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Arris Slammed on Q4

Jeff Baumgartner
2/14/2008
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The Arris Group Inc. (Nasdaq: ARRS) train slowed down as the cable tech company reported sagging revenues and a disappointing first-quarter forecast.

Shares slid 21.62 percent ($1.71), to $6.20 each, in early after-hours trading today as Arris reported that fourth-quarter revenues were down from the previous quarter. One culprit: smaller sales of embedded multimedia terminal adapters (eMTAs), a consumer-side device that combines a Docsis modem and cable VOIP capabilities.

On top of that, Arris lowered its forecasts, warning that some “short-term dynamics” may have an effect in the first half of 2008. That's particularly the case with what is believed to be its largest customer, Comcast Corp. (Nasdaq: CMCSA, CMCSK), which stressed earlier today that it expects to reduce capital expenditures in 2008. (See Comcast Adds Record 2.5M Subs in '07.)

Arris is forecasting first-quarter revenues of $270 million to $285 million, with non-GAAP net income per diluted share of 8 cents to 12 cents. Analysts were expecting first-quarter revenues of about $328 million and a profit of 19 cents per share.

Arris posted unaudited quarterly revenues of $249.6 million, which was up 6 percent year-over-year but down 2 percent versus the previous period. Fourth-quarter revenues also included about $6.6 million in sales that came following the Dec. 14 closing of its C-COR acquisition. (See Arris Sews Up C-COR.)

Lower revenues, smaller margins tied to the launch of its D5 universal edge QAM product, and some dilutive effects of the closing of the C-COR deal also contributed to a drop in non-GAAP net income. On that front, Arris posted $0.16 per diluted share in the fourth quarter, versus $0.32 in the previous period.

For all of 2007, revenues reached $992.2 million, up 11 percent from 2006. Arris attributed the rise to demand for VOIP, high-speed data, and video products in support of cable triple-play service bundling strategies.

Arris, which has won some D5 business with Comcast, ended 2007 with $391.8 million in cash and short-term investments, trimmed from $549.2 million at the end of 2006. It used roughly $367.6 million of its cash in the fourth quarter toward the purchase of C-COR. (See Comcast Taps Arris for Edge QAM Initiative .)

— Jeff Baumgartner, Site Editor, Cable Digital News

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