"We said that we expected a slow start, and we certainly had one," Arris chairman and CEO Bob Stanzione said during Wednesday afternoon's earnings conference call.
Although revenues were down by about $20 million, Arris still reported a better profit than in the year-ago quarter. (See Arris Reports Q1.)
Table 1: Arris Earnings Snapshot
|Source: Company reports|
* = non-GAAP EPS
And the vendor's first-quarter financials were fairly in line, or even better in the case of earnings per share, than Wall Street had been expecting from the Docsis and video-on-demand technology specialist.
Table 2: Analyst Comparison
|Analysts' Consensus Estimate 1Q09||Actual 1Q09|
|Source: Company reports, Morgan Keegan |
* = non-GAAP EPS
Despite the sluggish start, Arris expects a big rebound in the second quarter and deeper into 2009 as MSOs begin to ramp up deployments of the speedier Docsis 3.0 platform. Stanzione said business "picked up considerably" in the mid-point of the first quarter, but warned that the vendor is still "seeing cautious spending patterns."
Overall, Arris expects cable industry capital spending to be down by 5 percent to 10 percent in 2009.
Sales to Comcast Corp. (Nasdaq: CMCSA, CMCSK), Arris's largest customer, slowed down in the first quarter after the MSO bought and deployed cable modem termination system (CMTS) gear towards the end of 2008.
"However… we're expecting sales to our largest customer and to others to rise in Q2 and beyond," said Stanzione.
In terms of Docsis consumer premises equipment (CPE) action, Arris shipped 1.3 million units in the period, down from 1.6 million in the previous quarter. Arris said only a "small number" of the CPEs shipped were of the Docsis 3.0 variety. "We do see a large Docsis 3.0 upgrade cycle coming, but probably not until late in the year," Stanzione said, noting that most of wideband CPE sales activity is in Europe and, especially, Asia/Pacific. (See Docsis Device Shipments Drop in 2008.)
But wideband is also starting to pick up in the U.S., led largely by Comcast, which has about 40 percent of its systems already set for Docsis 3.0. (See 40%... & Counting.)
Elsewhere, Time Warner Cable Inc. (NYSE: TWC), another big Arris customer, is getting ready to deploy Docsis 3.0 in New York City sometime this summer. Cablevision Systems Corp. (NYSE: CVC), meanwhile, is using Cisco Systems Inc. (Nasdaq: CSCO) CMTSs and modems for its 101-Mbit/s service launch. (See Cablevision Debuts 101-Mbit/s Wideband Service and TWC Basics Boosted by Digital Transition.)
"Not only does spending on the Docsis 3.0 cycle sound better than we appreciated, Arris could see at least modest improvement across its portfolio," said Morgan Keegan & Company Inc. analyst Simon Leopold in a research note.
— Jeff Baumgartner, Site Editor, Cable Digital News