The closing of Arris’s $2.35 billion acquisition of Motorola Home last week makes it the nation’s top set-top provider, but the company has evidently been making some set-top progress on its own.
In particular, Arris is getting traction for a new line of gateways based on Comcast’s Reference Design Kit (RDK), a pre-integrated software bundle for hybrid QAM/IP and IP-only gateways and HD client devices. In January, Arris announced its first RDK-based product – a “headless” all-services gateway with a DOCSIS 3.0 modem that can support downstream bursts approaching 1 Gbps.
“Interest in the RDK architecture has spread around the world, and we’re now engaged with three Tier 1 operators in evaluating potential deployments,” Arris chairman, president and CEO Bob Stanzione said Wednesday during the company’s first quarter earnings call. He said Arris has begun in-home trials of that product.
“Both our Moxi and RDK gateway solutions are very complementary with the set-top gateway initiatives that are underway at Motorola Home, and you'll be hearing a lot more about this as we combine the teams and strengthen the joint roadmap,” Stanzione added.
Arris also shipped a record 2.9 million DOCSIS-powered modems in the quarter as demand for broadband gateways with embedded Wi-Fi remained strong. Ninety-two percent of those shipments were DOCSIS 3.0, up from 87% in the previous quarter.
On the network side, Arris expects to start “shipping significant volumes” of its new E6000 Converged Edge Router in the second quarter, Stanzione said. Arris is initially shipping the E6000 as a super-dense cable modem termination system (CMTS), but will evolve it to become a Converged Cable Access Platform that also integrates edge QAM capacity, enabling it to support cable's full suite of services.
Arris shipped a record 122,700 downstream CMTS ports in the quarter, but saw upstream shipments wane.
Arris posted first quarter sales of $366.9 million, beating analyst estimates of $356 million. Time Warner Cable and Comcast were its two largest customers in the quarter. TWC accounted for $92.9 million in sales, versus $47.1 million in the year-ago quarter, while Comcast brought in $59.1 million, off from $81.8 million a year earlier. Arris incurred about $7.2 million of acquisition costs related to the Motorola Home deal.
The newly acquired Motorola Home unit suffered a weak quarter, generating revenues of $740 million, below the $816 million expected by Raymond James analyst Simon Leopold. Stanzione said revenues tied to Motorola Home are expected to grow later this year as new products hit the market.
Given the recent close of the Motorola deal, Arris did not provide second quarter guidance Wednesday, but expects to during a call to be scheduled sometime next month.
But “Arris alone would be forecasting another good quarter, similar to, if not better than, the one we’re now reporting,” Stanzione said.
Leopold, meanwhile, expects the second quarter to be “messy” when considering a partial contribution from Motorola Home. He cut his second quarter sales estimate slightly to $1.108 billion from $1.161 billion, and his earnings per share estimate from $0.53 to $0.46.
