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Arris: Solid Q4, But Slow Start to '09

Jeff Baumgartner
2/12/2009
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Arris Group Inc. (Nasdaq: ARRS) sales jumped in the fourth quarter, thanks to a surge of Docsis 3.0 orders in the tail end of 2008. But the company's optimism heading into early 2009 was tempered with a warning that Comcast Corp. (Nasdaq: CMCSA, CMCSK), the vendor's largest cable MSO customer, is taking a "breather" in the first quarter when it comes to purchases of wideband-capable cable modem termination system (CMTS) gear.

On Wednesday afternoon's earnings call, Arris chairman and CEO Bob Stanzione said the CMTS purchasing pause comes after the vendor shipped a large volume of equipment to Comcast in the fourth quarter. He said the MSO will be deploying that gear in the early portion of 2009.

Comcast, which is basing its wideband deployment largely on CMTSs from Arris and Cisco Systems Inc. (Nasdaq: CSCO), had 20 percent of its footprint wired up for Docsis 3.0 by the end of 2008. That number has since risen to more than 35 percent as Comcast gets ready for new launches in markets including San Francisco and Denver. (See Comcast Widens Wideband Footprint .)

The MSO has said it expects to have its entire network Docsis 3.0-ready by the end of 2010, but a company spokesman on Wednesday declined to provide any new guidance on how much of that total it expects to have completed this year.

On the Arris call, Stanzione did note that some of those expectations have been built into the company's first-quarter guidance, which calls for revenues in the range of $245 million to $265 million, and GAAP net income per diluted share of between 6 cents and 11 cents. The vendor's first-quarter forecast tips in well lower than Wall Street's earlier expectation of $280 million in revenues and earnings of 19 cents.

"Despite the macro-economy and a pause from Comcast driving a sequential drop, we still expect a decent year," Morgan Keegan & Company Inc. analyst Simon Leopold offered in a note issued Thursday morning.

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