With a spin-off of Home Networks still on the backburner, CommScope is pursuing a 'transformation plan' for the unit that makes and sells set-tops, broadband gateways and streaming devices.

Jeff Baumgartner, Senior Editor

November 3, 2022

4 Min Read
CommScope can't rid itself of struggling Home Networks unit

Nearly eight months ago, CommScope delayed the spin-out of its struggling Home Networks unit and subsequently has seen demand for the division's products fade. Today the delay persists, sales are still dropping and there is no sign when or if CommScope will be able to execute on its original plan to spin-off Home Networks as a separate, publicly traded business.

CommScope has said it wants to get the Home Networks unit off the books to focus on its remaining "core" business, but the company was forced to delay the spin out because of supply chain constraints that slowed access to chips and other components that power its mix of set-top, broadband modems and gateways and streaming devices. The company has previously been open to other alternatives for Home Networks, including an outright sale.

Figure 1: (Source: RidingMetaphor/Alamy Stock Photo) (Source: RidingMetaphor/Alamy Stock Photo)

With no spin-off opportunity in sight, CommScope has resigned itself to doing what it can to improve the financial footing of the Home Networks unit.

"Home continues to be challenged with chip constraints, demand and negative impacts from foreign exchange rates," CommScope CEO Chuck Treadway said Thursday on the company's third quarter 2022 earnings call. "In response to this, we're implementing a transformation plan specific to Home to help improve performance."

Transformation will 'take time'

Treadway didn't provide details about what the plan entails, but his comments come as the unit again turned in lackluster results. Home Networks net sales in Q3 dropped 6% to $391 million paired with an adjusted EBITDA loss of $5 million. The EBITDA loss actually improved from a year-ago loss of $16 million that was saddled with some bad debt expense.

"Home continues to be our most significantly impacted segment from a chip supply perspective," CommScope CFO Kyle Lorentzen said.

In addition to constraints on chips and margins hit by foreign exchange rates, the revenue decline in Q3 came primarily from lower demand for broadband gateway devices, the company said.

As for that transformation plan? It will "take time to produce results," Lorentzen said.

Treadway noted later that CommScope holds monthly operating reviews for each business. Regarding Home Networks, he said, "we're just going to spend some time with them specifically on building a plan on how we can get this thing on the right track while we wait for components and figure out our next steps."

But, Treadway, added: "The business has to be in a healthier position before we made a move."

Meanwhile, one of CommScope's primary CPE rivals just completed a move. Technicolor split out its CPE business into a new, separately traded company called Vantiva, which recently shared its near term plans and priorities with Light Reading.

Access network unit sales flatten

Among other segments tied to the "core" CommScope business, the Access Network Solutions unit generated Q3 revenues of $342 million, up 1% versus the year-ago period. However, adjusted EBITDA dropped 43%, to $58 million, as margins shift toward products deployed at the network edge in support of a distributed access architecture (DAA).

Sticking with DAA, Treadway said CommScope remains agnostic to the technology options. Recently momentum has grown for a DAA option whereby a virtual cable modem termination system (vCMTS) is paired with remote PHY nodes. Comcast is taking that approach, and Charter Communications has made a similar selection for its DAA strategy.

Treadway noted that CommScope has its own vCMTS and that its traditional, chassis-based CMTS, the E6000, can act as a network core that can drive remote PHY devices. CommScope also supports the remote MACPHY option DAA, evidenced recently by Mediacom's selection of CommScope as its "primary vendor" for DAA.

Financial snapshot

Here's a glance at how the rest of CommScope performed in Q3:

  • Consolidated Q3 revenues of $2.38 billion, up 13% year-over-year.

  • Core CommScope (excluding Home Networks) posted sales of $1.99 billion, up 18%.

  • Connectivity and Cable Solutions saw revenues rise 28% to $1 billion thanks to strong fiber and connectivity demand.

  • Networking, Intelligent Cellular and Security Solutions (NICS) saw revenues jump 25% to $258 million, helped by record sales at Ruckus.

  • Outdoor Wireless Networks (OWN) generated revenues of $382 million, up 7%.

Related posts:

— Jeff Baumgartner, Senior Editor, Light Reading

About the Author(s)

Jeff Baumgartner

Senior Editor, Light Reading

Jeff Baumgartner is a Senior Editor for Light Reading and is responsible for the day-to-day news coverage and analysis of the cable and video sectors. Follow him on X and LinkedIn.

Baumgartner also served as Site Editor for Light Reading Cable from 2007-2013. In between his two stints at Light Reading, he led tech coverage for Multichannel News and was a regular contributor to Broadcasting + Cable. Baumgartner was named to the 2018 class of the Cable TV Pioneers.

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like