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Cable/Video

Comcast Taps Arris for Edge QAM Initiative

Amid concerns it could lose some eMTA (embedded multimedia terminal adapter) market share to rival supplier Thomson S.A. (NYSE: TMS; Euronext Paris: 18453), cable equipment vendor Arris Group Inc. (Nasdaq: ARRS) looks strong again after it revealed an important next-generation edge QAM deal with Comcast Corp. (Nasdaq: CMCSA, CMCSK). (See Thomson Wins eMTA Deal.)

Arris announced the deal Wednesday afternoon while discussing second-quarter results with analysts and reporters. (See Arris Reports Earnings.)

"We have won a major next-generation edge QAM project with Comcast. This win solidified our entry into the rapidly growing video application area," said Arris chairman and CEO Bob Stanzione.

Arris tried to shore up its video portfolio by inking a deal to acquire Tandberg Television earlier this year, but was quickly outbid by Ericsson AB (Nasdaq: ERIC). (See Tandberg Board Backs Ericsson Bid .)

Arris is among a large group of vendors -- including Tandberg TV, C-COR Corp. (Nasdaq: CCBL), BigBand Networks Inc. (Nasdaq: BBND), RGB Networks Inc. , Motorola Inc. (NYSE: MOT), and Harmonic Inc. (Nasdaq: HLIT) -- that are competing for a piece of what's expected to be a lucrative next-gen edge QAM market that's being driven by MSO deployments of switched digital video (SDV) architectures.

Suppliers are developing "universal" edge QAMs capable of sharing bandwidth and resources among multiple applications, including SDV, broadcast digital video, video-on-demand, and Docsis downstreams. (See Universal Edge QAM Market Heats Up and Arris Adds Edge QAM Muscle.)

Jim Lakin, president of Arris's Broadband Group, said it was his understanding that Arris is one of two suppliers Comcast has selected for its edge QAM project. Comcast is using edge QAMs from Harmonic and Scientific Atlanta for SDV tech trials happening in Denver and in Cherry Hill, N.J. (See Comcast Puts SDV Vendors to the Test.)

Harmonic CEO Patrick Harshman, speaking during his company's quarterly earnings call Wednesday afternoon, said Harmonic's edge QAM has been selected by a "major" cable operator for SDV and VOD deployments slated for the second half of 2007. Harshman noted he did not yet have permission to disclose the name of that MSO.

Although Arris did not cite potential revenues and shipment figures for the edge QAM selection by Comcast, it should help to offset concerns raised after Thomson announced earlier this week it had scored a deal to supply eMTAs to the Philadelphia-based MSO.

Comcast also buys eMTAs, a home-side device key to the rollout of IP telephony services, from Arris and Motorola.

In a research note distributed ahead of Arris earnings results, Morgan Keegan & Company Inc. analyst Simon Leopold said he expects Arris to hold its "dominant position" with Comcast when it comes to eMTAs, "but having another player doesn't help."

The Thomson-Comcast deal did not slow down Arris, which reported record CPE sales in the quarter. Arris said it shipped about 1.9 million eMTAs in the period. The company also began to send out "significant quantities" of multi-line eMTAs for cable-delivered business services.

"Our relationship with [Comcast] is rock solid," Stanzione said, when asked to comment on the MSO's deal with Thomson.

Although eMTA market share figures for the second quarter are not yet available, "we anticipate remaining in the No. 1 position," Lakin said.

During the quarter, Arris also shipped more than 6,900 cable modem termination system (CMTS) downstreams, another record for the vendor. Arris also gained approval from Cablevision Systems Corp. (NYSE: CVC) for deployment of the vendor's flagship CMTS product, the C4. Among U.S. MSOs, Cablevision is among those being heavily tested by the marketing muscle behind the rival FiOS service from Verizon Communications Inc. (NYSE: VZ).

Stanzione expects cable operators to begin the "Docsis 3.0 upgrade cycle" in 2008, referring to a new CableLabs specification that supports IPv6 and a channel bonding scheme that will push shared data speeds well beyond 100 Mbit/s. Comcast has already disclosed plans to begin some 3.0 tests during this calendar year. (See Comcast Preps Docsis 3.0 Trials.)

During the second quarter, Arris sales to Comcast reached $102.2 million, versus $91.6 million in the previous period.

Comcast is scheduled to report second-quarter earnings this morning (July 26).

— Jeff Baumgartner, Site Editor, Cable Digital News

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