Broadcom Anticipates Docsis 3.0 Push

Major MSOs like Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Cablevision Systems Corp. (NYSE: CVC) are going gangbusters with Docsis 3.0 rollouts in the U.S., but Broadcom Corp. (Nasdaq: BRCM) chief Scott McGregor thinks cable's wideband era won't really start to take hold for at least a couple more quarters.

"I do believe we were seeing a continued move over to Docsis [3.0]," the Broadcom president and CEO said yesterday during the chipmaker's second-quarter earnings call. "That's more of a next-year phenomenon."

That's not to say MSOs are putting off their wideband plans. McGregor was referring to operator purchases and deployments of Docsis 3.0 cable modems and embedded multimedia terminal adapters (E-MTAs).

"Obviously you need both the headend and the customer equipment in order to get the capability," McGregor later qualified. "But some people will deploy headends and not populate them," at least not until "they are upgrading their modems or the set-top boxes."

Broadcom has plenty at stake in all those areas. It makes chips for Docsis 3.0 modems (where it competes with Texas Instruments Inc. (NYSE: TXN)) and for Docsis 3.0 cable modem termination systems (CMTSs) -- the headed element of the Docsis architecture.

The case varies by MSO. Comcast stated this week that it has Docsis 3.0 wired up in about 50 percent of its footprint, and actually offers its 50-Mbit/s (downstream) wideband tiers in those markets. However, some operators, such as Bresnan Communications LLC and Massillon Cable TV Inc. , are starting to upgrade their CMTSs for Docsis 3.0, but have yet to deploy services or announce what speeds will grace the new faster tiers. (See Comcast: Wideband Build Is Nearly Half Done , Moto CMTS Powers Massillon's Docsis 3.0 Rollout, and Bresnan's 'Insurance Policy' .)

The more immediate impact from cable comes from high-definition programming, McGregor said. Broadcom is a key chip supplier of the Digital Terminal Adapters (DTAs) Comcast is using in Project Cavalry, an analog reclamation initiative that will clear up channels for Docsis 3.0, more HD networks, and additional video-on-demand (VoD) capacity. If the Federal Communications Commission (FCC) allows more DTAs to be deployed with embedded security, many more MSOs may start to use DTAs as part of their all-digital migration strategies. (See Comcast's $1B Bandwidth Plan }, Broadcom Bows DTA Chipset, and DTA Waiver Mania.)

"So that's another opportunity... that I think will be a wave over the next couple of years," McGregor said.

Normality ensues
Broadcom posted second-quarter revenues of $1.04 billion -- which was near the upper end of its forecast but represented a 13 percent decline from the same quarter last year. Net income dropped to $13.4 million (3 cents per share), versus $134.8 million (25 cents) a year ago. (See Broadcom Posts Q2.)

Still, revenues grew 22 percent compared with the first quarter, prompting McGregor to declare "a return to more normal customer ordering patterns following the dramatic decline in orders and adjustments" in the previous six months.

He said a good portion of the growth in the second quarter came from wireless combo chips, cellular basebands, stand-alone wireless platforms, Bluetooth, and chips supporting GPS (global positioning satellite) equipment. A portion of those revenues -- $65.3 million -- came by way of Broadcom's settlement with Qualcomm Inc. (Nasdaq: QCOM) announced in April. (See Qualcomm, Broadcom Settle.)

— Jeff Baumgartner, Site Editor, Cable Digital News

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