Light Reading
Surging shipments of cable and IPTV set-tops, video gateways, and CCAP devices drive higher than expected sales and earnings for equipment vendor.

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
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
Wagner’s Ring
Data Centers Drive Telcos Into the Future

8|28|14   |   2:20   |   (2) comments


Data centers are at the heart of key trends driving telecom -- network virtualization, the drive for increased agility, and the need to compete with OTT providers.
LRTV Custom TV
Why SPs Should Consider Cisco's EPN

8|27|14   |   5:40   |   (0) comments


Sultan Dawood from Cisco discusses Cisco's EPN, which enables SPs to build agile and programmable networks delivering new network virtualized services using Cisco's Evolved Services Platform (ESP).
LRTV Huawei Video Resource Center
Huawei’s Showcase @ Big Telecom Event 2014

8|26|14   |   2.56   |   (0) comments


SoftCOM is Huawei's framework for telecom business and network transformation. Haofei Liu, Solution Marketing Manager, Carrier Business Group, Huawei, showcases Huawei's SoftCOM architecture in this video.
LRTV Huawei Video Resource Center
Huawei @ BTE 2014: Director of Integrated Solutions on SoftCOM & NFV Monetization

8|26|14   |   4.43   |   (0) comments


Libin Dai, Director of Integrated Solutions, Carrier Business Group, discusses Huawei's SoftCOM and NFV monetization. Huawei believes that NFV monetization should be service-driven rather than network-driven, and that operators should have network transformation, service transformation and a compatible and collaborative ecosystem in place in order to deploy NFV.
LRTV Huawei Video Resource Center
Huawei @ BTE 2014: Director of US NFV Lab on CloudEdge & the Future of NFV

8|26|14   |   4.06   |   (0) comments


Sean Chen, Director of US NFV Lab at Huawei, discusses Huawei's new approach to NFV in open collaboration. Huawei believes that through Proof of Concept tests, it could help operators learn and communicate with the industry more effectively. Sean believes that successful implementation of NFV should have its values reaching to end users and discusses how Huawei's ...
LRTV Huawei Video Resource Center
Huawei's Highlights @ Big Telecom Event 2014

8|26|14   |   3.34   |   (0) comments


At the Big Telecom Event in Chicago Huawei showcases its high-level strategy, the SoftCOM architecture, which helps operators reduce the cost of ownership of their network infrastructure and generate additional revenue in the ICT service environment. Huawei showcases over 30 pilot programs from across the globe, focusing on the industry-leading commercial ...
LRTV Custom TV
VeEX – Live from the Show

8|21|14   |   5:58   |   (0) comments


An overview of VeEX Test and Measurement solutions including TX300S multi-service test set with VeExpress cloud-based management system, UX400 universal modular platform supporting 100G testing, and the redesigned RXT modular platform.
LRTV Custom TV
Transitioning CE 2.0 Networks Into the SDN & NFV Era With Telco Systems

8|19|14   |   5:19   |   (0) comments


Telco Systems' Ariel Efrati (CEO) and Moshe Shimon (VP of Product Management) discuss virtualization and how the company's new Open Metro Edge solution utilizes the SDN and NFV concepts to accelerate and orchestrate service delivery through its innovative product portfolio and software applications.
LRTV Custom TV
NFV Myths: Is NFV Still Several Years Away?

8|11|14   |   1:13   |   (0) comments


Some say that NFV (network functions virtualization) is still several years away from being implemented on mobile operator networks. This isn't the case. Operators can get started on their paths to NFV now, as this short video from Skyfire shows.
LRTV Custom TV
A New Security Paradigm in SDN/NFV

7|28|14   |   02:54   |   (0) comments


Paul Shaneck, Global Director Network Solutions for Symantec, discusses the evolving virtualized network, explaining how Symantec is leading the security discussion as it relates to SDN and NFV, and helping to ensure the network is protected and compliant.
LRTV Documentaries
Sprint's Network Evolution

7|24|14   |   14:59   |   (0) comments


Sprint's Jay Bluhm gives a keynote speech at the Big Telecom Event (BTE) about Sprint's network and services evolution strategy, including Spark.
LRTV Documentaries
BTE Keynote: The Software-Defined Operator

7|24|14   |   18:43   |   (1) comment


Deutsche Telekom's Axel Clauberg explains the concept of the software-defined operator to the Big Telecom Event (BTE) crowd.
Upcoming Live Events!!
September 16, 2014, Santa Clara, CA
September 16, 2014, Santa Clara, CA
September 23, 2014, Denver, CO
October 29, 2014, New York City
November 6, 2014, Santa Clara
November 11, 2014, Atlanta, GA
December 9-10, 2014, Reykjavik, Iceland
June 9-10, 2015, Chicago, IL
Infographics
A survey conducted by Vasona Networks suggests that 72% of mobile users expect good performance all the time, and they'll blame the network operator when it's not up to par.
Today's Cartoon
Hot Topics
Rogers, Shaw Take Aim at Netflix
Mari Silbey, Independent Technology Editor, 8/26/2014
Utilities to Pump $11.2B Into Smart Grid – Study
Jason Meyers, Senior Editor, Utility Communications/IoT, 8/26/2014
Verizon Launches QR Code Security Solution
Carol Wilson, Editor-at-large, 8/26/2014
Nokia's Maps Land on Samsung Devices
Sarah Reedy, Senior Editor, 8/29/2014
Verizon to Launch HD VoLTE in 'Coming Weeks'
Sarah Reedy, Senior Editor, 8/26/2014
Like Us on Facebook
Twitter Feed