Demand remains decidedly lumpy for telecom gear

Based on commentary this week from a number of telecom equipment suppliers – including several serving the US cable industry – demand among network operators remains unclear at best.

"We have seen no meaningful recovery," said CommScope CEO Chuck Treadway Thursday during his company's quarterly conference call with investors. Treadway said that, broadly, CommScope's customers had indicated they would resume buying the company's equipment during the second half of this year – but he said that hasn't happened yet.

Treadway's comments come roughly a week after CommScope warned of lower-than-expected financials for its third quarter, news that sent the company's shares tumbling.

But some other suppliers are seeing similar shortfalls.

Casa Systems CEO Michael Glickman noted a "meaningful decline of 42% in our cable business in the third quarter compared to the prior year. And we expect to see similar dynamics in the fourth quarter of this year," he said during his company's recent quarterly conference call, according to Seeking Alpha.

"With that said, it is important to note that this shortfall in revenue is not due to competitive market share losses but rather the delays associated with these [network] transitions," he explained.

Vecima Networks, another company that sells equipment into the cable industry, also reported a dip in its Entra product line that targets Distributed Access Architecture (DAA) cable technology.

"Customers have now temporarily shifted from building up their product pipelines to managing their DAA rollout logistics, expanding field deployment activity, and working through existing inventories. We anticipate renewed Entra sales growth in the second half of fiscal 2024 as customers bring inventories into balance while initiating new programs and deployments alike," explained Sumit Kumar, Vecima's CEO, in a release.

Cutting costs while looking for a rebound

Several vendors, including CommScope, said they would engage in cost-cutting efforts to counteract sluggish demand for their products. In some cases that could include layoffs. Indeed, both Adtran and Dish Network this week disclosed they're embarking on layoffs. 

Officials from CommScope did not immediately respond to questions from Light Reading on possible layoffs at the company.

Despite the mostly dour outlook from the likes of CommScope and others, some vendors offered more upbeat views. For example, Harmonic's broadband business pulled in third quarter revenues of $75.8 million, down 17.5%. But Harmonic officials said they expect a rebound in the company's broadband segment as early as the fourth quarter.

FWA competition, fiber upswing

Meanwhile, some cable network operators are reporting ongoing troubles in gaining new customers. For example, WideOpenWest (WOW) reported revenues and earnings this week slightly below some analyst expectations. But the company also warned that it lost customers during the quarter – and that those losses might continue. Specifically WOW's Internet customer base declined by 4,400 to a total of 503,400 during its most recent quarter.

"As we've talked about the macro environment, there are just fewer opportunities for new [customer] connects in the market and more players really buying for those customers," explained WOW CEO Teresa Elder during her company's quarterly conference call this week, according to Seeking Alpha. She also noted that fixed wireless access (FWA) services from the likes of T-Mobile and Verizon are having an impact on WOW's business. "So the competition with wireless, I think in previous quarters, I told you it's been barely a nit that we've seen. It started to pick up. And so we've seen more. So we've always enjoyed traditionally very, very low churn. It has ticked up a bit."

Elder's comments raised concerns among analysts. "This is considerably worse than prior implied guidance," wrote the financial analysts at B. Riley Securities in regards to WOW's expectations of ongoing customer losses in the future.

Regardless, some vendors, including those in the fiber component space, are now indicating that the worst may be behind them. For example, the analysts at B. Riley Securities pointed to Infinera's "surprisingly solid results and outlook" this week, noting that the company remains "one of our top optical recovery ideas."

And the financial analysts at Rosenblatt Securities argued that the new financial outlook from Lumentum indicates that the vendor may have reached a low point in its telecom equipment sales. They noted that the company's guidance for next year could augur "a sharp telecom recovery."