Scientific-Atlanta Inc. said Thursday that it was withdrawing any previous
guidance for the first quarter and fiscal-year 2002, citing slower MSO
deployment rates during the second quarter, which could carve into the vendor's
On the news, S-A stock dropped more than 21 percent, or $5.31, to $19.70 per
share in early trading Friday. That undercut a 52-week low of $21 that occurred
during intraday trading July 20.
In a 10-K filing for the year ended June 29, S-A said the total number of
digital-cable subscribers increased during the period, but the number of net new
digital subscribers by MSOs declined, which could have 'an adverse effect' on
first-quarter fiscal-2002 results.
According to Thomson Financial/First Call, S-A was expected to post
first-quarter and full-year 2002 earnings of $0.28 and $1.52 per share,
S-A also said it continues to have 'limited visibility' into inventories MSOs
may have accumulated last year and the early part of 2001.
UBS Warburg LLC said in a research note that it believes S-A's set-top
inventory levels should come down by 20 days in the second half of 2001 as long
as MSOs meet their digital-subscriber projections.
Still, the absolute level of inventories may still be too high, placing S-A
at a disadvantage for another couple of 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,' UBS Warburg said.
S-A also said the soft economy could impact consumer purchases of new digital
services and potentially trim orders from MSOs.
UBS Warburg downplayed S-A's fears in that area. Despite a sluggish first
half of the year for digital-TV-subscriber additions, the second half of 2001
'is if anything brighter on the end-user demand front,' UBS Warburg said, adding
that cable's analog-to-digital conversions continue to grow at about 1 percent