Upgrades Boost MSO Vendors

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Cable operators' deployment of advanced services istrickling down to their vendors' bottom lines.

A handful of cable-technology companies released earningsreports last week, and by and large, all of them reported record periods of revenue andearnings, giving credence to claims by cable operators that deployment of advancedservices is moving forward.

About nine cable-tech companies reported earnings lastweek, and all but one -- Com21 Inc. -- showed decent increases in revenue and earnings.

That growth also was reflected in their stock prices, whichrose an average of 1.5 percent -- except for Antec Corp., which saw its share price fallmore than 20 percent last Wednesday after missing its earnings forecast by a few cents.

Harmonic Inc. saw the biggest leap -- $6.12 per share, to$73.75 -- the day after its earnings release. The vendor's already high-flying stockcame back a bit the next day (Oct. 21), to $72.81.

"If you look at the results, the area of consistentstrength is in the transmission business -- the [hybrid fiber-coaxial]infrastructure," Warburg Dillon Read LLC analyst Nikos Theodosopoulos said."They had good revenue growth, good orders growth."

Theodosopoulos added that cable-modem companies likeGeneral Instrument Corp. and Tellabs Operations Inc., which makes telecommunicationsequipment and routers, are also starting to see significant growth in sales and orders ofthose products.

GI reported earnings of $48.9 million, up 24 percent forthe quarter, on revenue of $544 million, up 5 percent.

During the period, GI said it shipped 60,000"SURFboard" DOCSIS (Data Over Cable Service Interface Specification) modems,doubling the total shipped in the second quarter. The company said it shipped 800,000interactive digital set-top terminals during the quarter, an increase of more than 35percent over the same period in 1998. In addition, it also began volume shipments of itsmore advanced "DCT-5000+" terminals during the quarter.

GI's stock was up 62 cents per share on the day of theearnings announcement, closing at $49.31 Oct. 21.

Tellabs reported its best quarter ever, with sales up 38percent to $594.5 million and earnings up 73.4 percent to $144 million.

Theodosopoulos pointed to Tellabs'"Cablespan" universal-telephony-distribution product, which reported sales of$28 million for the quarter, up from $17 million in the previous year.

Tellabs shares rose $2 each after its earnings werereleased, closing at $61.06 Oct. 21. "The [cable] networks are being upgraded and newservices are being rolled out," Theodosopoulos said.

Harmonic -- a maker of fiber optic systems based inSunnyvale, Calif. -- led the pack by reversing its losses from the previous quarter,posting a profit of $7.7 million, or 23 cents per share, compared with a loss of 4 centsper share in the prior year.

The company doubled its revenue in the period to $52.6million. Harmonic attributed the revenue rise to increased shipments of its fiber opticequipment to AT&T Broadband & Internet Services. Harmonic is participating in anAT&T Broadband cable-telephony trial in Salt Lake City.

SoundView Technology Group analyst Kevin Slocum said thatalthough AT&T Broadband was a big boost to Harmonic, it wasn't the only factor inthe company's increased quarterly results.

"Obviously, AT&T was a huge factor in theirbusiness, but if you stripped out AT&T, the business grew 68 percentyear-over-year," Slocum said. "If you look at it further, the internationalbusiness grew 30 percent. I think the significant activity suggests that the upgrade ofthese networks is broadening out. I continue to think [Harmonic is] well-positioned."

C-COR.net Corp., another participant in the Salt Lake Citytrial, also saw a hefty revenue increase in the first quarter of its 2000 fiscal year,which ended Sept. 24 -- 86 percent to $64.5 million. The company also rebounded from a netloss of $1.1 million a year ago, reporting a profit of $3.1 million in the most recentperiod.

At Antec, earnings rose 116 percent to $10.8 million, or 27cents per share. Revenue at the company -- which designs and engineers HFC networks --increased 58 percent to $237.2 million.

At Amphenol Corp. -- which designs and manufactureselectrical, electronic and fiber optic connectors; coaxial and flat-ribbon cable; andinterconnect systems for the cable industry -- earnings rose 41 percent to $11.6 million,or 65 cents per share. Revenue was up 12 percent in the period, to $256.9 million.

CommScope Inc. -- a GI spinoff that makes high-bandwidthcables for video, data, and other telecommunications applications -- showed earnings of$19.7 million, or 38 cents per share, up 73 percent. Revenue rose 35 percent to $202.3million. The company said cable-TV and video sales were $148.6 million during the period,a 24 percent increase.

Cable-modem chip-maker Broadcom Corp. increased netearnings more than fivefold, from $5.2 million to $27.2 million. Revenue at the companywas $138.4 million.

Com21 reported a net loss of $2.5 million, or 12 cents pershare, even with last year's deficit. However, revenue shot up 85 percent to $25.3million in the quarter.

The company added that it sold 80,000 cable modems in thethird quarter -- a 239 percent increase -- and it shipped 91 headend units.

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