CommScope execs said they will need more time to complete the proposed spin-off of Home Networks, the struggling unit that makes and sells set-tops, broadband gateways, modems and other consumer premises equipment (CPE).

Rather than wrapping that transaction by the first quarter of 2022, the company says it is now on track to complete it the second quarter of 2022. That new, longer projection is "due to operational complexities of the transaction," Alex Pease, CommScope's EVP and CFO, said Thursday on the company's earnings call.

When completed, the transaction will transform Home Networks into a separate, publicly traded company. CommScope announced the plan in April, but has acknowledged that other alternatives are possible, such as sale, if the right opportunity emerges.

The anticipated spin-off ties into a broader evaluation of CommScope's entire business lead to the release of some assets deemed non-core, or possible strategic acquisitions.

Chuck Treadway, who was named CEO of CommScope last fall, said the optimization of the company's portfolio is about half of the way completed, and expects to complete that process by December. CommScope intends to share a bit more about that at an investor day that will take place later this year.

The Home Network unit's struggles continues in the second quarter, and were exacerbated by its exposure to supply chain constraints, particularly around access to semiconductors and other components. Amid sales declines for both video and broadband gateway, the Home Networks unit posted Q2 sales of $457 million, down 28% year-over-year.

Among positives, CommScope said it is making progress with sales of the "XB7," a new DOCSIS 3.1 gateway with integrated Wi-Fi 6, particularly with Comcast syndication partners in Canada, a group that includes Rogers Communications, Shaw Communications and Videotron. Another bright spot involved LTE/fixed wireless access and PON-powered CPE.

'Core' CommScope sees revenues rise 17.8%

Consolidated Q2 sales at CommScope rose 3.9%, to $2.18 billion. But the pieces of the business considered "core" (Broadband Networks; Venue and Campus Networks; and Outdoor Wireless Networks) saw revenues jump 17.8%, to $1.72 billion.

Within that core group, revenues at the Broadband Networks unit climbed 22%, to $808 million, as operators deployed more fiber-to-the-premises (HFC) networks, added more fiber to their hybrid fiber/coax (HFC) networks, or added capacity by splitting nodes or adding line cards or software licenses to cable network access systems.

CommScope noted that it has started to invest in DOCSIS 4.0, a next-gen specification for HFC networks that will delivery multi-gigabit speeds along with advanced security and low-latency capabilities.

The company's Venue and Campus Networks unit saw revenues rise 18%, to $563 million, citing strength in areas such as Wi-Fi 6 spending.

Outdoor Wireless Networks generated $358 million, up 9% year-over-year. Of note, the unit saw growth in both macro tower and metro layer deployments linked to site preparations for coming 5G buildouts, particularly in North America. CommScope doesn't make the radios for these deployments, but did see demand for the elements it does provide, such as power loading systems, cabling, steel reinforcement structures and cabinetry that holds the electrical components used at macro sites.

Mitigating supply chain issues

Like other companies along the telecom landscape, CommScope is grappling with supply chain disruptions and delays that are extending lead times and raising prices for elements such as silicon, copper, steel and freight.

Home Networks has been most impacted by the chip shortages, which have led to higher prices and lead times that can extend to more than year. Pease said 96% of revenue within the Home Networks unit is exposed to the semiconductor issue, compared to 25% to 50% for other parts of CommScope's business.

On a cost/inflation basis, CommScope estimates that supply chain constraints represented $45 million in Q2 2021 and so far represent $270 million for the full-year prior to mitigation steps that, it says, has cut that financial impact in half. Those steps included dynamic sourcing of materials, qualifying additional suppliers, taking increased advantage of CommScope's scale and redesigning products that can accommodate alternative solutions, Pease said. CommScope is also raising prices as required, he added.

Bracing for the 'fiber everywhere' trend

Elsewhere, CommScope said it is making progress with a new capital investment program at four manufacturing facilities designed to boost production capacity of fiber cabling, cabinets and fiber terminal enclosures.

The first of those projects came online in the second quarter, and more will follow over the next four quarters, enabling CommScope to participate in projects such as the Rural Digital Opportunity Fund (RDOF) and the broader "fiber everywhere trend," Treadway said.

CommScope expects those capacity investments to support $350 million to $400 million in incremental annual revenue growth by 2023.

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— Jeff Baumgartner, Senior Editor, Light Reading