Things are hard all over for CommScope's Home Networks business these days.
Already faced with a tough market for video devices offset by decent demand for broadband gateways, the unit is now contending with supply chain constraints, particularly with semiconductors. Though CommScope sees this issue as "transitory," with hopes that it might subside sometime in 2022, the current situation is causing demand to outstrip the company's ability to supply consumer premises equipment (CPE).
To amplify that point, CommScope's Home Networks unit ended Q1 with more than $1 billion in backlog, about twice the average it had in 2020, and the most since CommScope acquired Arris in 2019. Those shortages are also entering the frame as CommScope makes plans to spin out its Home Networks unit by Q1 2022.
"While it is difficult to forecast when these supply constraints will be resolved, this is a transitory issue," Chuck Treadway, CommScope's CEO, said on today's Q1 2021 earnings call. "I wouldn't say we're shut down" with respect to the components shortages, Treadway said later. "We're just not getting the supply we need."
Beyond the semiconductor issue, cost increases for other materials, such as copper, steel, resins and freight, have led to recent inflationary pricing.
CommScope is also facing constraints for fiber cable and fiber connectivity. However, those are "internal constraints" that are being addressed with factory investments that will come online later in the year, company CFO Alex Pease said.
Overall Q1 2021 sales of $2.07 billion beat Wall Street's expectation of $2.01 billion.
CommScope's Broadband Networks unit was a bright spot, as net sales climbed 29%, to $791 million, up from $613 million in the year-ago quarter. That part of the business, anticipated to gather some additional steam from various federal rural broadband stimulus programs, is benefiting from node splits and network capacity additions by cable operators. Recent growth in the segment is also attributed to an expanding PON business along with some progress tied to distributed access architecture deployments on hybrid fiber/coax (HFC) networks.
Sales at Home Networks dipped 19%, to $489 million, due to declines in both video and broadband gateways, reflecting the supply chain-driven backlog. However, CommScope did note that it is notching wins for IP streamers and seeing momentum with the XB7, a relatively new Wi-Fi 6/DOCSIS 3.1 gateway for Comcast and its syndication partners, which include Cox Communications, Rogers Communications, Videotron and Shaw Communications.
Q1 sales at Venue and Campus were flat, at $470 million, with some pickup seen among municipals that have cleared pandemic-rated backlogs for zoning and permitting applications tied to 5G connectivity projects.
Q1 sales at Outdoor and Wireless Networks dropped 8%, to $323 million, even as T-Mobile moves ahead with deployment of 600MHz and 2.5GHz spectrum.
- CommScope to spin off Home Networks unit
- CommScope open to other alternatives for Home Networks unit
- CommScope takes another step toward DOCSIS 4.0
- CommScope's set-top spin-out: How did we get here?
— Jeff Baumgartner, Senior Editor, Light Reading