Arris income down, outlook optimistic as Comcast deploys Gen 2 CCAP

Rethink Technology Research

Published  By Thomas Flanagan
Business looks dandy at Arris, even with an operating loss of $10.9 million for the fourth quarter, down from $72.5 million in operating income the previous year. Finances were hit by the equipment maker’s $822 million acquisition of Ruckus Networks, which Arris claims is already contributing to results and building a platform for future growth.
As revenues slipped slightly by 1% to $1.74 billion for the quarter and down 3.1% to $6.6 billion for 2017, CEO Bruce McClelland spoke about shifting to broadband in the CPE business being central to Arris’ strategy going forward, in other words moving away from legacy TV set tops. The increasing dominance of Arris in the CCAP market is expected to boost 2018 revenues along with expansion in its Network and Cloud operations.
It was fitting then that Arris announced a major win to coincide with its results, with Comcast deploying Arris’ E60000 Gen 2 modules – a win we expected given Comcast had previously expressed interest in using Arris’ E6000 routers to deploy Remote PHY (R-PHY).
US operators Grande Communications, TDS Telecom and WOW, plus Austria’s Liwest, Portugal’s NOS and Poland’s Toya have also rolled out Arris’ second generation modules for its E6000 Converged Edge Router (CER) CCAP platform this week.
The upgraded Gen 2 version, launched in October, enables customers to achieve up to 70% increase in headend service group density without consuming more rack space, with a software-based headend upgrade path to the Remote PHY (R-PHY) Distributed Access Architecture (DAA). Arris is known for providing flexibility in CCAP, supporting both R-PHY and R-MAC-PHY, but increasingly looks like its eggs are migrating to the R-PHY basket.
CCAP is pivotal for operators in upgrading broadband networks for video delivery and, critically, preparing for DOCSIS 3.1, which should include increasing spectrum to clear a path for higher bit rates and more channels. Arris is a major force in this market, along with Cisco, Nokia, Teleste and Casa Systems, but US encoding vendor Harmonic made a bold claim this week, stating it has deployed the world’s first virtualized cable access network for Swedish operator Com Hem using its CableOS virtualized CCAP product – something we will dive into in more detail next week.
Altice USA, Liberty Global, LG U+ and SK Broadband in South Korea, NBN in Australia and Multimedia Polska, to name a few, are also operator customers using E6000 CER products for broadband services – so arguably Arris is the market leader here and has made strides in CCAP since its E6000 CER first launched in 2012. Additional operators around the globe currently running trials are lining up for Gen 2 deployments, according to Arris, with the seven operator announced wins apparently representing a mere subset of the initial wave of E6000 Gen 2 deployments.
In simple terms, the E6000 CER integrates edge QAM legacy video architecture and CMTS DOCSIS IP network to deliver a readymade integrated-IP platform through CCAP. The Gen 2 modules are all about enabling customers to make cost savings in line with capacity upgrades from HFC access networks, no matter what the customer’s scale is.
Regarding Ruckus, employee equity payouts relating to the acquisition amounted to $61.5 million of Arris’ total $77.8 million in operating activities during the fourth quarter.
Comcast was the only operator of the seven not to provide a customer appraisal quote, but Arris still received some nice words. WOW COO Cash Hagen said, “We’re determined to not only provide our customers with more bandwidth but to provide them with infrastructure that will keep pace with tomorrow. The E6000 Gen 2 modules have enabled us to do exactly that without undertaking a significant investment or overhauling the hardware we already have in place.”
Head of Engineering at NOS, Paulo Ribeiro, said, “A solution that lets us increase the number of service groups and related channels, without having to add more rack space, means we can extend our initial hardware investment. With the Arris E6000 Gen 2 modules, we’re not only achieving cost savings but we’re also able maintain our capacity to deliver on growing customer demands for high-performance services.”
“Our strong fourth quarter results capped a year in which we made important strategic and financial strides in positioning Arris for long-term profitable growth. The recently closed Ruckus acquisition is already contributing to results and creates a more compelling, diversified platform for growth as we deliver innovative connectivity solutions across the enterprise and service provider markets. With respect to the first quarter 2018, we are estimating revenues in the range of $1.575 billion to $1.625 billion. For full year 2018, we expect revenues to be in the range of $7.1 billion to $7.35 billion,” said McClelland.