Cable modem/CMTS

Moto Broadband Gains Stand Out

Despite Motorola Inc. (NYSE: MOT)'s disappointing overall financial performance in the fourth quarter, the company recorded very strong broadband equipment sales as it smashed its old quarterly records for digital set-top box, cable modem, and cable modem termination system (CMTS) gear shipments.

In a little-noticed section of its earnings report Friday, Motorola said its Connected Home Solutions segment sales hit $980 million in the fall quarter, up 39 percent from about $700 million in the year-earlier period. At the same time, the division's operating earnings jumped to $118 million, more than double the $52 million that it reported in the year-ago quarter.

Motorola executives tried to take note of these achievements in their earnings conference call with analysts Friday. "Our Connected Home business knocked the cover off the ball with another strong quarter," said Ed Zander, chairman and CEO of the company.

But Moto's big broadband gains were drowned out by the tech manufacturer's setbacks in its much larger cellular phone handset business. Overall, the company's net income tumbled 48 percent to $624 million despite a 17 percent increase in revenue to $11.8 billion because of handset price cuts and the resulting lower profit margins.

Motorola officials credited the hefty Connected Home increases to the globalization of their business. In addition to its usual dominance in the U.S. and Canada, the company sold modems to StarHub and J-COM Broadband in Asia, IPTV set-tops to Telefónica SA (NYSE: TEF) and KPN Telecom NV (NYSE: KPN) in Europe, digital set-tops to Cablevision Mexico, and CMTS gear to NET in Brazil, among others.

"We're starting to ship to all parts of the globe," says a Motorola spokesman. "It's really starting to pick up in regions outside North America."

As a result, the company's equipment shipments surged across product lines. Digital set-tops led the way as Moto shipped 3.2 million boxes in the fall quarter, easily breaking its old record of 2.5 million. The total included 950,000 set-tops equipped with high-definition TV capabilities and 750,000 with embedded digital video recorders for major MSOs like Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Time Warner Cable Inc. (NYSE: TWC), as well as 298,000 IPTV set-tops for such telco TV providers as Verizon Communications Inc. (NYSE: VZ).

Likewise, Motorola shipped 3.2 million cable data and voice modems, topping its old quarterly high of 2.6 million units. This total included 1.3 million embedded multimedia terminal adapters (E-MTAs), making it the first time that the company shipped more than 1 million voice modems in a quarter.

Moto said it shipped a record amount of CMTS equipment during the fall as well. But the actual shipment figures are not available yet.

Thanks in large part to the record-setting quarter, Motorola's Connected Home division closed out the year with strong annual results. For all of 2006, the unit's sales climbed 16 percent to $3.3 billion while its operating earnings increased 46 percent.

Moto shipped more than 10 million digital set-tops for the year, including 3.8 million HD-enabled boxes and 2.8 million DVR-equipped models. The company also shipped 10.7 million modems for the year, including 3.7 million E-MTAs.

— Alan Breznick, Site Editor, Cable Digital News

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