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Adelphia Deal May Help Three Tech Vendors

Now that Time Warner and Comcast have finally gained federal approval of their $17.6 billion joint buyout of Adelphia Communications, the big question in the cable tech world is which equipment suppliers will benefit the most from the transaction. With the nation's two largest MSOs slated to divvy up Adelphia's somewhat neglected cable systems and swap other systems to build up their regional market clusters, industry analysts expect the deal's consummation to unleash a big wave of capital spending. Comcast alone is expected to spend $150 million upgrading its Adelphia systems for VOIP and other advanced digital services over the next two years. And Time Warner, which will gain about two-thirds of Adelphia's 5.3 million cable subscribers, is likely to spend even more on system upgrades. In a fresh dispatch from Wall Street, Friedman, Billings, Ramsey & Co. analyst Brian Coyne has a few ideas about which vendors will emerge as the winners. Coyne posits that Arris, C-COR, and CommScope stand to gain the most from the upcoming takeover because of their product portfolios and current positions with Adelphia, Time Warner, and Comcast. Coyne expects Arris to capture substantial voice modem business from the old Adelphia properties because the equipment vendor is already the lead supplier of embedded multimedia terminal adapters (E-MTAs) to both Comcast and Time Warner. With Adelphia's VOIP plans on hold the past two years because of the pending sale of its systems, both MSOs are expected to launch VOIP in numerous Adelphia markets as quickly as possible. In addition, Coyne thinks Arris will pick up some headend equipment business because of the system swapping that Comcast and Time Warner plan to do. Thanks to the planned horse trading, he argues, Arris will gain Time Warner as a cable modem termination system (CMTS) customer in such current Comcast markets as Dallas, leading to a "bump in spending" because of Comcast's reluctance to invest in its soon-to-be-former systems. Coyne contends that C-COR could reap as much as $60 million in additional hardware and software orders over the next 18 months from the Adelphia lottery because of its savvy product positioning. In particular, he sees potential for both C-COR's new OptiMax 3100 node and network service manager software, the latter of which is already being deployed by Time Warner. As for CommScope, Coyne believes that it will benefit from renewed spending on basic hybrid fiber coax (HFC) by the new owners of the Adelphia systems as they seek to maintain and extend their cable networks. Noting that CommScope saw about $10 million per quarter in revenues from Adelphia before the MSO went bankrupt a couple of years ago and stopped investing heavily in its networks, he projects that HFC spending could return to nearly that level again by the end of this year. -- Alan Breznick, Site Editor, Cable Digital News
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