Okay, maybe the set-top isn’t dead after all.
Bucking a trend marked by withering set-top sales, Arris said set-top unit shipments jumped 43% in the fourth quarter versus the prior period.
Arris, almost a year removed from its acquisition of Motorola Home, said demand rose on a mix of traditional set-tops as well as new hybrid QAM/IP XG1 HD-DVRs shipped to Comcast in support of the MSO’s X1 rollout. Following its initial reliance on Pace boxes, Comcast is starting to spread the wealth following the rollout of X1 in all its markets and plans to accelerate customer deployments in 2014.
“[T]he Comcast XG1 came on very strong at the end of the year following the successful completion of product qualification,” Arris chairman and CEO Bob Stanzione said on Wednesday afternoon’s earnings call.
The XG1 “played a nice factor in the quarter,” added Larry Robinson, president, customer premises equipment, for Arris. The XG1 is the first product commercially deployed by Arris that is based on the Reference Design Kit (RDK), the pre-integrated software stack for set-tops and gateways being managed by Comcast and Time Warner Cable.
Stanzione also attributed the surge to Arris’s initial shipments of DVB-based boxes to Latin American operators in the quarter, while also seeing “strong demand” from telcos for IP-based boxes.
Playing a big role there was Verizon Communications, which, at $150 million, represented 12.5% of Arris sales in the quarter (Comcast represented 18.6%, or $222.7 million; Time Warner Cable represented 6.9%, or $82.6 million). Robinson said Arris got a bump as Verizon continued to drive its video service deeper in its system footprint aided by “QIP” (QAM/IP) set-tops.
On the downside, Arris said shipments of DOCSIS devices dropped following a record third quarter, but expects momentum to return in the current quarter. Arris said 87% of DOCSIS CPE shipments were DOCSIS 3.0, and 58% were Wi-Fi-enabled.
Arris said the E6000, it’s next-gen Converged Cable Access Platform (CCAP), supported more than 2 million subscribers by the end of 2013, doubling the number it posted in the third quarter.
“The customer base is expanding and it's truly global with the CCAP refresh cycle gaining momentum and showing strong demand for the first half of this year,” Stanzione said.
And it’s finding new ways to distribute its former flagship cable modem termination system product, the C4. At this week’s NCTC Winter Educational Conference in Tampa, Steven Krapp, Arris’s CMTS product management director, said the vendor has launched a program in which it will buy back C4, refurbish them, and sell them to smaller operators.
Stanzione said Time Warner Cable has not changed its all-digital upgrade plans in the face of its proposed merger with Comcast. “So far we don’t see any change and frankly we don’t anticipate much of any change.” At this week’s NCTC confab, Stanzione admitted that Arris is “holding our breath” on how the deal might alter MSO spending patterns.
On the financial front, Arris posted sales of $1.19 billion, ahead of Wall Street’s expected $1.16 billion. Arris earned 54 cents, ahead of the 45 cents expected by analysts. CPE sales of $865.4 million represented 72% of sales, with the balance, $336.9 million, driven by Arris’s network & cloud portfolio.
Arris expects first quarter sales of $1.17 billion to $1.21 billion, and earnings per share of 42 cents to 47 cents. That’s above consensus expectations of 46 cents and $1.14 billion, Raymond James analyst Simon Leopold said in a note issued Thursday.