Light Reading

Arris Rides Capex Wave in Q4

Alan Breznick
2/20/2014
50%
50%

Cisco's loss definitely appears to be Arris's gain.

Riding a wave of increased capital spending by its leading cable and telco customers, Arris Group Inc. (Nasdaq: ARRS) racked up higher than expected sales and earnings for the fourth quarter as its shipments of traditional set-top boxes, next-gen video gateways, and next-gen Converged Cable Access Platform (CCAP) devices all posted strong increases. The company reported nearly $1.2 billion in revenue and adjusted net income of $77.6 million, or 54 cents per share, for the quarter, beating Wall Street's consensus estimates and winning praise from analysts.

Customer premises equipment (CPE) led the way for Arris, particularly on the video side, generating $865.4 million in revenue. Unlike rival Cisco Systems Inc. (Nasdaq: CSCO), which has been slumping badly on the video side, Arris reported that cable set-top box shipments leapt 43% in the quarter as cable operators raced to deploy both low-end digital transport adapters (DTAs) and high-end home video gateways to compete against telcos, satellite TV providers, and over-the-top (OTT) video providers. (See Revenue, Income Slide In Cisco's Q2 2014.)

One standout set-top unit was the XG1, a new, hybrid IP video gateway that Arris is now supplying to Comcast Corp. (Nasdaq: CMCSA, CMCSK) for the MSO's rollout of its next-gen X1 platform. Arris said its deployments of the XG1, its first box to support the cable industry's Reference Design Kit (RDK) IP video software stack, got off to a promising start in the fall after earning product qualification.

"The Comcast XG1 came on very strong at the end of the quarter," noted Arris chairman and CEO Bob Stanziohe on the company's earnings call late Wednesday. "Certainly the XG1 played a nice factor in the quarter," agreed Larry Robinson, president of Arris's CPE division.

Another standout performer was the DVB-based set-top box that Arris introduced in Latin America during the fall quarter. With telcos initially showing healthy demand for the new IP-based set-tops, Stanzione said Arris views the market as another "strong opportunity."

On the access network side of the ledger, Arris reported growing demand for its integrated CCAP device, known as the E6000. The company said the E6000's deployment base doubled to cover cable systems with more than 2 million subscribers in the fourth quarter, as MSOs began installing the more powerful, high-density, space-savings CCAP devices in their cable headends.

Bruce McClelland, president of network and cloud and global services for Arris, said the E6000 accounted for more than half of the company's shipments of broadband infrastructure equipment in the quarter, outstripping its flagship C4 cable modem termination system (CMTS). He said Arris is seeing "strong interest around the world" in its CCAP product.

About the only downside in the earnings report for Arris was a quarterly sales decline in its traditional DOCSIS equipment business, which includes cable modems, data gateways, and CMTS devices. While the company officials declined to specify how much DOCSIS shipments and sales dropped from their record levels in the third quarter, they said they anticipate a strong rebound in the first quarter.

As usual, three of the biggest US MSOs and telcos generated a significant share of Arris's sales in the fourth quarter. Comcast led the way with $227.7 million in order, or 18.6% of Arris's total, followed by Verizon Communications Inc. (NYSE: VZ) with $150 million (12.5%) and Time Warner Cable Inc. (NYSE: TWC) with $82.6 million (6.9%).

On the earnings call, several analysts pressed Arris executives about the impact of Comcast's pending $45.2 billion deal to buy Time Warner Cable. The analysts wondered whether TWC might pull back or change its ambitious capital spending plan because of the deal. (See Comcast to Buy Time Warner Cable for $45.2B .)

But, shrugging off those concerns, Arris officials said they're seeing no evidence of any spending cuts or shifts by either TW Cable or Comcast, which are both planning to boost their capex this year. "So far we're seeing no change and we don't anticipate any change," Stanzione said. "We're going full steam ahead."

— Alan Breznick, Cable/Video Practice Leader, Light Reading

(3)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
albreznick
50%
50%
albreznick,
User Rank: Blogger
2/28/2014 | 5:15:38 PM
Re: Everything's Looking Up for Arris
One other thing to consider: What does Arris do for an encore now? When you're sitting on top of the world, the only way to go is down, no? :) 
albreznick
50%
50%
albreznick,
User Rank: Blogger
2/28/2014 | 5:04:47 PM
Re: Everything's Looking Up for Arris
One thing that was downfor Arris was DOCSIS device shipments, products like cable modems and E-MTAs. Don't know if this was a fluke or what yet. But that is an area to watgh.  
albreznick
50%
50%
albreznick,
User Rank: Blogger
2/26/2014 | 9:44:44 PM
Everything's Looking Up for Arris
There seems to be barely a cloud in the sky for Arris these days. Almost every piece of its business is firimg ahead. Will be interesting to see if Cisco can get re-energized in the cable space quickly and halt Arris' market momentum.    
Flash Poll
From The Founder
The Swedish vendor has undergone a significant transformation during the past few years, adjusting to the demands of next-generation communications companies.
LRTV Documentaries
LTE Paves the Way for the 5G Revolution

4|20|15   |   4:20   |   (0) comments


Håkan Andersson, head of 5G product strategy of the Radio Business Unit at Ericsson, discusses the role of LTE, the US and other industry verticals in building a true 5G ecosystem.
LRTV Documentaries
The 3GPP's Road to 5G Standardization

4|17|15   |   4:43   |   (0) comments


Satoshi Nagata, chairman of the 3GPP's TSG-RAN group and a manager at NTT Docomo, explains the standardization process for 5G, as well as the biggest challenges and opportunities.
LRTV Documentaries
AlcaLu CTO Makes the Case for a New 5G Air Interface

4|16|15   |   3:54   |   (0) comments


Michael Peeters, CTO of wireless at Alcatel-Lucent, explains why 5G will require a new air interface to meet its diverse performance targets.
LRTV Documentaries
AlcaLu + Nokia: The New Uber-Vendor

4|15|15   |   2:42   |   (4) comments


Heavy Reading Senior Analyst Gabriel Brown discusses the technological and competitive opportunities and challenges if a merger between Alcatel-Lucent and Nokia comes to pass.
LRTV Huawei Video Resource Center
Huawei's Data Center Power Play

4|15|15   |   6:22   |   (0) comments


Huawei has developed industry-leading energy efficiency capabilities for its indoor and outdoor data center solutions, explains Dr. Fang Liangzhou, vice president of Huawei's Network Energy product Line.
LRTV Huawei Video Resource Center
Huawei’s Routers, Switches Get the Green Mark

4|15|15   |   2:02   |   (0) comments


TUV Rheinland's Frank Dudley explains how Huawei's routers and switches have been successfully tested by energy efficiency experts and have gained Green Mark Certification.
LRTV Documentaries
A Finn, a Frenchman & a Guy From New Jersey Walk Into a Merger...

4|15|15   |   3:17   |   (0) comments


Stop us if you've heard this one before... Light Reading CEO Founder & CEO Steve Saunders weighs in on the technical and cultural implications of a Nokia and Alcatel-Lucent merger.
LRTV Huawei Video Resource Center
Accounting for Better Solutions

4|10|15   |   02:31   |   (1) comment


Murad Yousuf, CTO at Saudi Arabia's Ministry of Finance (Dept. of Zakat & Income Tax), talks about the benefits of deploying router technology from Huawei.
LRTV Huawei Video Resource Center
What's in Store for Huawei & DataCore?

4|10|15   |   05:44   |   (0) comments


At the CeBIT trade show in Hannover, Germany, George Teixeira, CEO of software-defined storage (SDS) specialist DataCore Software, explains why he has just signed a partnership agreement with Huawei Technologies.
LRTV Huawei Video Resource Center
Du Puts Its Faith in Huawei's Routers

4|9|15   |   3:42   |   (0) comments


Adnan Masood, director of Enterprise MS Solutions Marketing at du, the United Arab Emirates (UAE) operator also known as Emirates Integrated Telecommunications Company, explains why his company chose to use Huawei's multifunctional AR routers as part of its managed enterprise services.
LRTV Huawei Video Resource Center
Huawei Gets Active in the Data Center

4|9|15   |   3:17   |   (0) comments


With enterprise users looking to maximize the use of their data center assets, Huawei’s Chief Architect & Technical Director of IT Data Center Solutions, Bruce Su, explains how the company's six-layer active-active data center solution is eradicating the need to deploy passive, redundant data center assets.
LRTV Huawei Video Resource Center
Blue Consult & Huawei for a Better Solution

4|8|15   |   4:01   |   (0) comments


Martin Rott, CEO, and Marc Metzler, head of sales virtualization, from Germany's Blue Consult discuss their collaboration with Huawei and TrendMicro to develop a secure, scalable IT platform that can meet the needs of the most demanding enterprise users.
Upcoming Live Events
May 5, 2015, Hyatt McCormick Place, Chicago, IL
May 6, 2015, Georgia World Congress, Atlanta, GA
May 12, 2015, Grand Hyatt, Denver, CO
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 8, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 9, 2015, Chicago, IL
June 10, 2015, Chicago, IL
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
November 11-12, 2015, The Westin Peachtree Plaza, Atlanta, GA
All Upcoming Live Events
Infographics
Network Instruments, a JDSU division, shares results from its 2015 State of the Network, a global survey on security.
Hot Topics
Verizon Scores New OTT Content Deals
Mari Silbey, Independent Technology Editor, 4/16/2015
What if the Comcast Merger Fails?
Mari Silbey, Independent Technology Editor, 4/20/2015
Nokia & Alcatel-Lucent: What's Going On?
Ray Le Maistre, Editor-in-chief, 4/15/2015
Huawei P8 Launch: Cue Applause!
Ray Le Maistre, Editor-in-chief, 4/16/2015
LPWA: A Threat to 'Wait & See' IoT Operators?
Steve Bell, Senior Analyst, Heavy Reading, 4/16/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Data Center Interconnect, or DCI, is one of the hottest sectors in telecom currently. Since coming back to Light Reading last year, prodigal-son style, I've ...
LR CEO and Founder Steve Saunders sits down with the head of Qosmos to talk about the changing state of the art in deep packet inspection technology, including its role in SDN and NFV architectures.
Cats with Phones
Stig's Big Decision Click Here
Stig's big decision for the day was to decide which item would be more fun to chew: the smartphone or the Rubik's Cube.