.m., in
heavy trading on the New York Stock Exchange.

S-A then announced Friday that it would begin buying back
shares under a previously approved repurchase program.

Possibly to distance itself from S-A's problems, rival
General Instrument Corp. told analysts last Friday that it expects to beat profit
forecasts for its third quarter, which closed Sept. 30.

GI said it should report earnings per share of 21 cents to
22 cents, versus 17 cents in the same period a year ago. Analysts were expecting 19 cents
per share, according to Zacks. GI's net income should be $36 million to $39 million,
versus pro forma profit of $25 million a year ago, the company added.

Up until Friday, most cable stocks were down by
single-digit percentages during a down week on broader market indexes.

S-A said its sales in the quarter will be about $257
million -- down about 13 percent from $295 million in the same period a year ago, and down
about 15 percent from $304 million in the fourth quarter. Bookings -- an indication of
future sales -- will amount to about $300 million, up from $263 million a year ago, but
down from $320 million in the fourth quarter.

Domestically, digital-equipment sales were up, but not by
enough to offset expected declines in analog set-top sales. Overall, S-A's
subscriber-sector sales were down $20 million versus the fourth quarter.

S-A said it shipped 18 digital-headend systems to customer
sites in the quarter. The company produced 97,000 Explorer 2000 digital set-tops during
the period, but shipments did not meet projections because customer launches were behind
schedule.

The set-top-launch delays stemmed from system-integration
problems and "customer requests for later software releases with a richer
consumer-feature set," S-A said in a prepared statement. S-A added that some
operators opted to put more resources into deploying digital headends in 1998 rather than
into buying set-tops.

S-A CEO James McDonald said in the statement that the
company believes that it is pursuing the right strategies domestically and
internationally, adding, "We are continually assessing our international business
strategies, and we will take aggressive measures, as appropriate."

S-A said international sales would be down 54 percent, to
$62 million, with softness in all nondomestic regions, and especially in the Asia-Pacific
region.

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