S-A Tumbles on DTV Concerns


Scientific-Atlanta Inc. last Thursday said it would withdraw any previous guidance for the first quarter and fiscal 2002, because slower second-quarter MSO deployment rates may carve into its profits.

S-A's stock price dropped more than 21 percent, or $5.31, to $19.70 in early trading last Friday (Aug. 17). That undercut a 52-week low of $21 that occurred during intraday trading July 20.

In a securities filing, S-A said the total number of digital-cable subscribers increased in the fiscal year that ended June 29. But the number of net new digital subscribers by MSOs declined, which could have "an adverse effect" on fiscal first-quarter 2002 results.

S-A also said it continues to have "limited visibility" into inventories that MSOs may have accumulated last year and in early 2001.

USB Warburg said in a research note it believes S-A's set-top inventory levels should drop in the second half of 2001, if operators meet their digital-subscriber projections. But the absolute level of inventory may still be too high, placing S-A at a disadvantage for a few more quarters.

"It is also possible that S-A's numbers will be perfectly fine, but clearly few investors will want to take that to the bank at this point," USB Warburg said.

S-A also said the soft economy could affect consumer purchases of new digital services, and potentially trim orders from MSOs.

USB Warburg downplayed S-A's fears in that area. Despite a sluggish first half for digital-TV subscriber additions, the second half of 2001 "is if anything brighter on the end-user demand front," the note said.

Cable's analog-to-digital conversion rate continues to grow at about 1 percent per month, S-A added.