Light Reading

Arris Rides Capex Wave in Q4

Alan Breznick

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
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? :) 
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.  
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.    
From The Founder
Steve Saunders provides an overview of white box networking and introduces a new "slim line" version of the OSI 7-layer model.
Flash Poll
Live Streaming Video
CLOUD / MANAGED SERVICES: Prepping Ethernet for the Cloud
Moderator: Ray LeMaistre Panelists: Jeremy Bye, Leonard Sheahan
Between the CEOs
Centec on Ethernet Switching

11|26|15   |   09:58   |   (0) comments

Centec CEO James Sun talks to Steve Saunders about Ethernet switching and the white box revolution.
LRTV Custom TV
Delivering Service Agility in the Virtualization Era

11|25|15   |   5.41   |   (0) comments

Interview with Massimo Fatato, WW OSS Business Lead, Hewlett Packard Enterprise.
Wagner’s Ring
How Might Open Source Fail?

11|24|15   |     |   (9) comments

Open source, SDN, and NFV are looking inevitable – but performance, standards proliferation and regulatory capture could derail the movement.
LRTV Custom TV
NFV Lifecycle Orchestration – a Fresh Vision for Telco

11|23|15   |   6.40   |   (0) comments

Simon Osborne, CTO Comptel, and Heavy Reading's Caroline Chappell reveal the business impacts of new SDN and NFV, and what the term service orchestration actually means. Together they define Lifecycle Service Orchestration and how the virtualized future will look for telecoms operators.
Between the CEOs
Cisco's Virtual Role in Saudi

11|20|15   |   12:15   |   (1) comment

Light Reading founder and CEO Steve Saunders talks with Zayan Sadek, Regional Manager at Cisco Systems, about the competitive communications services market and advance of virtualization in Saudi Arabia.
LRTV Huawei Video Resource Center
Huawei Leads With Kubernetes for Cloud PaaS

11|19|15   |   08:26   |   (0) comments

Huawei is looking to Kubernetes as a key tool for building robust open source technologies for customers and partners, said Ying Xiong, chief architect of cloud platform at Huawei, in an interview with Light Reading West Coast Bureau Chief Mitch Wagner at the recent Kubecon conference.
Women in Comms Introduction Videos
WiC in London: The Highlight Reel

11|19|15   |   5:33   |   (1) comment

NetCracker's Mervat El Dabae headlines an inspiring morning in London with help from leading women from Vodafone, TalkTalk, Hyperoptics and Ciena.
LRTV Documentaries
Why Saudi's So Hot for New Tech

11|19|15   |   05:07   |   (0) comments

Light Reading's Steve Saunders reports from Saudi Arabia, a hyper-competitive market desperate to embrace the next generation of communications technologies and services.
LRTV Custom TV
Why Data Models Deliver More Value Than Information Models

11|19|15   |   5.08   |   (0) comments

Stefan Vallin argues that more automation is needed to manage end-to-end services and the hybrid networks they run on, and that data models are key to achieving this.
Telecom Innovators Video Showcase
SDN Management & Orchestration in the WAN

11|17|15   |   7.20   |   (0) comments

Carol Wilson and Packet Design CTO Cengiz Alaettinoglu discuss CSPs' SDN service delivery and assurance requirements. Learn about a modular approach to building automated control, orchestration and management functions for the WAN that are policy- and analytics-driven.
LRTV Custom TV
Flash Networks: Optimizing for Radio Spectral Efficiency

11|17|15   |   3:34   |   (0) comments

Today most optimization vendors only focus on optimizing voice or data. Ofer Gottfried, Flash Networks' CTO, shows how improving data throughput and maximizing spectral efficiency reduces capital and operating expenses while also providing a platform for user engagement.
LRTV Custom TV
Making Pay-TV User Experiences Millennial-Friendly

11|16|15   |   6:42   |   (0) comments

The unique challenge of reaching and engaging Millennials is driving pay-TV video experience transformation that can include higher quality UIs, viewing of multiple content streams at once and seamless transitions between handheld devices and the television.
Allot MobileTrends Report H2/2015 reveals how daily online behavior can be used to discover smarter ways to profile customers and propose valuable, real-time offers to them.
Hot Topics
Samsung to Sell Wireless Networking Unit?
Dan Jones, Mobile Editor, 11/23/2015
Sprint, Verizon Face Reorganization, Job Cuts
Dan Jones, Mobile Editor, 11/20/2015
Sprint to Get $1.2B From New Leasing Venture
Dan Jones, Mobile Editor, 11/23/2015
How Might Open Source Fail?
Mitch Wagner, West Coast Bureau Chief, Light Reading, 11/24/2015
Samsung: No Sale of Wireless Unit
Dan Jones, Mobile Editor, 11/25/2015
Like Us on Facebook
Twitter Feed
December 15, 2015
Virtualizing Cable Services
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Centec CEO James Sun talks to Steve Saunders about Ethernet switching and the white box revolution.
Light Reading founder and CEO Steve Saunders talks with Zayan Sadek, Regional Manager at Cisco Systems, about the competitive communications services market and advance of virtualization in Saudi Arabia.
Cats with Phones
Can't Find the Phone on Thanksgiving? Click Here
Check under the cat! (hint: bottom right)
Live Digital Audio

Broadband speeds are ramping up across Europe as the continent, at its own pace, follows North America towards a gigabit society. But there are many steps to take on the road to gigabit broadband availability and a number of technology options that can meet the various requirements of Europe’s high-speed fixed broadband network operators. During this radio show we will look at some of the catalysts for broadband network investments and examine the menu of technology options on offer, including vectoring and for copper plant evolution and the various deployment possibilities for FTTH/B.