Arris Q1 earnings up 6% as burgeoning cloud, enterprise network units offset slow video sales

Arris STB
Video device sales dropping nearly 13% in the first quarter. (Arris)

Despite continuing struggles among its pay TV operator clients, Arris saw first quarter revenue increase by 6% to $1.58 billion, beating analyst forecasts. The strong results were once again driven by its burgeoning network and cloud and enterprise networks businesses. 

Revenue from the Suwanee, Georgia, vendor’s CPE division was down 17% to $855 million in the first quarter, with video device sales dropping nearly 13% to $453 million. 

Sales in Arris’ network and cloud unit, however, were up over 25%, thanks once again largely to brisk movement of DOCSIS 3.1-capable E6000 converged edge routers and Generation 2 line card sales for these devices, well as HFC optics. 

“In combination with fiber expansion programs, operators are preparing to support mass market gigabit services for consumers. This translates into strong investment in DOCSIS 3.1 capacity on our E6000 platform, investment in our Gen 2 line cards to more than double system capacity and strong demand for our HFC portfolio of headend optics and fiber node platforms,” said Bruce McClelland, Arris CEO. “In fact, we were a little surprised by the strength of the DOCSIS 3.1 capacity purchases this quarter as we'd expected some of this demand later in the year.”

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Meanwhile, Arris’ new enterprise networks business increased revenue from $46 million in the fourth quarter to $170 million in the first quarter, its first full quarter of operation, thanks in part to brisk Wi-Fi sales in the hospitality and services market, as well as the launch of the OpenG portfolio of CBRS products. 

As for the slow U.S. pay TV market and its impact on Arris CPE unit, “Our focus on the CPE business is to manage for profitability, capitalizing on the opportunities in broadband, managing the decline in U.S. video and continue to diversify our revenue base internationally. We anticipate that revenues will return to the billion dollar range in Q2. Pressure on product cost has not abated, with memory prices continuing to increase and lead times and availability of other components becoming more challenging,” McClellande said.

“Performance from enterprise networks and network & cloud more than offset a lower quarter in CPE sales,” continued McClelland, summing up Arris’ first quarter. “Overall our results demonstrated good progress toward our goals of driving profitable growth by diversifying into higher-margin products, expanding internationally and broadening the capabilities of Arris to deliver innovative services to address the explosive demand for bandwidth capacity.”