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CommScope Swaps Leadership of Its CPE Biz

Jeff Baumgartner
8/15/2019

CommScope's customer premises equipment business, acquired via the Arris merger in April, is undergoing a changing of the guard.

The company confirmed to Light Reading that industry vet Joe Chow has been hired to lead its CPE segment in an SVP role, succeeding another long-time industry mainstay, former Arris and Motorola Home exec Larry Robinson.

Robinson has been a key player in the cable, telco and satellite CPE business for almost two decades. He joined Arris in 2013 via the acquisition of Motorola Home, and had served as president of Arris's CPE business.

CommScope, which thanked Robinson for his 18-plus years of contribution to the combined company, said Robinson has decided to "pursue other interests." Robinson will stay on through mid-September to help with the transition as the reins are handed over to Chow.

Given Robinson's experience with operators and CPE suppliers, Chow has some big shoes to fill. But Chow also has lots of background and experience on which to draw. Chow, most recently an exec at WiFi chipmaker Quantenna Communications, also led Cisco Systems' Connected Devices Business Unit. He later joined Technicolor in 2015 when Technicolor acquired Cisco's CPE business in 2015. Chow joined Cisco through its acquisition of Scientific-Atlanta in 2005 for $6.9 billion.

What's next for CommScope's CPE business?
The leadership switch atop CommScope's CPE segment is likely to spur more speculation about the long-term fate of that part of the company's business. That CPE segment remains one of the world's largest concerning set-top boxes and DOCSIS cable modems, but it has been struggling of late (Arris Q2 2019 CPE segment sales dropped 9%, to $890 million).

The traditional video set-top box market has been eroding as cord-cutting becomes more rampant and as consumers opt to purchase Roku players and other streaming devices instead of leasing set-top boxes from service providers. A study released this week by D+R International estimates that US consumers used more than 36 million owned devices to access a service provider's video services via apps in 2018, up 33% from 2017.

Arris's typically strong broadband CPE business, meanwhile, has been temporarily weakened as the company recovers from the shift of production out of China to sidestep the financial impact of US-China tariffs. CommScope expects that part of the business to improve in the second half now that the bulk of that transition is completed.

Still, as the Arris-CommScope deal was being consummated, there was speculation that CommScope might look to sell off the set-top box business.

CommScope has not announced any major strategic decisions about its CPE business. However, industry watchers and sources familiar with the company's business wonder if CommScope will attempt to sell off that piece to a private equity firm or try to carve out a partnership with an original design manufacturer (ODM) that would reduce its exposure to the current CPE headwinds.

Partnering more directly with a device ODM could be made easier for such a transition as cable operators such as Comcast and Charter Communications look to gain control of the software that powers and manages their set-tops and modems. As MSOs extract that software piece and ask for vendors to simply make the hardware, the role of an original equipment manufacturer (OEM) like CommScope/Arris will be reduced.

If CommScope ultimately decided to go that route and look for an ODM to carry more of the weight of its CPE business, one possible candidate is Taiwan's Pegatron Corp., one of Arris's long-time manufacturing partners. Arris sold its set-top and modem manufacturing facility in New Taipei City to Pegatron in February 2018. At the time, Arris said the sale would help it boost investments in new technologies and to take advantage of Pegatron's manufacturing scale.

But if CommScope is planning any significant moves, it's keeping those plans close to the vest. A statement from Chow signals that CPE will remain an important part of CommScope's business moving forward.

"The CPE business has a bright future and CommScope is taking an important role in defining it -- whether that's by delivering important firsts in Wi-Fi home networking or pioneering the evolution to Smart Media Devices," Chow said in a statement. "We're investing in innovation. We're building our retail channel. We're expanding our global sales. That's the reason the executive leadership team brought me onboard -- as a statement about the priority of CPE in our organization and to lead our next stage of innovation."

Update: Chow formally announced himself Monday (August 19) as the new head of CommScope's CPE business. In a blog post, he was optimistic about CommScope's CPE business despite the challenges, including adjustments to the company's supply chain and "geopolitical headwinds."

"We have one of the strongest portfolios in the industry," added Chow, noting that he was directly involved with the deployment of Quantenna's WiFi chipset in Comcast's DOCSIS 3.1-powered XB6 gateway. "We have an incredible breadth of expertise. We have global scale. We can innovate and take solutions to market better than anyone else. And that’s a great place to start."

Dismantling of Arris's former leadership team
Robinson's forthcoming exit is also another step in the ongoing dismantling of Arris's leadership team before the CommScope acquisition. That deal closed just four months ago.

Last week, CommScope announced that it had eliminated the COO role and disseminated those duties to company president and CEO Eddie Edwards and other execs. That resulted in the departure of Bruce McClelland, the former CEO of Arris who was serving in the COO role following the merger. McClelland, two industry sources said, was directly involved in the hiring of Chow to head up CommScope's CPE business going forward before he exited the company.

Also gone is Dan Whalen, the former head of Arris's Network & Cloud unit. Kevin Keefe, an exec who joined Arris from the Motorola Home deal, now heads that segment.

CommScope also confirmed this week that Ian Whiting, the former president of Ruckus Networks (the wireless company Arris acquired in 2017), left in June. CommScope SVP and CTO Morgan Kurk is heading Ruckus on an interim basis until the company brings on a new leader for that division.

This flurry of leadership changes has concerned some analysts, with Raymond James analyst Simon Leopold holding in a recent research note that the departure of McClelland adds risk and "raises a cautionary flag."

The stripping away of Arris leadership DNA also caused him to ask CommScope directly on last week's Q2 call if it believes it has the "bench strength" to move forward and be successful with the recently acquired Arris assets.

CommScope's Edwards responded that he's confident the company is in good shape despite the recent exec changes. "We have very competent people in both sides of the company that have the ability to move up," he said on the call.

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— Jeff Baumgartner, Senior Editor, Light Reading

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