Arris a ‘bright spot’ amid downer year for telecom vendors, Morgan Stanley analyst predicts

Arris

Sales of DOCSIS 3.1 hardware and software will immunize Arris in particular from what will be a rough year for telecom vendors, predicts Morgan Stanley analyst James Faucette.

“This pressure on CAPEX spending, particularly from telcos, combined with disruption due to M&A activity, should continue to trickle down to equipment providers in 2017, similar to what we saw from CSCO, INFN, and FFIV as the calendar year came to a close,” Faucette said to investors in a note Tuesday. “While we note a new administration could change the CAPEX environment for carriers, we do not think this change would affect 2017 expectations.”

RELATED: Arris reports another hot quarter, net income up 75% in Q3

Sponsored by Dell Technologies

Whitepaper: How to Elevate Your Content Delivery Workflows With Dell EMC PowerScale

Learn how Dell EMC PowerScale helps meet surging viewer demand while reducing costs with a single centralized platform for the ingest, processing, and delivery of the content your viewers love.

Faucette said Arris will most benefit from the offset provided by operators in need of incremental enhancements to their networks. 

“Cable companies are facing challenges from the disaggregation of content and move to OTT/cord cutting,” he added. “However, to combat this, they have leveraged their position as a broadband provider to continue their relationship with the customer. 

“Given customers who get broadband service from a cable provider are more likely to bundle in pay-TV (for U- Verse, AT&T saw 97 percent attach rates), cable companies have every incentive to keep this relationship in tact,” Faucette also noted. “This will drive continued investment in DOCSIS 3.1 in 2017 in order to help cable companies to maintain their lead as telcos increase investments in fiber.”

Arris announced warrant agreements with both Comcast and Charter Communications earlier this year. Comcast has been an early entrant into the DOCSIS 3.1 market, and Arris has touted products including its E6000 edge router as being part of the Comcast rollout. 

Read more on

Suggested Articles

Alan Wolk, co-founder and lead analyst at TV[R]EV, carries out a postmortem on Quibi.

AT&T is still suffering massive pay TV subscriber losses and HBO Max is still working through distribution woes.

Using its OTT Video Market Tracker tool, Parks Associates has found that the number of OTT services in the United States has reached nearly 300.