CommScope reported a 31% decline in net sales to $571 million in its Home Networks segment during the fourth quarter, as brisk movement of DOCSIS 3.1 gateways failed to offset the cratering demand for pay TV set-tops.

Overall, Q4 net sales for the Hickory, North Carolina, technology vendor dropped 7% to $2.29 billion, with the Broadband Networks business showing particular strength. Driven by the network capacity needs of its cable operator clients, Broadband Networks net sales increased 17% to $789 million in the quarter. Outdoor Wireless Networks ticked up 1% to $295 million, while the Campus and Events portfolio declined 6% to $477 million.

The conspicuous erosion in video technology sales comes at a precarious moment, with the company kicking off a new business-wide evaluation called “CommScope NEXT” under recently appointed CEO Charles Treadway. 

Also read: CommScope Pitches DAA, Virtualization at Cable-Tec Expo

Outlined in the slide below, CommScope NEXT will kick the tires on everything from head counts to business systems to product portfolios, looking for ways to streamline, cut costs and generate more net sales, more than two years after its $7.4 billion swallowing of Arris Corp.

“When you think about duplicative systems, just think about the acquisition of Arris—we've brought two very large companies together, two $5 billion plus companies. When we put those together, you find a lot of duplicative systems,” Treadway explained to investment analysts during Wednesday’s earnings call. 

“A great example is what we have in the IT side,” he added. “One company runs Oracle, and one company runs SAP. As we move to one system, we're going to have significant savings from that.”

CommScope is trying to offset the decline in full-featured DVR set-tops with OTT-centric devices. But the longer term trend lines don’t look nearly as attractive as the ongoing “dance” the company says it’s involved in with cable operators over broadband network capacity.

“They come back to us when they need more capacity in their network,” said Morgan Kurk, executive VP, CTO and segment leader of CommScope’s Broadband Networks unit, describing the interaction Wednesday.

“They buy physical cards, and then they add additional capacity to those cards in effect,” Kurk added. “It's a software related capacity add over time, and they do that until they exhaust the amount of bandwidth that's available to them. So, it is an opportunity to continue to sell additional licenses to them until they reach a certain point and then they go back to buying hardware to increase that available capacity again. That's the dance that's going on. Of course, there is also the upgrade to the network, whether it is to go to DOCSIS 4.0 which expands the amount of spectrum available and thus the amount of both hardware and software that they can buy from us. And also, the change in architecture from the centralized CCAP to distributed access architecture, whether it's Remote MAC or Remote PHY. This puts more of this equipment out toward the edge of the network to reduce some costs in the headend and to increase the capacity of the backhaul network and to reduce latency. So, all of those things will be going on for the next decade.”

CommScope has laid off approximately 160 employees across its Home Networks division, as sales of one of the unit’s primary products, pay TV set-tops, decline.

Chatter among current and former CommScope employees on TheLayoff indicates that CommScope’s entire video customer premises equipment (CPE) staff based Horsham, Pennsylvania has been let go. Layoffs among CommScope Home Networks employees in San Diego have also occurred, according to message board postings.

"CommScope continuously monitors evolving marketplace conditions as a matter of business practice,” the Hickory, N.C.-based CommScope said in a statement emailed to MCN Tuesday. “We review our entire business to make our organization lean and agile, and to leverage global growth opportunities. Across the industry, there has been a significant decline in service provider investment in video programs, as the result of continued reduction in PayTV subscriptions, increased competition from over-the-top services, and the transition to lower-cost video devices.”

CommScope, Technicolor and other original equipment manufacturers (OEMs) servicing the pay TV set-top business are under pressure from video cord cutting affecting their cable, satellite and telco operator clients. These customers lost more than 5 million linear TV subscribers in 2019.

Concurrently, the days of the multi-tuner, multi-gigabyte DVR set-top are on the wane.

With what remains of their video businesses, CommScope’s operator clients are moving to OTT-centric models that utilize, in many cases, consumer grade video streaming devices such as Roku and Amazon Fire TV. Proprietary set-tops, meanwhile, have in other instances been reduced to thin-client devices running Android TV middleware.

CommScope got into the video CPE business in 2018 with its $7.4 billion purchase of Arris.

“Home network space is a significant challenge this year as operators and carriers continue to deal with material subscriber losses,” noted CommScope CFO Alexander Pease in February, projecting a 20% sales decline for Home Networks sales in 2020.

“We are taking steps to reduce our current workforce in our Home Networks segment to instill greater efficiency, cost-competitiveness and focused innovation in areas with long-term growth opportunity,” CommScope added in its statement. "We plan to lead in the transformation of the digitally connected home, leveraging our core skills in systems, software, and hardware to create and connect a device ecosystem that enables new services and solutions, transformational consumer experiences, and profitable new business models. We are committed to positioning Home Networks to be a healthy, competitive business moving forward."

CommScope has laid off approximately 160 employees across its Home Networks division, as sales of one of the unit’s primary products, pay TV set-tops, decline. 

Chatter among current and former CommScope employees on TheLayoff indicates that CommScope’s entire video customer premises equipment (CPE) staff based Horsham, Pennsylvania has been let go. Layoffs among CommScope Home Networks employees in San Diego have also occurred, according to message board postings. 

"CommScope continuously monitors evolving marketplace conditions as a matter of business practice,” the Hickory, N.C.-based CommScope said in a statement emailed to Next TV Tuesday. “We review our entire business to make our organization lean and agile, and to leverage global growth opportunities. Across the industry, there has been a significant decline in service provider investment in video programs, as the result of continued reduction in PayTV subscriptions, increased competition from over-the-top services, and the transition to lower-cost video devices.

CommScope, Technicolor and other original equipment manufacturers (OEMs) servicing the pay TV set-top business are under pressure from video cord cutting affecting their cable, satellite and telco operator clients. These customers lost more than 5 million linear TV subscribers in 2019.

Concurrently, the days of the multi-tuner, multi-gigabyte DVR set-top are on the wane.

With what remains of their video businesses, CommScope’s operator clients are moving to OTT-centric models that utilize, in many cases, consumer grade video streaming devices such as Roku and Amazon Fire TV. Proprietary set-tops, meanwhile, have in other instances been reduced to thin-client devices running Android TV middleware. 

CommScope got into the video CPE business in 2018 with its $7.4 billion purchase of Arris. 

“Home network space is a significant challenge this year as operators and carriers continue to deal with material subscriber losses,” noted CommScope CFO Alexander Pease in February, projecting a 20% sales decline for Home Networks sales in 2020. 

“We are taking steps to reduce our current workforce in our Home Networks segment to instill greater efficiency, cost-competitiveness and focused innovation in areas with long-term growth opportunity,” CommScope added in its statement. "We plan to lead in the transformation of the digitally connected home, leveraging our core skills in systems, software, and hardware to create and connect a device ecosystem that enables new services and solutions, transformational consumer experiences, and profitable new business models. We are committed to positioning Home Networks to be a healthy, competitive business moving forward."

After watching its network and cloud business slump every quarter since it paid $7.4 billion to acquire leading cable technology vendor Arris a year ago, CommScope declared that it can only get better from here. 

Late last week, the Hickory, N.C. company reported a 32% fourth-quarter slide in network and cloud sales to $366 million. Cable operators, still reaping the benefits of DOCSIS 3.1 upgrades and figuring out how to approach transformative new schemes such as Distributed Access Architecture (DAA), still aren’t spending on infrastructure like they were a few years ago. 

CommScope told its investors that will change in 2020. 

“We remain confident that network and sales bottomed in 2019,” said CommScope CFO Alexander Pease, speaking to investors during his company’s Q4 earrings call. “With underlying consumer bandwidth demand continuing to grow, coupled with our investments in virtualized and distributed access architecture platforms, we remain in a strong position to guide operators through the 10G network infrastructure investments that they will deploy within the coming decade.”

Also read: Harmonic Adds Two More Tier 1 Clients for CableOS

The perennial leader in technologies such as Cable Modem Termination System (CMTS), CommScope suddenly finds itself in the position of playing catchup with Harmonic, which has jumped out to an early lead in the emerging era of network virtualization and DAA

CommScope CEO Marvin Edwards assured investors that CommScope is moving forward in regard to these innovations. 

“We completed a major release of our vehicle of virtual CMTS product, which will prepare us for operator deployments in early 2020,” Edwards said. “We also completed deployment and development of our remote PHY shelf product, which enables operators to place multiple RPD modules in a single chassis for data distribution from remote hubs.”

Overall, combined company net sales for CommScope declined 19% in the fourth quarter, as other sectors besides network and cloud slumped for the company, too. 

Customer Premises Equipment declined 25% to $824 million in Q4, for example, while mobility sales were off 6% to $366 million. 

For the year, net sales for the combined CommScope declined 13.8% to $9.76 billion. 

After watching its network and cloud business slump every quarter since it paid $7.4 billion to acquire leading cable technology vendor Arris a year ago, CommScope declared that it can only get better from here.

Late last week, the Hickory, N.C. company reported a 32% fourth-quarter slide in network and cloud sales to $366 million. Cable operators, still reaping the benefits of DOCSIS 3.1 upgrades and figuring out how to approach transformative new schemes such as Distributed Access Architecture (DAA), still aren’t spending on infrastructure like they were a few years ago.

CommScope told its investors that will change in 2020.

“We remain confident that network and sales bottomed in 2019,” said CommScope CFO Alexander Pease, speaking to investors during his company’s Q4 earrings call. “With underlying consumer bandwidth demand continuing to grow, coupled with our investments in virtualized and distributed access architecture platforms, we remain in a strong position to guide operators through the 10G network infrastructure investments that they will deploy within the coming decade.”

Also read: Harmonic Adds Two More Tier 1 Clients for CableOS

The perennial leader in technologies such as Cable Modem Termination System (CMTS), CommScope suddenly finds itself in the position of playing catchup with Harmonic, which has jumped out to an early lead in the emerging era of network virtualization and DAA

CommScope CEO Marvin Edwards assured investors that CommScope is moving forward in regard to these innovations.

“We completed a major release of our vehicle of virtual CMTS product, which will prepare us for operator deployments in early 2020,” Edwards said. “We also completed deployment and development of our remote PHY shelf product, which enables operators to place multiple RPD modules in a single chassis for data distribution from remote hubs.”

Overall, combined company net sales for CommScope declined 19% in the fourth quarter, as other sectors besides network and cloud slumped for the company, too.

Customer Premises Equipment declined 25% to $824 million in Q4, for example, while mobility sales were off 6% to $366 million.

For the year, net sales for the combined CommScope declined 13.8% to $9.76 billion. 

LAS VEGAS — One of the most powerful vendors in the cable industry, CommScope, is having a quiet CES, debuting only one product, which seems to fill in the bottom rung of its WiFi 6 mesh product line.

Last year, CommScope, under its acquired Arris brand name, released two dual-piece Surfboard mesh WiFi systems that supported 802.11ax, otherwise known as WiFi 6, the $550 Surfboard Plus and the $650 Surfboard Max Pro.

Set to be released in the second quarter, the new two-piece system, which has a more simplified two-piece name, “Surfboard Max,” will ostensibly be a little cheaper than the aforementioned systems. CommScope hasn’t released a price yet. And it’s hard to tell how much of a step down the device is from the two previous product iterations.

CommScope said the Max AX6600 “compliments” the first two iterations, featuring two routers, each delivering 6.6 Gbps speeds with a total coverage areas of 5,500 square feet. The system’s third band, with 4.x4 WiFi 6, provides dedicated backhaul.

“Surfboard Max represents the whole-home coverage and gigabit speeds that consumers expect from our flagship WiFi portfolio in a new performance tier designed to meet the needs of an even greater range of consumers,” said Evan Groat, senior VP of the home networks retail products group at CommScope. “Now, people upgrading their home network have a new, powerful and stylish option to support their ultra-high-definition 4K content, high-performance gaming, and connected lifestyle for years to come.”

CommScope reported a 29.3% revenue decline in its network and cloud business to $376.9 million, as operators continue to digest ample capacity build-outs that occurred over the last several years.

“Our network and cloud segment sales were lower driven by combination of factors, including customer-driven M&A, strong capacity additions added in late 2018, and to a lesser extent a temporary pause in spending as the industry aligns around a path toward virtualization,” Alex Pease, CommScope CFO, told investment analysts during the company’s third quarter earnings call Thursday.

Sales for CommScope’s network and cloud unit, acquired at the beginning of the year along with its $7.4 billion purchase of Arris, declined 37% in the second quarter.

Related: Arris Chief McClelland Out as CommScope Reports Slow Q2 Network and CPE Sales

“We're starting to see an uptick in CMTS license purchases from a major tier 1 North American cable operator as they begin to exhaust capacity from last year. This is a good indication for continued purchases of current CMTS products to the foreseeable future,” Pease added.

CommScope, meanwhile, said it is in trials with several operators on vCore, a virtual CMTS platform it hopes to launch commercially by the end of next year.

The vendor, long the top cable access tech vendor, finds itself playing catchup in the areas of virtualized network access technology, with Silicon Valley company Harmonic already in the market and deployed with Comcast via a $175 million multi-year licensing deal. Competition-wise, that Comcast deal could prove even more complex if the No. 1 U.S. cable operator moves forward with plans to syndicate the virtualized solution it has cooked up using Harmonic tech.

Also along the lines of next-gen network tech, CommScope said it is working with an unnamed tier 1 cable operator and a chipmaker on a remote PHY device.

But in the here and now, it remains tough sledding for CommScope, with the customer premises equipment business down 12.2% to $826.4 million in the quarter. The vendor attribute the slowdown to reduced spending by cable operators, who are all seeing their video businesses shrink right now. Tariffs from Donald Trump’s trade war with China were also a factor. 

Making its first appearance at Cable-Tec Expo Show following its purchase of Arris earlier this year CommScope will present three technologies it believes will provide clarity for cable engineers to finally make some forward-looking decisions about their networks ... and start rendering some product orders.

Extended Soft Frequency Division Duplex (FDD) blends elements of Full Duplex DOCSIS and Extended Spectrum DOCSIS, two technologies cooked up by CableLabs to extend the life of hybrid fiber coaxial networks into the next two decades. 

In fact, Chris Busch, CommScope engineering fellow in the office of the CTO, calls Extended Soft FDD “the union of the two technologies,” allowing operators to adjust allocation of bandwidth across the upstream and downstream channels.

Full Duplex DOCSIS has the capability of delivering symmetrical 10 Gbps speeds. But its uptake has been limited by what are perceived to be some inflexible factors.

“If we’re going to make Full Duplex work for us as industry, we need to have ability to use spectrum in many different use cases,” Busch said.

He added that unlike FDX, CommScope’s trials of Extended Soft FDD have revealed no rigid need for a node plus zero network configuration.

“A lot of Extended Soft FDD is amplifier friendly,” Busch said. “It’s a boon to the operator.”

CommScope will make its pitch next week amid a slow sales year for cable access technology vendors in general.

Also speaking to MCN Monday, Todd Kessler, senior VP of product management for CommScope, noted that the shift from centralized integrated CCAP architecture to Distributed Access Architecture (DAA) is one of the biggest technological changes the cable industry has ever made. He believes CTOs will continue to mull these decisions through the calendar year.

To hopefully move the market along, CommScope will also present what it calls DAA Aggregator, a product that lets operators connect up to eight HFC nodes to one Remote PHY device. This significantly increases the number of homes passed per RPD serving group—from 20 to 40 to between 150 to 300—enabling deeper reach into neighborhoods and a simplified path to network upgrades.

Also being demonstrated: DOCSIS Timing Protocol uses precise timing distribution over the DOCSIS networks for time-critical processing and applications, where a fraction of a second means the difference between success and failure. Current and future applications include mobile backhaul, virtual reality, and autonomous vehicle control.

“This is all built around driving the cable operators to better utilize their HFC plant, and breath new life into HFC architecture, taking fiber deeper, and adding to the technology,” Kessler said. 

Less than six months after taking over Arris, CommScope has completely turned over its top-level executive ranks, with CPE chief Larry Robinson slated to walk out the door next month.

Robinson, who departs following a 9% second-quarter sales dip for his division, will be replaced by veteran set-top industry executive Joe Chow, a longtime denizen of Cisco, and later through mergers and acquisitions, Technicolor.

Chow most recently served as senior VP of product and program management at Quantenna, the company that put the Wi-Fi chipset in Comcast’s XB6 gateway.

“My background is steeped in developing and deploying CPE. I delivered software services, DVRs, and broadband gateways. I started the IPTV business at Cisco. Later, I became the general manager for its entire CPE business,” Chow said, introducing himself with a CommScope company blog post.

Having endured quite a bit of M&A himself, Chow added, should help. “Everyone is facing challenges across many fronts. We’re contending with far more diversity and product fragmentation than in the past. Speeds are getting faster. Devices are more connected. Experiences are converging. Connected homes are becoming a reality. But the big question is how this all ties together.”

Related: Arris Chief McClelland Out as CommScope Reports Slow Q2 Network and CPE Sales

As for Robinson, he’d been with Arris since 2013, when the company acquired Motorola Home. He exits right behind Bruce McLelland, the former Arris CEO who was bounced from the CommScope COO position last week, just a few months after his new overlords propped him up in the position.

Other recent high-level Arris departures include Dan Whalen, who oversaw the also-struggling network and cloud business. He gave way to Kevin Keefe, who also joined Arris in the Motorola Home acquisition.

Ian Whiting, who headed the Ruckus Wireless division acquired by Arris last year, departed in June. CommScope senior VP and CTO Morgan Kurk has taken over Whiting’s role.

No matter who’s in the corner offices, Arris is facing many challenges. Not only has Donald Trump’s tariff war disrupted its Asian manufacturing, but longtime telecom technology businesses including set-tops and cable network access equipment are facing disruption.

CommScope paid $7.4 billion to acquire Arris, closing on the company in the first quarter. Immediate speculation had CommScope breaking off the CPE piece from Arris and divesting it. But there hasn't been much buzz about that recently. 

“This decision to flatten our leadership structure expands accountability, which we've been striving to do in virtually every part of our company as part of our transformation,” CommScope CEO Eddie Edwards told investment analysts during last week’s Q2 call, explaining the decision to sack McClelland. “I am deeply committed to CommScope's continued growth and success and with the board's full support I'm taking a more active day-to-day operational role in leading our company through these challenging times.”

Bruce McClelland is out at CommScope, with the company eliminating his COO position.

The former Arris CEO was named chief operating officer in February, as CommScope structured its management team following its $7.4 billion acquisition of Arris.

But McClelland has been quickly spun out, his responsibilities dispersed to CommScope CEO Eddie Edwards and other members of the management team, as each of the acquired Arris business sectors continued to struggle in the second quarter. Arris on Thursday evening simultaneously announced McClelland’s departure and its second quarter earnings.

“This decision to flatten our leadership structure expands accountability, which we've been striving to do in virtually every part of our company as part of our transformation,” Edwards told investment analysts. “I am deeply committed to CommScope's continued growth and success and with the board's full support I'm taking a more active day-to-day operational role in leading our company through these challenging times.”

Challenging indeed.

The Arris Network and Cloud division saw sales slide 37% year over year to $344 million. Large cable operator clients are carefully plotting out revolutionary changes to their broadband networks, pushing out functionality closer to the node in the move toward Distributed Access Architecture, while converting the work of proprietary appliances to software virtualization running on commodity-level servers.

Recently, Arris, Cisco and Casa Systems—the leaders of the traditional cable access technology busienss—have sat on the side of the road, as a new insurgent in the business, Harmonic, has carved out huge deals with Comcast and Liberty Global for its virtualized Converged Cable Access Platform product, CableOS.

Meanwhile, in the customer premises equipment (CPE) sector brought over by Arris, sales were down 9% to $890 million, with Donald Trump’s trade war with China forcing CommScope to make tough manufacturing moves in Asia. Arris manufacturing is in the process of being moved out of China and into the Philippines, Vietnam and Indonesia.

Sales were also off 10% for Ruckus Networks, which specializes in such things as Wi-Fi, IoT and CBRS deployments. The unit generated $151 million in the second quarter.

Just four months after CommScope closed on Arris, some analysts questioned the move to fire the head coach.

"The Arris acquisition appears worse than we previously thought, with the [virtual CCAP] transition as the unexpected headwind," wrote Raymond James analyst Simon Leopold in a note to investors. "We can appreciate the possible frustration CommScope management might feel, but we do not understand how this action helps.”

For their part, CommScope managers stuck towhead had been McClelland’s key talking points in recent months. Notably, he had position Arris as having a key advantage over insurgents like Harmonic, having written code for cable access networks dating back decades.

“We believe that the fact that we have been writing this code for the past 20 years supporting it, featuring it and are now importing it to these two ends gives us a unique advantage in having something that is very hardened and something that is very featurish,” said Morgan Kurk, chief technology officer.

Added Edwards: “Despite the challenging year, we remain very excited about the combined CommScope and Arris portfolio. We are now just four months into the ownership of the Arris business.

“As we continue to integrate our teams and processes, our enthusiasm for what we can achieve together grows stronger. Together we have a more compelling and diversified global platform to promote service providers and enterprises. To that end, I want to highlight what we believe were some of the exciting growth opportunities ahead for CommScope.”

CommScope has added to its Distributed Access Architecture (DAA) portfolio, announcing the debut of the RD1322 2x2 Remote PHY module.

The new device is expected to begin service provider testing later this year. It installs directly into CommScope’s base NC4- and OM4-series fiber nodes.

Cable access equipment sales have been sluggish of late—they were down 38% in the first quarter, according to Dell’Oro Group—as operators mull how to move forward with DAA.

But CommScope, which closed on its $7.4 billion purchase of Arris earlier this year, believes sales will pick up in the second half of 2019, and it’s trying to match that market.

“Cable MSOs are beginning to wait for remote PHY architecture to mature, which is impacting spending along with the general reduction in capital spend,” CommScope CEO Eddie Edwards said during the company's Q1 earnings call. “With demand for bandwidth continuing to grow at an exponential rate. We expect this trend to reverse and for investment in network capacity to increase throughout the year.

CommScope’s DAA portfolio includes its RPD, Remote PON, R-PHY Shelf, Video Unified Edge (VUE), ICX Switch family, and hybrid E6000 I-CCAP/CCAP Core products. It also features a full suite of virtualized products, including the E6000 Virtual Core (vCore) and vManager framework of tools, including industry-leading monitoring, management, and traffic engineering functions.

“As global operators continue to invest in tomorrow’s 10G networks, the outside plant will represent a primary budget focus,” said Kevin Keefe, senior VP and segment leader of CommScope’s network and cloud division. “Our RD1322 2x2 RPD is the answer for operators looking to maximize their existing infrastructure to deliver tomorrow’s networks and services as quickly as possible.”

Added said Jeff Heynen, research director, broadband access and home networking, Dell’Oro Group: “CommScope has one of the largest footprints of optical nodes among major cable operators worldwide. As cable operators continue to distribute their access networks and increase both upstream and downstream bandwidth, the RD1322 2x2 RPD is an option, as operators choose from a variety of DAAs and pathways as they bridge to tomorrow’s networks.” 

Arris announced today that its Android TV-based VIP6102W UHD IP set-top will be deployed by TDS Telecom as part of its cloud-based TDS TV+ platform.

Madison, Wisconsin-based TDS plans to launch the IP-based video solution later this year in its central Oregon footprint. Arris has made numerous deployments of Android TV set-tops in Europe, but this is the first time the CommScope-owned company has deployed the solution in North America.

TDS TV+ will featured more than 260 linear channels, on-demand content, pay-per-view programming and TV Everywhere viewing.

Last year, TDS announced the deployment of a full suite of IPTV solutions, including IP VOD, IP linear and cloud DVR, all based on TiVo’s Next-Gen Platform. The TiVo technology works across device ecosystems including managed Android TV set-tops.

Related: TDS Telecom to Launch TiVo Next-Gen Platform

Arris’s VIP6102W UHD IP offers integration between the set-top, cloud TV back office, the TiVo user interface and various third-party apps, including Netflix. A voice controller is also enabled. Arris Professional Services will support the deployment with a customized user experience, integration into the TDS system, and a remote-control firmware upgrade application. Arris’s cloud-based Eco Service Management will help TDS manage the device and provide exceptional customer service.

The VIP6102W is Wi-Fi 5 enabled and 4K capable. 

“We turned to Arris because we needed a more efficient platform for IP video delivery that combined both managed and un-managed video delivery options. The new platform enables TDS to customize the user experience for different customer segments,” said Ken Paker, senior VP of information and network technologies and CTO at TDS. “By combining Arris’ industry-leading technology, services, and experience with Android TV’s user interface, designed around content discovery and voice search, TDS can now provide customers with an easy-to-use, application-based video experience.”

“This is a significant milestone for Arris as we deploy our first Android set-top in North America with TDS,” added Larry Robinson, senior VP and segment leader of customer premises equipment at CommScope. “This suite of customized solutions showcases our portfolio’s unmatched versatility and our range of expertise in serving the unique needs of our operator customers as they deliver the future of TV.”

Arris has announced the pending retail availability of two new mesh Wi-Fi systems built around the new Wi-Fi 6 standard.

The Surfboard Max Pro is priced at $649 at Best Buy and directly from Arris starting July 22. It enables speeds of up to 11 Gbps and coverage up to 6,000 square feet. The Surfboard Max Plus delivers speeds of up to 7.8 Gbps. It’s priced at $549 for a two-router mesh system and is available for pre-order from Amazon, Wal-Mart and directly from Arris. Both products come in a cheaper single-router iteration, as well.

The new systems feature the latest wireless and modulation technologies, including OFDMA and High Order Modulation. Arris claims the devices are the only Wi-Fi 6 products on the market that use the new standard for three separate bands.

Related: Alliance Unveils WiFi 6 Certification Program

The Surfboard Max systems also feature management apps for both iOS and Android mobile devices. Support for Amazon Alexa voice-enabled devices is also featured.

“We did our research and took the time to get them right, maximizing the full potential of Wi-Fi 6, tri-band, and mesh,” > said Evan Groat, VP of Arris’ consumer products group, in a statement. “The result is the world’s first true tri-band Wi-Fi 6 mesh systems. They offer performance that no other system can match.”

Offering a physical reminder that the golden age of pay TV isn’t totally gone, TiVo is getting set to debut its next-generation DVR for its cable operator clients.

According to redacted FCC documents first unearthed by Variety, the new device is being manufactured by Arris (recently purchased by CommScope) and will be the “Series 7” follow-up to the Series 6 Bolt digital video recorder, which was introduced back in 2015.

Arris is also the manufacturer of the Bolt, which TiVo sold through both its consumer products division and its B2B MSO business.

TiVo isn’t officially commenting on the new hardware.

TiVo said during its first-quarter earnings call in May that 22 million pay TV households around the world use its “advanced television experience.”

Lately, TiVo has been distributing its UX through Android TV-powered set-tops and other thin-client OTT devices. But the product-photo-bereft FCC filing is a reminder that the old business of supplying full-featured DVRs to MSO clients hasn’t totally gone away.

It was speculated that CommScope might split off and sell Arris’ video CPE business after its purchase of the company earlier this year.

Dell’Oro Group analyst Jeff Heynen, however, isn’t necessarily convinced.

“Set-tops are a mature business but they’re still a good run rate business if you can manage cost and manage supply chains,” Heynen told MCN in a recent interview. “Certainly, the set-top box market is declining, but it still throws off a lot of cash CommScope didn’t have before.”

As large and midsized cable operators transition to virtualized CCAP, one of the big questions has been, can CommScope’s recently acquired Arris unit maintain its leadership position against the hordes of virtualized insurgents like Harmonic and Nokia charging the gate?

“We’ve worked well with operators over the last 20 years and we feel that we’re a pretty trusted vendor at this point,” Tom Cloonan, chief technology officer of CommScope’s newly integrated Network and Cloud group, said. “It’s ours to lose if we can’t create a good virtualized system.”

In Cloonan’s view, CommScope already has a leg up with its new virtualized Converged Cable Access Platform (CCAP), vCore, which it showcased at ANGA COM in Cologne, Germany.

‘Using Stable, Hardened Code’

Just as it did back in 2013, when Arris transitioned from the C4 to its E6000 converged access router, it’s using a lot of what it calls “hardened” legacy source code for vCore.

“A lot of people were amazed at how well the E6000 worked when it first hit the field,” Cloonan said. “We worked off of 15-year-old code that had been modified and improved over the years for the C4. And we hope to reap that kind of success with a similar approach. We’re using stable, hardened code in a virtualized platform.”

Based on a micro services architecture, vCore performs CCAP functions in software using off-the-shelf x86 Intel-based servers. But as operators transition to Distributed Access Architecture (DAA) using remote PHY nodes, their legacy E6000 hardware can be used to handle media access control (MAC) processing in lieu of servers.

“We allow the product to change its personality,” Cloonan said. “You can download software and transition it from being a normal CCAP box into one that functions in the Remote PHY world.”

The ability to keep using the E6000 hardware is key, given that CommScope controls 55% of the $1.5 billion global CCAP market with its flagship product, according to the Dell’Oro Group.

CommScope is in trials right now with a number of operators for vCore. “The game plan is to roll out the product in the next 12 to 18 months,” Cloonan said. “We’re picking partners right now for deployment.”

CommScope moves into the virtual market as Comcast, working closely with Harmonic and its CableOS software product, is developing its own virtual CCAP technology — one it could possibly syndicate, just as it does with its X1 video platform, according to a recent Light Reading report.

“Comcast is on the verge of deploying significant CableOS channels in the second half of this year,” Jeff Heynen, senior analyst for the Dell’Oro Group, said. “There are still some hurdles to overcome with respect to management and interoperability. Comcast is in the very early stages of its R-PHY deployment and will likely use a combination of gear from Harmonic, Arris and Cisco, with Arris and Cisco providing R-PHY nodes tied to existing E6000 and CBR-8 CCAP cores.”

In Europe, Vodafone Germany, Com Hem, Stofa and TDS are in the midst of moving quickly to virtualization and DAA, seeking to capitalize on benefits including dramatically reduced power consumption and easier service and maintenance.

In the U.S., Cox Communications and Altice USA are also likely to make moves to DAA on “a soonish timeline,” Heynen said, adding that the “jury is still out” on Charter Communications and any respective DAA transition.

But right now, major domestic DAA activity remains focused on Comcast, which is trying to work out the economics of having a lot more nodes in the field do a lot more of the network processing.

“Comcast will deploy a significant number of virtualized platforms alongside the R-PHY nodes because, economically and environmentally, they have to get the overall price per service group down in order to hit very aggressive targets for their DAA deployment,’ Heynen said. “You can’t deploy 10 times your existing node base without doing something very radical to the current DOCSIS channel pricing regime.”

Also at ANGA COM, CommScope was busy demonstrating several other technologies that are even more forward-looking — low-latency DOCSIS and Frequency-Division Duplex (Soft FDD) DOCSIS.

Within the confines of industry tech consortium CableLabs, CommScope is on committees developing these respective technologies, and the vendor used ANGA COM to show how they might work.

With 5G promising to reduce the typical 25-35 millisecond latency down to as low as 1 millisecond — the kind of network performance that would benefit advanced gaming, virtual reality and autonomous vehicles — CommScope is hoping to deliver a similar level of performance with low-latency DOCSIS.

Among the low-latency solutions being discussed in committee, according to Cloonan, is a system of dividing network packets by application, identifying those that apply to low-latency applications and giving them priority.

‘Soft FDD’ Emerges As Alternative

CommScope also is working with CableLabs on Soft FDD, which Cloonan said could emerge as an alternative for cable operators for which a transition to the “node plus zero” environment required by the next-generation Full Duplex (FDX) DOCSIS standard simply isn’t feasible.

Ultimately, FDX promises symmetrical data speeds as high as 10 Gigabits per second, with the signals stacked on top of one another — a scheme that doesn’t respond well to application beyond the node.

Soft FDD would allow operators to “take FDX equipment and not use it in an FDX way,” Cloonan said, keeping the upstream and downstream signals separate, as they have been for the past 50 years.

Rather, through software, operators would be able to remotely determine how spectrum is split from upstream and downstream channels.

CommScope is making its first appearance at ANGA COM in Cologne, Germany since acquiring Arris, and it will be subsequently demoing a range of new DOCSIS-enabled cable network technologies, as well as its own virtual CCAP.

With insurgent makers of software-powered Converged Cable Access Platform (CCAP) tech such as Harmonic and Nokia nipping at its heels, CommScope is showing off the E6000 vCore, a fully virtualized CCAP that it says is already in trials, with “significant deployments anticipated later this year.”

CommScope’s virtualized CCAP will initially run on the company’s dedicated CCAP hardware, the E6000. But it will soon move to support Intel-powered x86 servers as the vendor’s cable operator clients move into Distributed Access Architecture (DAA).

Meanwhile, with wireless competitors touting the ultra low latency of their developing 5G networks, CommScope is demoing a low latency version of DOCSIS that will reduce typical latency from around 25 milliseconds to around 1 millisecond.

CommScope’s demo will compare gaming applications on regular service flows against games running over prioritized low-latency flow. Among many other applications, low-latency DOCSIS, the company noted, will be crucial to gaming and virtual reality performance, as well as collision-avoidance systems in self-driving cars.

Also being demo’d: Frequency-Division Duplex (aka Soft FDD), which allows operators to remotely conduct frequency splits via software. Soft FDD uses Full Duplex DOCSIS technology and provides a foundation for symmetrical services, CommScope said

“Residential home networks now rival enterprises in both demands from internet-connected devices and for performance of managed services,” said Kevin Keefe, CommScope’s senior VP and segment leader, network & cloud. “We are developing technology and architectures that result in smarter, adaptive networks. With these announcements, we’re accelerating the march toward virtual, automated and orchestrated infrastructure capable of delivering massive amounts of capacity and bandwidth.”

Reporting its first quarterly earnings since being acquired by CommScope, Arris said that sales declined across its product sectors.

Network and cloud sales slide 18% to $440 million, with CommScope attributing the decline to a particularly strong first quarter in 2018.

“Networking and Cloud business is experiencing an unusually slow start to the year with cable MSO spending well below seasonal norms,” said CommScope CEO Eddie Edwards to shareholders. “While demand for Arris' HFC products remains solid, shipments of the E6000 are down significantly.”

On the customer premises equipment side, shipments of broadband devices were down 35%. CommScope said that this was the result of production lines moving out of China to get out of the way of tariffs.

Shipments of video set-tops, however, increased 7% year over year.

Arris is the latest seller of cable access network equipment to feel a pinch, as first quarter revenue for all vendors has been slow.

“Interest and distributed access networks remain strong, but industry deployments are still very limited,” Edwards said. “Arris has implemented a very elegant upgrade path with the deployed base of the E6000 routers and HFC fiber nodes, which is though operationally and capital spending efficient.”

Notably, Edwards said Arris is at work on a fully virtualized of Cable Converged Access Platform (CCAP). Currently, Arris’ No. 1 position in CCAP is being challenged by Harmonic and Nokia, which are replacing hardware-driven network infrastructure with software.

“A fully virtualized version of the product is also an option for operators that prefer that path. We feel very good about our position to support the bandwidth needs in the future,” Edwards said. 

CommScope is preparing its first quarterly earnings report since closing on its $7.4 billion purchase of one of the cable industry’s biggest technology vendors, Arris.

With the biggest manufacturer of pay TV set-tops, cable broadband gateways and cable access network gear, not to mention new wireless connectivity products being developed and sold under the Ruckus Networks banner, all under the control of the Hickory, N.C.-based CommScope, what happens next?

Multichannel News posed that question to Jeff Heynen, research director of broadband and access and home network for Dell’Oro Group. Heynen has been observing the business of cable technology for nearly 20 years. Here are five things he believes are worth considering going forward in a cable industry now heavily under the influence of CommScope:

Can CommScope maintain Arris’s profitable global leadership position in cable access? This is the “No. 1 question” about the merger, according to Heynen, who said Arris controls about 55% of the worldwide market for the converged cable access platform (CCAP) and for cable modem termination systems (CMTS). This market, he said, was worth about $1.5 billion worldwide in 2018 and is still growing at a single-digit pace.

In the run-up to the merger’s closing just a few weeks ago, the narrative is that the deal was driven by complementary movement into wireless markets like Citizens Broadband Radio Service (CBRS), a huge focus for Arris’s Ruckus Networks division.

“Wireless operators are densifying and entering the broadband market and cable operators are likely to build wireless networks,” BTIG Research analyst Walter Piecyk wrote shortly after the deal was announced. “CommScope and Arris have complementary products that address these diverse sets of service providers.”

But CommScope also covets Arris’s network and cloud division, Heynen said, and hopes that not only will the CCAP/CMTS market continue to grow, but Arris will be able to maintain its dominant market share.

Both of those are big ifs, Heynen said, with upstarts including Harmonic and Nokia developing alternative Distributed Access Architecture solutions for operators and looking to displace leaders Arris, Cisco Systems and Casa Systems.

As operators begin to virtualize cable-access components like CMTS and push these functions out of the plant and closer to the subscriber, “Harmonic has a lot of momentum and is really pushing the envelope” with its virtualized cable access technologies, Heynen said.

The biggest operator client, Comcast, is already moving aggressively in the direction of DAA, he added. “You can save on rack space, you save on power consumption and you save on hardware costs,” Heynen said. “Comcast is going to be a big driver of DAA. The question is, how fast does Comcast move?”

Will the deal deliver CommScope the kind of synergies it needs to rekindle growth? CommScope is projecting $150 million in annual run-rate cost synergies in year three of the merger. But what about sales synergies? The company also expects a 30%-plus boost in adjusted earnings per share in the first full year post-closure, but investment analysts think that figure could be even better.

With operators pushing fiber ever deeper, “there are obvious synergies in being able to sell the [optical] infrastructure as well as the electronics,” Heynen said.

“In theory, CommScope should be able to leverage the Arris brand name, at least on the electronics side, and be able to bundle packages of new fiber nodes along with the additional bandwidth operators buy when they purchase Arris equipment,” he said.

CommScope’s stock is still recovering from an abrupt 30% hit it took a year ago, when investors became suddenly aware that its fiber connectivity equipment and mobile solutions sales were slowing down. Indeed, CommScope needed some kind of catalyst to juice sales of fiber, splitters, splicers and everything else that goes into the optical distribution network.

As an example of a potential cross-selling opportunity, Heynen cited the potential of Comcast’s upcoming migration to Full Duplex DOCSIS.

“If Comcast wants to do Full Duplex, it will need to achieve a goal of having only 50 or 60 homes per node,” Heynen said. This is a lofty objective, as fiber nodes typically service around 500 individual homes.

“It will be a phenomenal amount of spending. It’s not going to happen just over two years or five years, but it’s going to happen.”

Is CommScope really going to chuck Arris’s CPE division? Since the moment the deal was announced, the popular assumption has been that CommScope will sell Arris’ Customer Premises Equipment (CPE) business, which as been beset by challenges ranging from global parts shortages to the secular decline of the pay TV set-top.

But Heynen doesn’t see divestiture happening. “Set-tops are a mature business but they’re still a good run rate business if you can manage cost and manage supply chains,” he said. “Certainly, the set-top box market is declining, but it still throws off a lot of cash CommScope didn’t have before.”

Meanwhile, Heynen believes DOCSIS 3.1 gateways also have plenty of near-term potential.

“As much as Comcast and Charter like to say their DOCSIS 3.1 rollouts are over, they’re nowhere near done on the CPE side,” he said. “Most of their customers are still on DOCSIS 3.0 gateways.”

Ruckus Networks has announced the immediate availability of its CBRS portfolio, which includes CBRS-band LTE access points and varioius cloud-based services.

Ruckus, which was acquired last month when CommScope closed on its $7.4 billion acquisition of parent company Arris, has participated in nearly 50 trials of networks based on the Citizens Broadband Radio Services (CBRS) spectrum band, the 3550 - 3700 MHz-frequency swath the FCC had previously set aside for a narrow collection of government services. Ruckus is also a founding member of the CBRS Alliance.

The is FCC currently looking to finalizes commercial CBRS spectrum availability, and organizations across a wide variety of verticals will be able deploy their own private LTE networks.

Comcast and Charter Communications are among the telecom companies looking to provide CBRS network services. 

“The market needs cloud-based, easy-to-deploy CBRS solutions to enable the growing opportunities of private LTE networks in the mobile, cable and enterprise segments,” said Kyung Mun, principal analyst for Mobile Experts, delivering a statement in CommScope’s announcement today. “LTE solutions similar to Ruckus’—that are simple to deploy like Wi-Fi—will help drive rapid adoption of private LTE networks across numerous market segments. Our forecast is that nearly one million CBRS small cells will be shipped by 2023.”

Added Ian Whiting, senior VP and segment lead for Ruckus Networks: “Now that commercial availability of CBRS is a reality, we’re excited to support organizations across a variety of industries to harness the mobility, security, and quality of service that this shared spectrum provides.”

CommScope has completed its $7.4 billion acquisition of Arris.

Eddie Edward, president and CEO of Hickory, N.C.-based CommScope, will lead the combined company that touts around 30,000 workers, 15,000 patents and $850 million in annual R&D spending.

Bruce McClelland, formerly CEO of Atlanta-based Arris, will now assume the role of chief operating officer of CommScope. The company hasn’t publicly discussed any layoffs. But it did say it hopes to experience $150 million in cost synergies in year three of the transaction.

Private equity firm The Carlyle Group will become a minority owner of the combined company with its $1 billion equity investment.

The two combines had combined pro forma revenue of $11.3 billion in 2018.

Announcing the deal in November, the telecom vendors pitched a merger based on mutual interests in wired/wireless convergence associated with 5G, as well as applications like CBRS.

Related: CommScope Buys Arris in $7.4B Deal

“This is a major milestone in the evolution of these two great companies and a significant moment for our industry,” Edwards said in a statement. “With the completion of this exciting transaction, we are creating a new CommScope that will help shape communications connectivity and networks of the future with greater technology, solutions and employee talent. We are committed to building on our well-established track record in prior transactions of meeting or exceeding our synergy targets and generating significant value for shareholders.”

Added McClelland: “Together, we combine great employee talent and experience, an impressive record of innovation and industry firsts, and a sharp focus on creating a world-class customer experience. The entire Arris team and I are eager to get started and help make CommScope one of the top names in technology.”

Arris CEO Bruce McClelland will transition to chief operating officer of CommScope, as the latter prepares to close on its $7.4 billion acquisition of Arris.

Meanwhile, Morgan Kurk, the current COO of Hickory, N.C.-based CommScope, will shift over to become chief technology officer of the combined company.

Related: Arris Shareholders Sign Off on $7.4B Acquisition by CommScope

CommScope’s leadership announcement didn’t address the fate of Arris’ top technology executives: Charles Cheevers, CTO of customer premises equipment; Tom Cloonan, CTO of network solutions; and Mehmet Yavuz, CTO of the Ruckus Networks division.

“The addition of Arris and Ruckus to form the new CommScope will enhance our technology leadership throughout the network from the core, through the access, to the edge,” Kurk said in a statement. “I look forward to helping unlock this potential by driving tighter integration across the company and leadership through the ecosystem.”

Added Eddie Edwards, CommScope president and CEO, in a statement.

“We continue to make progress to bring CommScope and ARRIS together and ensure we are better positioned to capitalize on emerging trends, including network convergence, fiber and mobility everywhere, 5G, and Internet of Things.”

“Bruce and Morgan will play pivotal roles in leading our combined companies into a successful future,” Edwards added. “I look forward to working with both of them, along with the entire CommScope management team, in the years to come as we drive profitable growth in new and growing markets, provide end-to-end wired and wireless communications infrastructure solutions and deliver enhanced value to our shareholders.”

The deal was announced in October and approved by Arris shareholders late last month. 

Arris investors have approved the $7.4 billion acquisition of the technology company by CommScope.

In a shareholders meeting in London, investors holding 99% of the company’s stock signed on for the deal, which was announced in October.

"This approval marks another important milestone in accelerating our strategy. Together, we believe Arris and CommScope have an unprecedented opportunity to help shape future communication networks and to look to deliver additional value to our shareholders, customers, partners and employees," said Arris CEO Bruce McClelland, in a statement.

Related: Arris’ $7.4B CommScope Buyout Draws Shareholder Lawsuit

The approval followed a lawsuit filed last month in a New York federal court against Arris by shareholder Louise Agnes-Sampson. She claimed Arris didn’t disclose key financial projections needed by investors to effectively vote in the London meeting.

Shortly after the deal was announced, BTIG Research analyst Walter Piecyk said the combined companies could realize $300-$450 million in annual cost synergies.

“Wireless operators are densifying and entering the broadband market and cable operators are likely to build wireless networks,” Piecyk wrote in a note to investors. “CommScope and Arris have complementary products that address these diverse sets of service providers. As an example, Arris has developed CBRS access points that will appeal to wireless and cable operators and CommScope is developing a SAS (Spectrum Access System) that enables the functionality of those access points.”

Arris is being sued by an investor who claims its Dec. 26 proxy statement doesn’t provide enough information about the company’s proposed $7.4 billion buyout by CommScope.

The complaint, obtained by Bloomberg, and filed in the U.S. District Court for the Southern District of New York, was filed by Louise Agnes-Sampson. She claims that with a Feb. 1 shareholders meeting to vote on the proposed deal coming up, “It is therefore imperative that the material information that has been omitted from the proxy is disclosed prior to the shareholder vote so Arris shareholders can properly exercise their corporate suffrage rights.”

Those named in the suit include Arris Chairman Bob Stanzione and CEO Bruce McClelland.

Related: CommScope Buys Arris in $7.4B Deal

“On December 19, 2018, the defendants filed a materially incomplete and misleading proxy with the SEC and disseminated it to Arris’ shareholders,” the suit claims.

The proxy, the suit adds, “fails to provide enough information regarding financial projections for the company. In particular, the proxy fails to disclose: Arris’ projected unlevered free cash flows and its underlying line items; all line items used to calculate Arris’ non-GAAP EBITDA; a reconciliation of all non-GAAP to GAAP metrics; and Arris’ projections for the years 2022 and 2023.

Arris reps haven’t yet responded to MCN’s inquiry for comment. 

Arris is set to launch a new WiFi system that it says can deliver multi-gigabit speeds throughout homes as large as 6,000 square feet.

Targeted for availability in the first half of 2019, and set to be previewed at next week’s CES Show in Las Vegas, the SURFboard mAX Pro Sri-Band 4x4 WiFi 6 system supports 400% faster speeds and four times the range of WiFi 5 (802.11ac), according to Arris.

While most current mesh systems commonly use dual-band (2.4 GHz and 5 GHz) technology, the SURFboard mAX Pro System uses a third, 5 GHz band that enables more connected devices in a single router configuration.

Using WiFi 6, the Alexa-compatible SURFboard mAX Pro System has a usable range of up to 6,000 square feet--or up to 3,000 sure feet with a single SURFboard mAX Pro Router.

"It is the answer to consumer demand for the fastest speeds throughout the entire home,” said Evan Groat, senior VP and GM of Arris’ consumer products group. “Gigabit is becoming table stakes, and we've combined the best networking technology available to ensure that consumers can use all the speed they pay for, on every device, in every room, for years to come."

“Arris’ continued foray into WiFi 6 comes at an opportune time in the wireless market,” added Andrew Zignani, senior analyst for ABI Research, shilling for Arris in the company’s product announcement. “Specifically, the growing number of connected devices in the home is creating a surge in network traffic and driving demand for more reliable and higher-capacity WiFi.”

After abandoning plans to launch a new advanced IPTV platform, Verizon has rolled out on a limited basis a new CPE upgrade for its existing pay TV system, which it’s calling Fios TV One.

The upgrade, which Verizon said has been deployed to a limited number of Fios subscribers in upstate New York and New York City; Pittsburgh and Harrisburg, Pa.; Massachusetts markets; Richmond, Va., and several other markets, includes a voice remote and secondary receivers that are WiFi connected, meaning they don’t have to be placed near coax.

There’s Netflix integration directly into the user interface. And the platform is 4K/UltraHD-capable.

Verizon said other Fios TV One markets will be announced later in December and January.

New Fios TV One subscribers will receive a 1 Gbps internet connection and landline phone for $79.99 a month. They’ll also receive a year of Amazon Prime service and a second-generation Amazon Echo device. Existing customers can upgrade at no additional uptick to their service charge, although they will be charged for equipment.

The upgrade is sorely needed, with Verizon’s once industry-leading pay TV platform lagging behind such similarly monikered next-gen systems as Comcast’s X1 and Altice One.

Related: McAdam: No Content Buys for Verizon

And the investment is a little surprising, given Verizon’s recent emphasis on 5G and vocalized abandonment of traditional pay TV bundling.

This stance was made clear in by exiting former CEO Lowell McAdam in 2017, when he told the company’s Yahoo Finance media division, “We made our bet several years ago before we bought AOL and Yahoo and combined them together to do Oath that we weren’t going to be investing in the linear TV model I’ve said this a couple of times, I think the linear model is dead, it’s just going to take a long time to die.”

Verizon lost 63,000 Fios TV users in the third quarter, lowering its subscriber base to 4.497 million.

Notably, Verizon just took a $4.5-billion writedown on its Oath assets. 

French technology vendor Technicolor SA has responded to a Reuters report that it is looking to sell all or part of itself, as it grapples with a downturn in its pay TV set-top business.

“This is an ongoing process in keeping with management's mission to deliver value for shareholders," Technicolor said in the statement. "In this regard, Technicolor stresses that any discussions are at a preliminary stage. No strategic decision or commitment has been made.”

Reuters reported that Technicolor has been talking recently to other companies and private equity firms, including Bain Capital, about sale and merger options.

Related: Technicolor, Cisco Seal the Deal

Technicolor, which has provided media services to film and TV companies for nearly a century, paid $600 million in 2015 for Cisco’s set-top business.

Consolidation of pay TV operators has challenged that business. But the recent global shortage of multi-layer ceramic capacitors (MLCCs) has further constrained profitability for Technicolor.

For its part, rival Arris consolidated its set-top holdings around the same time Technicolor bought out Cisco, paying $2.1 billion for the No. 2 set-top maker at the time, the UK’s Pace. Two weeks ago, Arris announced a deal to sell itself to CommScope.

Technicolor’s Connected Home unit, which houses its set-top manufacturing business, generated 56% of the company’s overall revenue in the first half of this year. 

Arris-owned Ruckus Networks said it has partnered with American Tower for what it is billing as the first commercial deployment of a private LTE network built around the CBRS spectrum.

The two tech vendors have established the network at the newly renovated ISM Raceway in Phoenix, Arizona. The the LTE network will use frequency consigned to the Citizens Broadband Radio Service, in the range of 3.5 GHz to 3.7 GHz, previously utilized on a limited basis by the U.S. Navy and a few other government entities.

Related: Arris IDs CBRS as an Opportunity Right Now

ISM Raceway, which has undergone a $178 million renovation, will utilizes Ruckus Q710 and Q910 LTE access points. Systems integrator American Tower also used Ruckus T310 tiers and T610 series outdoor 802.11ac access points in the network.

"Arris excels in providing world-class connectivity solutions to large public venues, and we are proud to add ISM Raceway to that list," said Tim O'Loughlin, president of U.S. sales and global marketing and customer operations for Arris, in a statement. "With our Ruckus products on-site, NASCAR fans will have better connectivity to upload and download content like videos, photos and apps -- or engage on social media -- allowing them to be just as fast as their favorite driver out on the race track.”

Arris, which agreed to be purchased by CommScope last week for $7.4 billion, is aggressively seeking deployment of CBRS with operators serving enterprise customers such as shipyards, airports and sports venues. Arris says it can offer their low-cost, private LTE networks that are more reliable than WiFi.

“We and other companies can deliver that to you today,” said Arris CPE division chief Charles Cheevers last month at SCTE Cable-Tec Expo.

With their respective operator client bases consolidating, and each facing expensive transitions to next-generation wireless technology product lines, two struggling telecom vendor giants joined forces last week.

In a deal valued at $7.4 billion, financing included, Hickory, N.C.-based CommScope purchased Suwanee, Ga.-headquartered Arris. The pact combines two vendors of roughly the same girth; each is market-capped around $5 billion. At $31.75 a share, CommScope paid a 14% premium for Arris.

The deal is expected to close in the first half of next year. CommScope will be in charge of the combined company, but Arris CEO Bruce McClelland and his management team, as well as the Suwanee office, will remain in the fold. Private-equity giant The Carlyle Group has invested $1 billion into CommScope to finance the deal in exchange for a 16% stake. It will have two seats on the board when the deal closes.

The combined company should generate estimated annual revenue of around $11.3 billion and EBITDA of around $1.8 billion.

Both CommScope and Arris are selling the deal on the notion that they sell complementary network components for technologies like Citizens Broadband Radio Service (CBRS). Analysts tend to agree, but actual stock buyers remain skittish — evidenced by CommScope’s 20-plus percent slide on Wall Street in the aftermath of the announcement.

Certainly, both companies could use a boost.

Arris spent lots of money over the last six years bulking up in the pay TV set-top business, acquiring Motorola Mobility’s customer premises equipment division (formerly General Instrument) for $2.35 billion. In 2015, it gobbled up No. 2 set-top supplier Pace out of the UK for $2.1 billion. With large operator clients like Comcast looking to phase out of full-service pay TV set-tops, and milk the last life out of those they have in the market, Arris is looking to transition, evidenced by its $800 million purchase of Ruckus Wireless last year. But around 35% of its revenue still comes from the fading set-top business.

Shortly after the deal was announced, Arris reported a 4.5% third-quarter revenue decline to $1.651 billion.

CommScope is looking to transition into 5G connectivity products, as well, but it’s struggling in the here and now of the mature 4G era (although sales were up 2% in the third quarter to $1.15 billion).

BTIG Research analyst Walter Piecyk estimated that the combined companies could realize $300 million to $450 million in annual cost synergies.

Edwards conceded that the North American pay TV set-top business is in decline. “But it is a good cash generator, so that’s something that doesn’t scare us,” he added. “We have managed a lot of businesses for cash in our past.”

REUNITED

It turns out CommScope and Arris have been together before. Here’s a timeline showing how, in a complex series of deals spanning 21 years, CommScope just paid $7.6 billion for assets it had previously been connected to.

1997: Horsham, Pa.-based General Instrument (GI), which specializes in semiconductors and other cable and satellite TV electronics hardware, splits into three companies: General Semiconductor, Next Level Systems and CommScope.
1998: Next Level Systems, which houses the former GI’s cable and satellite set-top business, changes its name to GI Corp.
2000: Motorola pays $17 billion for GI. Combined with Zenith Communications assets, GI will be the foundation of a unit that will ultimately be rebranded as Motorola Mobility.
2001: Google buys Motorola Mobility for $12.5 billion.
2012: Arris pays $2.35 billion for Motorola Mobility’s Home division, which houses the former GI assets.
2018: CommScope pays $7.6 billion to buy Arris.

Comcast is testing a new streaming set-top that would deliver popular OTT services like Netflix and Amazon Prime Video to its broadband only customers over managed network.

Comcast hasn’t officially commented on the trials, which were first reported by CNBC to be ongoing in several small markets. However, Light Reading did some additional digging and is reporting that Comcast is using the Arris-made, 4K-capable Xi6, a client that operates the cable company’s X1 video system.

Update: An earlier version of this story incorrectly presumed Light Reading's sourcing came from Comcast. Light Reading has not disclosed its sourcing.  

The device would provide broadband-only customers with a pathway to popular OTT services—to a point. It wouldn’t be an OTT streaming device like, say, Roku or Amazon Fire TV, which would let users play a wide variety of apps, including those for virtual pay TV platforms like Sling TV and DirecTV Now.

Rather, it would incorporate apps already embedded into the X1 ecosystem and enable Comcast customers to add cable pay TV services at a later time, should they be so inclined. Notably, however, the Xi6 has no DVR components. 

In a huge merger among telecom industry vendors, CommScope has agreed to purchase Arris in an all-cash deal with a total purchase price of $7.4 billion, $31.75 a share.

After a widely reported series of talks, the deal was announced by CommScope this morning. Both companies have market capitalizations in the area of $5 billion.

Notably, the $7.4 billion figure, CommScore said, factors in debt financing for the purchase. The Wall Street Journal pegs the base value of the transaction, minus interest, at $4.93 billion. 

Following closure of the deal, Eddie Edwards will continue in his role as president and CEO of Hickory, N.C.-based CommScope. Arris CEO Bruce McClellan and other key Arris managers will be joining the combined company. CommScope said it will “maintain a significant presence” within Arris’ Suwanee, Georgia headquarters.

The Carlyle Group has reestablished an ownership position in CommScope through a $1 billion minority equity investment as part of CommScope’s financing of the transaction.

Related: Arris Close to $5.6B Purchase by CommScope: Report

“After a comprehensive evaluation of our business and the evolving industry we operate in, we are confident that combining with Arris is the best path forward for CommScope to grow and provide the greatest returns for shareholders,” said Edwards, in a statement. “CommScope and Arris will bring together a unique set of complementary assets and capabilities that enable end-to-end wired and wireless communications infrastructure solutions that neither company could otherwise achieve on its own. With Arris, we will access new and growing markets, and have greater technology, solutions and employee talent that will provide additional value and benefit to our customers and partners.”

Added McClelland said, “CommScope is an ideal partner for Arris. In addition to providing immediate and substantial cash value to our shareholders, we are excited for what this combination will deliver for our customers, partners and employees around the world. Today’s agreement is a testament to the strength of Arris: our leading technology, talented employees and established competitive position. With CommScope, we expect to further advance Arris’ strategy to drive innovation across our iconic brands and pioneer the standards and pathways for tomorrow’s personalized, connected always-on consumer experience. Arris will become part of an even stronger, more global industry leader, and I look forward to working with the CommScope team to achieve great results for the combined company.”

Arris paid $800 million to acquire Ruckus Wireless last year and had been diversifying its product line to match the wireless convergence of its cable operator client base. But after its $2.1 billion purchase of Pace in 2016, it remained heavily ensconced in the fading pay TV set-top box business, with 35% of its revenue coming from that sector.

CommScope, meanwhile, not only offers an escape for Arris, but a synergistic partner, with the two tech vendors selling complimentary products in emerging areas like CBRS.

BTIG Research analyst Walter Piecyk said the combined companies could realize $300-$450 million in annual cost synergies.

“Wireless operators are densifying and entering the broadband market and cable operators are likely to build wireless networks,” Piecyk wrote in a note to investors last week. “CommScope and Arris have complementary products that address these diverse sets of service providers. As an example, Arris has developed CBRS access points that will appeal to wireless and cable operators and CommScope is developing a SAS (Spectrum Access System) that enables the functionality of those access points.”

CommScope and Arris combined control approximately 15,000 patents and about $800 million in average annual research and development investments. Their combined company is expected to serve customers across more than 150 countries.

For the 12 months ended September 30, on a pro forma basis, the combined company would have generated revenues of approximately $11.3 billion with adjusted EBITDA of approximately $1.8 billion.

Arris is on the cusp of a $5.6 billion deal that would see the leading cable industry vendor sold to wireless tech company CommScope, CNBC reports.

Citing unnamed sources, the news services said a deal could be announced as soon as Wednesday. Last week, it was Reuters that reported that the two companies were in talks. Reps for both Arris or CommScope have yet to respond to MCN’s inquiries for comment.

Arris stock was up about 12% at mid-day while CommScope was down about 2%. 

With a market capitalization of just over $5 billion, Arris is involved in cable wireline broadband and has made moves to follow the cable industry’s migration into wireless, acquiring Ruckus Networks last year for $800 million.

But Suwannee, Georgia-based Arris remains heavily entrenched in the fading pay TV set-top business following its 2016 acquisition of Pace for $2.1 billion. In fact, set-tops still account for 35% of its business.

Market capped at $4.689 billion, CommScope produces complimentary products in emerging sectors like CBRS and would provide Arris with an exit strategy.

Related: Report: CommScope Talking Buyout With Arris

“Wireless operators are densifying and entering the broadband market and cable operators are likely to build wireless networks,” said BTIG Research analyst Walt Piecyk in a note to investors last week. “CommScope and Arris have complementary products that address these diverse sets of service providers. As an example, Arris has developed CBRS access points that will appeal to wireless and cable operators and CommScope is developing a SAS (Spectrum Access System) that enables the functionality of those access points.”

Piecyk said the combined companies could realize $300-$450 million in annual cost synergies.

“A combination of the two companies could broaden the target market in to regions where each company derives only a small percentage of revenue today,” he added. “CommScope generates 15% ($730 million annualized) of its revenue in APAC vs only 5% ($370 million annualized) at Arris, while in the Americas outside of the US, Arris generates 19% ($1.3 billion annualized) of revenue vs 7% ($355 million annualized) at CommScope.

Arris executives met with Federal Communications Commission officials last week, asking the federal government for grace under Trump administration-imposed Chinese import tariffs that Arris says will drive up annual costs for broadband equipment in the U.S. by $200 million.

“The proposed tariffs would effectively impose a massive tax on our country’s broadband ecosystem by significantly raising the costs of key broadband inputs,” read an Arris FCC filing. “Ultimately, American consumers and businesses, including small and midsize businesses, would pay the price. Moreover, the imposition of tariffs would create a drag on future broadband innovation, putting U.S. broadband leadership, including 5G wireless efforts, and American jobs at risk.”

The filing was first reported by Light Reading, which said it was discovered by Raymond James analyst Simon Leopold. Leopold estimated that with the step-up of the Trump Administration’s import tariffs from 10% to 25% on Jan. 1, 2019, the total costs of U.S. broadband equipment could spike by $500 million annually.

Related: Arris said to have held merger talks with Commscope

Arris said the products impacted by the tariffs include “telephony/broadband/data gateways, cable/telephony modems, nodes, wireless access points, bridgers, routers, controllers, and transceivers.”

In its filing, Arris included a letter, signed by 170 members of Congress, asking the United States Trade Representative (USTR) to exclude broadband from the tariffs.

At the very least, Arris would like some time for the U.S. broadband industry to adjust.

“If USTR proceeds with the proposed additional tariffs, it should provide sufficient time, at least 12 months, for companies to make the necessary supply chain changes,” Arris said. “Arris broadband equipment is complex and involves highly customized manufacturing operations. Working with its manufacturing partners, Arris will incur significant time and expense in shifting operations outside of China, particularly given the need to ensure the security of proprietary information and technology for ARRIS and its broadband provider customers.”

The Suwanee, Ga.-based tech vendor also said the tariffs threaten the larger goal of 5G deployment.

“This future wireless technology holds particular promise for broadband deployments in rural America, where it may not be economically or geographically feasible to widely deploy wireline fiber networks,” the filing added. “Given the transformative potential of 5G, the U.S., along with countries like China, South Korea and Japan, is racing to deploy 5G technology. According to one report, China is currently leading the world in 5G readiness, with the U.S. close behind.”

But “the proposed tariffs would raise the cost of these critical inputs, slowing the adoption of new 5G technologies by Ruckus customers and diverting resources away from Ruckus’s investments in 5G,” Arris said. 

ATLANTA - Telecommunications tech vendor CommScope is conducting acquisition talks with cable tech company Arris, Reuters reports.

Both companies have presence at the just-about-to-end SCTE Cable-Tec Expo Show, positioned not too far from Arris’ Suwanee, Ga. headquarters. Neither is commenting at this point.

Read More: Cable-Tec Expo 2018

As Reuters noted, Arris shares spiked 13% on Wednesday, with rumor of the deal talks hitting Wall Street.

"We see some industrial logic to the deal, but we are not prepared to believe it,” wrote Raymond James analyst Simon Leopold, who published a note on the reported deal talks. "We see very little overlap for cost synergies beyond G&A. The companies are quite different, with Arris focused on electronics and CommScope on apparatus."

As cable operators around the world enter the finishing stages of DOCSIS 3.1 deployment, it’s still unclear as to how much current demand there is for 940 Mbps downstream services, the technology’s current speed threshold.

Read More: Cable-Tec Expo 2018

But as it has at each Cable-Tec Expo over the last several years, Arris is challenging the industry to see 1-gig downstream as just a signpost coming up fast. With internet of things putting more connected devices in the home, and applications like 4K streaming and virtual reality emerging, the vendor says cable operators are going to need to bring 20 Gbps into the home in the next 10 to 15 years.

While compounded annual growth rates (CAGR) of downstream traffic on the internet have stabilized a little of large, “upstream is actually accelerating, 25-30%, which is quite a bit higher than the 20% it used to be,” said Tom Cloonan, chief technical officer of Arris’ Networks Solutions unit, noting that the Suwanee, Georgia-based vendor is now focusing on technologies that improve upstream capacity and latency.

Related: Comcast testing FDX with MaxLinear, Other Vendors

In doing so, Arris is walking a bit of a marketing tight rope, as it tries to sell a more immediate network upgrade, Full Duplex DOCSIS (FDX), and a separate, theoretical one that is further out, Extended Spectrum DOCSIS.

As subscriber bandwidth demands grow and equipment capacities increase, MSOs will need to expand their upstream spectrum, and FDX provides a somewhat immediate opportunity to do just that, Cloonan said.

FDX enables DOCSIS 3.1 hybrid fiber-coax (HFC) networks to support shared 10 Gbps transmission capabilities in both the upstream and downstream directions. The current technology, DOCSIS 3.1, will support 10 Gbps downstream and only 1 Gbps upstream, once all of the standard’s features are finally actualized.

With CableLabs completing the specifications for FDX a year ago, Cloonan and his team will be using Cable-Tec Expo to show off network solutions based on the second generation E6000 Converged Cable Access Platform, with an eye for FDX upgrades occurring in the next two years.

Indeed, at the booths of multiple technology vendors, Full Duplex will be in the here and now this year, with operators including Comcast, for example, looking to swap in FDX-capable nodes as they transition to Distributed Access Architectures (DAA). And for its part, Arris has already been in the market touting the FDX upgrade potential of its DOCSIS 3.1 network solutions, such as one recently deployed by Australia’s NBN earlier this year.

To make FDX a reality, Cloonan explained, operators will need to be able to move quickly to a node+0 environment and be willing to upgrade their Cable Modem Termination Systems (CMTSs), nodes and CPE.

Of course, that’s asking a lot for some cable companies.

Further out and currently in the research and development phase, Extended Spectrum DOCSIS, Cloonan said, may be better suited for cable operators that want assurances that their future high-capacity networks will work in existing node+X environments that may not support FDX operation, which requires node+0.

“There are a lot of operators who have no intention of getting to a node+0 environment in next 10 years,” Cloonan said. “It’s going to take a while to run fiber deep enough to get to node+0.”

Capable of working in node+6 configurations, and delivering theoretical symmetrical speeds as high as 60 Gbps, Extended Spectrum DOCSIS (aka “DOCSIS 4.0”) is being championed by operators including Cox Communications.

With Extended Spectrum DOCSIS, operators would use more—a lot more—than the 1.2 GHz of plant spectrum they currently exploit for DOCSIS 3.1. In fact, they’d use more than the 1.8 GHz leveraged by FDX. Extended Spectrum’s visionaries see as much as 3 Ghz, or even 6 GHz, being used.

It was Cloonan who first pitched the Extended Spectrum idea two years ago, with the technologists proposing the use of 6 GHz of spectrum and Fiber Deep to deliver symmetrical speeds as high as 50 Gbps.

Earlier this year, Jeff Finkelstein, executive director of advanced technology for Cox, told Lightreading that he had a team of Georgia Tech graduate students perform calculations suggesting the concept could actually work.

“A lot more work has to be put into it to prove it will work,” added Cloonan, who envisions a go-to-market for Extended Spectrum sometime in the mid-2020s range. “It’s not going to be put into the field next week.”

Of course, all of this work on advanced DOCSIS technologies is unfurling as Arris continues to support the current DOCSIS 3.1 standard.

“From Arris' point of view, we’re still developing 3.1 features,” Cloonan said. “The spec is several thousand pages long, and certainly, not every feature was turned on on day one. We’re still rolling features in. It’s still a very active program.”

Arris has named four-year company veteran Kevin Wirick to lead its new “Network Intelligence and Automation” business.

The new unit will focus on developing, making and selling cloud-based network management solutions to operator customers. Wirick’s team will operate under the umbrella of Dan Whalen’s Network and Cloud business unit. Wirick will report directly to Whalen.

With Arris clients increasingly using Distributed Access Architecture (DAA) technologies, the vendor said network processing has increased by a factor of 10 to 100. The products developed and sold by Wirick’s team will aim to simplify network provisioning, enable efficient scaling, and provide insights to help reduce operational costs.

Products overseen by the the group include Eco Service Management, a platform that operationalizes the delivery and management of WiFi, triple play and connected home solutions; and ServAssure, which monitors the network pipeline

Wirick joined Arris in 2014 from Motorola and previously led its video network infrastructure business. 

The CBRS Alliance and the Wireless Innovation Forum announced this week that Ericsson, Nokia and Sercomm have joined Arris’ Ruckus Networks unit as the first technology vendors to achieve certification for new CBRS band devices.

Last month, Ruckus said that it had been given FCC certification for its entire portfolio of “OpenG”-branded access points designed to work in the 3.5 Ghz Citizens Broadband Radio Service (CBRS) spectrum.

Related: Ruckus Gets CBRS Certification for Access Points

Cable and wireless operators are exploring opportunities for the Citizens Broadband Radio Service Device band, a 150 MHz-wide portion of largely underused spectrum existing between 3.55 GHz and 3.7 GHz. CBRS will ultimately be used for private LTE networks such as airports and industrial campuses.

Having the telecom industry’s major vendors certified is a major step in the broader plan to have CBRS commercial deployments achieved by the end of the year. Earlier today, Federated Wireless said that it has asked the FCC for permission to move forward with commercial CBRS deployments as soon as October, the company announced.

“This major milestone in the commercialization of the CBRS band represents the first of what we believe will be many more certifications announced over the next few months as the industry moves towards Initial Commercial Deployment,” said Lee Pucker, CEO of the Wireless Innovation Forum, in a statement.

By the end of the year, the CBRS Alliance said it expects to have nearly a dozen labs set up around the world to conduct testing for what it has branded as its “OnGo” certification of CBRS technology.

“We see immense value in leveraging OnGo technology for private LTE and neutral host environments and are seeing growing interest across industry sectors, including public venues, smart cities, enterprises, healthcare and more,” said Chris Stark, head of North American business development at Nokia and chairman of the CBRS Alliance.

“Ruckus Networks believes this innovation band will open up compelling new use cases by enabling LTE technology to be deployed and operated in a cost effective and scalable manner,” added Mehmet Yavuz, CTO of Ruckus Networks. “As one of the first companies to achieve FCC & OnGo certification for 3.5 GHz indoor and outdoor access points, we have been seeing extraordinary results in more than 20 OnGo trials across different verticals that are ready for initial commercial deployment and range from connectivity to automation use cases.”

Arris said that European operator Eltrona is the latest cable company to deploy its Remote Pay distributed architecture solution to deliver DOCSIS 3.1-powered 1-gig broadband service in Luxembourg.

Eltrona is using the Arris E6000 Gen 2 converged cable access platform, along with E6000N R-PHY, which provides both the CCAP core and R-PHY device. In this approach, which is defined in the CableLabs Modular Headend Architecture, the PHY layer is moved from the CCAP into a node or remote shelf, but the MAC processing, provisioning and monitoring functions remain in the headend.

Related: Arris Touts Euro Customer ‘Wins’ at IBC

Also being deployed: Arris Touchstone TG3443 Cable Voice Gatgeways, which include 4x4 802.11ac dual band radios.

“Our focus for the remainder of the year continues to be on expanding our E6000 footprint,” declared Arris CEO Bruce McClelland during Arris’ second-quarter earnings call in August.

“With its market-leading density and throughput, coupled with its flexibility to support DOCSIS3.0, DOCSIS3.1, video and Remote PHY, [the E6000] continues to provide the best value for cable operators,” McClelland added. “And you can watch for a new DOCSIS3.1 launch announcement from a major international customer over the next few weeks that leverages our full Network & Cloud portfolio, as well as CPE products.”

Arris is using the ongoing IBC Conference in Amsterdam to announce a flurry of deals with European operators.

In Germany, the vendor’s E6000 Gen 2 converged edge router is being used by Liberty Global to launch DOCSIS 3.1 services.

Sky Italia, meanwhile, will upgrade its consumer set-tops to hybrid models from Arris to comply with new European Commission energy efficiency regulations. The Arris devices also add HEVC encoding and 802.11ac Wi-Fi capabilities.

In Denmark, Stofa is using Arris vManager is it looks to accelerate its deployment of gigabit-speed services. The product allows Stofa to automate the provisioning of new nodes on its network, securing, managing and configuring the devices with accuracy and speed.

And in the UK, Freesat selected Arris to develop its first subscription-free, 4K HDR video devices. The deal represents the first line of Arris products for the UK retail channel. It will also result in the first KreaTV device for DVB-S2. The devices will be available in UK retail outlets in the beginning of next year.

"We're gaining steady momentum in the international market by responding quickly to the evolving needs of our service provider customers and consumers around the world," said Steve McCaffery, president and managing director, international business operations group for Arris, in a statement. "Our customers appreciate the diversity of solutions that we offer, and our latest design wins attest to our leadership and expertise in helping them deliver tomorrow's entertainment and broadband experiences."

IBC 2018 kicked off Thursday. 

Ruckus Networks said today that it has been given FCC certification for its entire portfolio of “OpenG”-branded access points designed to work in the 3.5 Ghz Citizens Broadband Radio Service (CBRS) spectrum.

Having one of the telecom industry’s major vendors certified is a major step in the broader plan to have CBRS commercial deployments achieved by the end of the year. Earlier today, Federated Wireless said that it has asked the FCC for permission to move forward with commercial CBRS deployments as soon as October, the company announced.

Cable and wireless operators are exploring opportunities for the Citizens Broadband Radio Service Device band, a 150 MHz-wide portion of largely underused spectrum existing between 3.55 GHz and 3.7 GHz. CBRS will ultimately be used for private LTE networks such as airports and industrial campuses.

“This major milestone is one of the final stages before CBRS commercial deployments are made possible,” said Ian Whiting, president of Ruckus Networks, in a statement. “As a leading network provider, we are enabling organizations to deploy and manage a private LTE network, as easily as deploying a Wi-Fi network. Our OpenG LTE portfolio enables customers across a variety of different verticals to take advantage of this spectrum.”

Related: Federated Wireless Files with FCC to Start Deploying CBRS in October

Arris-owned Ruckus also announced that it has partnered with multi-family broadband provider Pavlov Media to trial CBRS 3.5 GHz LTE access points in Champaign-Urbana, Illinois.

Overall, Ruckus said it has conduced more than 20 CBRS trials with operators and enterprises, and it has another 30-plus trials pending. 

Ruckus Networks has announced the promotion of Bart Giordano to senior VP of worldwide sales.

Giordano has served as a sales executive for Ruckus since August 2015, through the purchase of the company by Brocade, as well was the subsequent acquisition of by current owner Arris.

Related: New Ruckus Networks Chief Plans to Stay the Course

He’s replacing Ian Whiting, who was promoted to the Ruckus president position in June, after the departure of Dan Rabinovitsj, who is now in a VP-level position at Facebook.

In Ruckus’ top sales job, Giordano will report to Whiting and oversee revenue, gross margin and all aspects of the company’s go-to-market activities.

“Since joining Ruckus Networks three years ago, Bart Giordano has built a top-notch global sales team,” said Whiting, in a statement. “Bart’s been responsible for growing revenue and market share through strategic partners and verticals, and his team has secured major design wins with Google, Facebook, IBM, and Lenovo. We look forward to the continued opportunities that Bart and his team will bring to our business and our partners.”

Arris credits Giordano with establishing the cloud services practice for Ruckus’ software-as-a-service portfolio. During the first half of 2018, Ruckus Cloud Wi-Fi has been one fo the company’s fastest growing products, expanding internationally.

“Moving ahead, I look forward to leading a world-class organization to sell our industry-leading products and services alongside our channel partners. We’ll continue our focus to expand core vertical segments and deliver solutions that result in positive business outcomes for our customers,’ Giordano added. 

Ongoing global shortages of electronic components, including multi-layer ceramic chip capacitors, are getting worse, and relief is not expected until at least the end of 2018.

That is the conclusion of reports issued recently by Morgan Stanley and Stifel, which are tracking a supply problem that has impacted the ability of vendors including Arris to deliver electronic components including gateways and modems.

“Lead times remain elevated across a number of components, including capacitors, resistors, memory and certain discretes, according to our analysis of distribution data,” Stifel reported in a recent update. “We continue to see signs of double ordering as customers scramble for parts. The multi-layer ceramic capacitor (MLCC) shortage is the most severe, with many parts seeing order-rescheduling requests from customers waiting on MLCCs or other parts.”

Parts suppliers are currently in the process of adding additional production capacity. But these moves won’t impact the market until at least the end of the year, the reports say.

Related: Arris Hit Hard By Shortages of Capacitors, DRAM

Supply in particular for MLCCs—staple components of devices including modems and smart phones—is being impacted by surging demand in the automotive, IoT and industrial markets, the investment banks say.

In June, Arris issued a note to operator clients warning them to expect delays and price increases on certain products. This resulted in some clients shifting orders for items including DOCSIS 3.1 modems to other suppliers.

“Most companies like us are in an environment where trying to secure supply is on a week-to-week basis and prices fluctuate pretty significantly,” Arris CEO Bruce McClelland told investment analysts during his company’s second quarter earnings call.

“We're not in a position we can absorb those costs. And so, we've been pretty upfront and open with customers on what the price increases are,” McClelland added.

As surging demand makes the procurement process for electronics more challenging, there is also the issue of tariffs that is impacting the market.

“Of particular concern to Nokia are the recent tariffs imposed on trade with China, which specifically target a wide range of components that are critical to 5G,” Nokia wrote in an FCC filing last week. “Unless exemptions are provided for these products, these latest duties threaten to raise the cost of 5G infrastructure in the U.S. by hundreds of millions of dollars. This is an important context that further emphasizes the need for the Commission to lower barriers to deployment where it can.”

Arris announced that veteran IT executive Karen Renner will be its new chief information officer, replacing Phil Baldock, who quietly left the company last month to join POS terminal technology vendor Verifone.

Renner arrives from global defense contractor Thales, where she served as North American CIO since May 2017. Before that, she held CIO positions at aluminum producer Novelis from 2010-2016, and at General Electronic from 2005-2010.

She’ll report directly to Arris CEO Bruce McClelland, working out of Arris’ Suwanee, Georgia headquarters.

"Karen Renner is a firm believer in building the culture, capacity, and capability of the IT team to take full advantage of digital opportunities that help drive business results," McClelland said in a statement. “Arris will look to Karen to strengthen our IT program in pursuit of our next stage of growth.”

Added Renner: ”What drew me to Arris is its focus on transforming the way people connect in our digital world. I look forward to refining that focus through our IT program as part of the Arris executive leadership team.”

Baldock joined Arris in 2016 amid the Pace acquisition. 

Ruckus Networks announced that it is providing its virtual SmartZone controllers and certified indoor/outdoor Wi-Fi access points in the expansion of a Facebook-led partner program aimed at building public Wi-Fi across Africa, India, and Indonesia.

The partner program is part of an expansion of Facebook’s Express Wi-Fi initiative, which is seeks to connect more individuals across the globe to the internet. Under Express Wi-Fi, local business owners install Wi-Fi hotspots, with high-speed internet services provided by local ISPs, mobile network operators and other Facebook broadband service partners.

The new vendor-focused partner programd within Express Wi-Fi not only initially includes Arris’ Ruckus Wireless unit, but also Arista, Cambium Networks--access point manufactures are being brought in to build Express Wi-Fi devices.

"We are committed to providing connectivity to people in the most remote areas of the world," said Ian Whiting, president of Ruckus Networks, in a statement. "We are excited to be a partner in Facebook's Express Wi-Fi Certified program, which is another important step in bridging the digital divide, giving individuals access to high-performance Wi-Fi networks. Ruckus strives to connect the unconnected, and we look forward to an ongoing partnership with Facebook.”

Related: New Ruckus Networks Chief Plans to Stay the Course

The Ruckus products featured in the Express Wi-Fi deployment include the company’s adaptive antenna BeamFlex technology. The patented technique aims to increase connection quality and range, delivering better voice and data communication and significantly improving power efficiency.

"Express Wi-Fi is part of Facebook's initiative to help bring more people online globally," said Guy Mordecai, Facebook’s product lead for Express Wi-Fi. "We're excited to launch the Express Wi-Fi Certified program and have Ruckus as one of our initial partners. With this program, we hope to expand the Express Wi-Fi ecosystem and work with partners like Ruckus to help bring affordable Wi-Fi solutions to emerging markets."

Arris has announced the first device to receive the Wi-Fi Alliance’s EasyMesh certification.

The VAP4641 Wi-Fi extender supports the open standard that enables interoperability with any other Wi-Fi device certified under the open standard. Under current not-so-interoperable life without wide availability of EasyMesh modems and extenders, users are compelled to purchase compatible extenders from the same manufacturer that provided their modem.

Related: Wi-Fi Alliance Takes Aim at Whole-Home Networking 

The wall-plug mounted VAP4641, part of Arris’ HomeAssure family of Wi-Fi products, features 4x4 antennas and 802.11ac Wi-Fi capability.

“In the case of Arris HomeAssure, the Wi-Fi Controller sits on top of the EasyMesh protocol," said Arris CPE division chief Charlie Cheevers, speaking to Wi-Fi NOW. "The EasyMesh MAP creates the network topology and sees everything, but it is the Wi-Fi controller algorithm above that adds all of the critical intelligence, including client steering, band steering, changing channels, and more.” 

“Companies like Google and in particular Apple believe their smartphone should do all it can do make the connection experience as good as possible for the consumer. Now with EasyMesh in the home, the EasyMesh controller will know know more about the overall Wi-Fi topology than the Apple phone. That also means that ideally, Apple phones should obey messages sent from EasyMesh networks,” Cheevers added.

"Our home Wi-Fi vision is to provide ubiquitous coverage from a single network," said Larry Robinson, president, customer premises equipment at Arris, in a statement. "We're proud to continue our contributions to the Wi-Fi Alliance's multi-AP specifications and Wi-Fi EasyMesh program to help service providers bring new innovations like the VAP4641 Wireless Extender to consumers. We're making it easier for consumers to install, configure and manage their home network, while delivering Gigabit speeds."

Arris has announced a broad-reaching deal with Australia’s NBN Co. to provide Full Duplex-capable, DOCSIS 3.1-powered broadband services to 3 million of the cable operator’s subscribers by 2020.

Under the agreement, Arris will supply its E6000 Gen 2 CCAP platform and its OM4100 OptiMax 4x4 segmentable nodes, as well last its CM8200B DOCSIS 3.1 modems.

Related: Arris to Be ‘More Selective’ With Its Set-Top Box Business

Arris will also provide its ServAssure NXT network management platform, as well as the resources of its global software and devices services team.

“They’re able to add bandwidth and pay 65% - 75% of what they paid before,” noted Dan Whalen, president of Arris’ Network & Cloud division, in an interview with Multichannel News. “They’re able to do more using less power and less space.”

Whalen noted the preponderance of fiber competition in the Australian region. The ability for NBN to provide the gigabit symmetrical services enabled by Full Duplex DOCSIS will be a significant competitive boost for the operator, Whalen said.

He compared the Down Under market to Latin America and the Caribbean, noting a shortage of technologists in the region familiar with next-generation HFC network. NBC, Whalen said.

“There’s a lot of fiber-to-the-curb and fiber-to-the-home, but but not a lot of people to support DOCSIS," he said.

This has benefited Arris’ growing Global Services unit, Whalen added, which is being called upon by NBN to help manage the network.

“They’re looking for someone to step in and manage the end-to-end operation of their network,” he explained.

Related: Arris Hit Hard By Shortages of Capacitors, DRAM

At least on the CPE side, Arris has been troubled of late, as all companies working in the electronics business, by shortages of components, including memory chips and capacitors.

SNL Kagan analyst Jeff Heynen said he believes the impact of these component shortages should be short-lived. “Though it will have an impact on how quickly DOCSIS 3.1 devices can be deployed,” he added in a direct tweet to Multichannel.

For his part, Whalen downplayed the effect of the shortages in Arris’ Australian DOCSIS 3.1 deployment.

“I feel pretty comfortable that we have workarounds,” he said. 

Arris continues to struggle with the global shortages of key electronic components, which it said was the principal cause of a 13% drop in CPE sales in the second quarter.

“Most companies like us are in an environment where trying to secure supply is on a week-to-week basis and prices fluctuate pretty significantly,” Arris CEO Bruce McClelland told investment analysts during the company’s second quarter earnings call last week.

“We're not in a position we can absorb those costs. And so, we've been pretty upfront and open with customers on what the price increases are,” McClelland added.

Related: Arris to Be ‘More Selective’ With Its Set-Top Box Business

Arris conceded in March that it has been among the suppliers affected by spiking global demand for dynamic random access memory (DRAM) chips. During its Q2 call, the company also conceded that the strained supply of multilayer ceramic capacitors (MLCC) is also taking a toll on business.

MLCCs are used in a wide range of electronic devices—everything from modems and gateways to smart phones to pay TV set-tops. In June, the National Cable TV Cooperative issued a warning to its operator constituents to expect delays on product shipments. And one Midwestern operator has admitted to switching its modem supplier from Arris to Hsinchu, Taiwan-based supplier Hitron.

For his part, McClelland said he visited Asia himself in July to meet with key parts suppliers.

“It's a reality of the entire market at this stage and we'll stay close both on the supply side and on the customer side to be as optimized as we can around the cost of production,” he said.

Related: Arris to Unload Taiwan-Based Set-Top, Modem Factory

Arris saw revenue in its CPE division decline from $1.15 billion in the second quarter of 2017 to $1 billion. Broadband device revenue declined 17.1% year over year to $405 million, while video CPE revenue declined 7.6% to $603 million.

In addition to raising prices to account for rising components costs, Arris said it was shifting focus to profitability and eliminating “low-contribution customer engagements.”

For Arris, and a broad array of other similarly situated companies rooted in electronics manufacturing, the shortages might not ebb soon.

With sectors like the automotive industry using exponentially more MLCCs these days, the leading global manufacturer of these parts, TTI, released a memo in April that indicated a somewhat intractable problem.

“We have reached a point that some manufacturers are concentrating their future activity on smaller case sizes and less commoditized technologies of the market like high voltage and flexible termination, with a particular focus on high-reliability end-markets such as automotive and medical,” the company said. “So while manufacturers are adding capacity, it’s generally not for commercial commodity parts—making this market condition even more difficult to navigate.”

Ian Whiting doesn’t expect to rock the boat when he officially takes the helm of Ruckus Networks on July 1.

Whiting is stepping in then as president of Arris’s Enterprise Networks unit, which includes the wireless/mobile-focused Ruckus, said he intends to move ahead with a strategy that he forged with Dan Rabinovitsj, the person he is succeeding in that role.

RELATED: Ian Whiting Tapped to Head Up Ruckus Networks

“I don’t anticipate needing to make any changes to strategy,” he said, noting that he, who has been serving as Ruckus’s chief strategy officer, worked closely with Rabinovitsj, on the integration following Arris’s acquisition of Ruckus late last year.

“I think we share the same view of where we fit into the industry,” Whiting said. “That’s the plan – to stick with it.”

He said the general focus is for Ruckus to continue to focus on its key verticals, expand on the service provider market, and broaden the international scope of its business.

RELATED: Arris Closes Ruckus Wireless Acquisition

Whiting will be taking over as the relatively new Enterprise unit of Arris is performing well in the early going.

RELATED: Ruckus Gears Up for the CBRS Band

And part of the plan going forward is to have Ruckus Networks play a more prominent role in the growing Internet of Things market, edge computing, and the opportunities ahead for CBRS (Citizens Broadband Radio Service), an emerging shared swath of spectrum that will play a big role in new private LTE networks and factor into cable’s mobile and wireless tech and service strategies.

IoT presents the nearer-term opportunity, as Ruckus has already begun to ship IoT gateway products.

The CBRS sector is in the early adopter phase as the FCC and other agencies iron out rules for the spectrum, but it’s also “building quite a head of steam,” he said.

RELATED: Cable’s Latest, Greatest Wireless Opportunity

Arris, he added, has been required to put more resources into that as it responds to demand from customers that are pushing ahead on trials and proof-on-concept deployments, including some early, paid opportunities. CBRS is also enabling Ruckus to enter new markets, Whiting said.

Whiting said Ruckus is also poised to jump on the market for 802.11ax WiFi, adding that upgrades to a new WiFi standard historically given the company a significant lift as customers deploy new access points and switching gear (in addition to Ruckus, Arris also acquired an ICX Switch business via its deal with Broadcom) to handle denser, higher-capacity networks.

Although much of the mobile and wireless discussion tends to focus on the U.S. and Western Europe, Whiting said Ruckus is also keeping tabs on opportunities in emerging markets, such as India, the Philippines, and Africa, where investments are being made in basic infrastructure. 

There’s a big move at the top of Ruckus Networks arriving roughly six months after Arris sealed its acquisition of the wireless-focused company.

RELATED: Arris Closes Ruckus Wireless Acquisition

Arris announced Thursday (June 14) that Ian Whiting, the chief commercial officer of Ruckus Networks, has been named president of Arris’s Enterprise Networks unit, which includes Ruckus Networks.

Whiting, who reports to Arris CEO Bruce McClelland, will succeed Dan Rabinovitsj, who is  leaving to pursue a new opportunity in the technology arena, Arris said.

Whiting’s new role at Ruckus Networks takes effect on July 1, 2018.

Rabinovitsj, who joined Arris following the acquisition, is departing after the successful integration” of Ruckus Networks and will work with Whiting to ensure a smooth transition, the company said.

In his previous role at Ruckus, Whiting has been playing a leading role in vertical markets such as education, hospitality, MDUs, government, large public venues, retail and service providers.

Arris closed its acquisition of the Ruckus Wireless and ICX Switch business from Broadcom in December 2017.

The acquisition has been a positive one so far for Arris. Its new Enterprise business generated a higher than expected $170 million in Q1 2018.

The deal is also positioning Arris to become a big player in the emerging market for shared CBRS spectrum, which is expected to play a key role in the cable industry’s future mobile and wireless strategies.

RELATED: Cable’s Latest, Greatest Wireless Opportunity

Arris’s Q1 results were a mixed bag as solid growth in its Network & Cloud and Enterprise segments arrived alongside a sales slowdown for both video and broadband consumer premises equipment (CPE).

Arris Q1 CPE sales were $875 million ($323 million for broadband devices and $552 million for video devices), down from $1.05 billion ($424 million for broadband devices and $631 million for video devices) in the year-ago period.

The decline in video set-top sales reflected the general softness of the pay market, while direct revenue contribution was impacted by both lower sales volumes and ongoing memory cost issues.

With that backdrop, Arris has already said it would be more selective with its set-top business and put more emphasis on profitability.

RELATED: Arris to Be ‘More Selective’ With Its Set-Top Box Business

Arris is also working with customers on pricing adjustments that reflect increased memory costs, but those benefits are expected to emerge in the second half of the year, Bruce McClelland, Arris’s CEO, said Tuesday on the earnings call.

The drop in broadband CPE sales was attributed to typical “seasonality” in Arris’s business alongside reduced purchases of DOCSIS 3.0 modems and gateways in anticipation of accelerating investments in DOCSIS 3.1 devices, McClelland said

He called that situation a “short-term blip,” noting that Arris will probably exit 2018 with 30% to 40% of cable broadband CPE being DOCSIS 3.1 devices, up from roughly 10% by the end of 2017.

“We expect momentum to return again this quarter as several new DOCSIS 3.1 products ramped up volume and we continue to anticipate a robust broadband CPE upgrade cycle tied to the customer migration to Gigabit services as we're seeing already in our Network & Cloud business,” he explained.

He said Arris expects CPE revenues to return to the “billion dollar range” in the second quarter.

However, “pressure on product cost has not abated, with memory prices continuing to increase and lead times and availability of other components becoming more challenging,” McClelland said.

On the network side, Arris saw strong sales for its E6000 converged cable access platform as MSOs bought into Gen 2 line cards that more than double capacity. Q1 revenues for Arris's Network & Cloud segment were $536.3 million, up 25% year-over-year. 

“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,” McClelland said.

Arris’s new Enterprise business, driven by its acquisition of Ruckus Wireless, came in at a higher than expected $170 million in the quarter.

McClelland said Ruckus Networks has more than 20 technology and operational trials using the CBRS 3.5 GHz band, a slice of shared spectrum that's expected to factor heavily into cable’s future mobile and wireless strategies.

RELATED: Comcast Wants to Test CBRS in Philly

Another bright spot was international sales, which grew 30% year-on-year, a contributed 43% to Arris’s overall revenue in Q1.

Overall Q1 sales were $1.57 billion, down from $1.48 billion in the year-ago quarter and below Wall Street consensus of $1.6 billion, but in line with company guidance. 

Arris ended the quarter with $543 million of cash resources, up from $511 million at the end of 2017.

Arris expects Q2 sales in the range of $1.76 billion to $1.81 billion, reflecting an expected rise in CPE sales, and full-year 2018 revenues of $7.1 billion to $7.3 billion. 

Raymond James analyst Simon Leopold reiterated his “Strong Buy” on Arris stock and a target price of $37 per share. 

Following its recent acquisition of Ruckus Wireless, a move that enhanced Arris's focus on the wireless and enterprise sectors, Arris will continue to seek out deals that can broaden its addressable market.

That means it won’t be going off on any wild tangents but rather stick to its new knitting, which is all about providing connectivity – wired and wireless – to consumers and businesses.

With regard to future M&A, “We’re looking for opportunities that are near-adjacencies to what we’ve in today, things that logically build on top of the businesses that we’re in, so it’s easier to get synergies,” Arris CEO Bruce McClelland said Wednesday on the company’s investor day, held in New York. “One-plus-one equals more than two…We’re looking at things that are accretive to the business going forward.”

“I really believe that M&A is a core part of what we need to do,” Dave Potts, Arris’s EVP and CTO, added later. “I think it is a place that we will want to continue to try to put dollars to work.”

McClelland didn’t identify any specific companies on Arris’s M&A radar, but did spell out some areas that would qualify to be on it, including the enterprise sector, security, as well as opportunities to bolster its traditional infrastructure business, including wireless, transport and optical transmission.

But a primary focus of Arris’s capital strategy will be in R&D, which will grow to $700 million this year, thanks in part to the Ruckus acquisition. R&D is “really the fuel for the business…that’s the best possible use of cash in the business,” McClelland said.

Arris’s investor day spanned the scope of its business. Here’s a snapshot of some specific areas that were covered:

Waxing Wireless  

Starting with what Arris has with the new Ruckus Networks unit on board, the company plans to take advantage of a wireless LAN arena with a total addressable market of $15 to $17 billion and one that is growing at 8% to 10% a year.

Of note, the company is anticipating a transition to 802.11ax that will that will also create push to new edge campus switching technologies, and drive “secular upgrades” into product areas that Ruckus has covered, Dan Rabinovitsj, president of Arris Enterprise Networks, said.

Arris, through Ruckus Networks, is also getting positioned for the needs of the enterprise Internet of Things market, as well as opportunities that will come way of CBRS, a swath of shared spectrum in the 3.5GHz band that will be used by incumbents as well as for unlicensed and lightly licensed use by others, including cable operators.

RELATED: Ruckus Gears Up for the CBRS Band

For enterprise IoT, Ruckus plan centers on consolidating the physical layer access networks into a unified IoT network using access points with IoT modules that can support a fragmented group of standards and technologies, including Bluetooth Low Energy, Zigbee and LoRA.

“This fragmentation has been a huge problem,” Rabinovitsj said. “We’re PHY-agnostic…we have zero religion about this.”

He said Apple and others are remedying this issue in the consumer sphere by building their own technology silos. But that approach won’t fly with enterprise customers, he said.

Steve Martin, Ruckus’s CTO, expanded on the CBRS initiative at the company, noting that the shared spectrum approach in the 3.5GHz band represents a “breakthrough,” and a significant opportunity.

“Spectrum is like beachfront property…they’re not making any more of it,” he said.

RELATED: Comcast Wants to Test CBRS in Philly

The CBRS opportunity, which will use spectrum allocation servers to keep users in that band from interfering with each other, has drawn interest from a wide range of segments, including cable operators that view it as a way to augment mobile service that are leaning on MVNO agreements.

RELATED: CBRS Spectrum to Open Windows of Opportunity for Cable Ops

“The trials are getting bigger and more sophisticated,” he added, noting the largest one spans some 90 nodes covering both indoor and outdoor locations across multiple city blocks.

“This stuff is real,” he said. “Frankly our pipeline is limited by our ability to handle the trial requests at this point, so we're being very opportunistic about it.”

The Drive Toward Distributed Access

A portion of Arris’s discussion about what’s going on in the wired part of the network centered on cable’s push toward distributed access architectures (DAA), which push functions and electronics further out on the network and into the node.

RELATED: Cable Industry Preps Push to Next-Gen Access Networks, Virtualization

As a sign of momentum there, Arris announced today that Danish service provider Stofa has launched what’s being billed as Europe’s first Gigabit internet service based on the remote PHY spec. To enable it Stofa is using Arris’s flagship CCAP, the E6000, with a software upgrade that pairs with the vendor’s NC2000 R-PHY optical nodes.

The move to DAA also gets cable operators into the world of digital optics, which opens to door to new competitors that want to jump into the investment cycle to come.

“Who knew that HFC was cool again?” McClelland joked. “It will be competitive. There are lots of people who would like a piece of that, and it’s going to grow over time. I would rather be where we are than where everybody else is." 

On Arris’s consumer premises equipment (CPE) side of the house, share has been gradually shifting more heavily toward broadband devices – the currently mix is still dominated by video (60%) as broadband (40%) continues to close the gap.

Larry Robinson, president of Arris's CPE business, reiterated that, for set-tops, the company will try to grow share selectively with an emphasis on margin and a continued pursuit of cost-reduction programs as rising memory costs remain an issue.

RELATED: Arris to Be ‘More Selective’ With Its Set-Top Box Business

There’s a “maniacal focus on streamlining business operations,” Robinson said.

As for trends, Robinson said integration of 4K and HDR technologies are part of the evolution, as well as voice-based navigation, and whole-home WiFi capabilities. There’s also an opportunity emerging to build far-field microphones into traditional CPE products as ambient voice capabilities become a more important component of smart home solutions.

“There’s even talk of 8K,” driving a number of new use cases for video, Robinson said. However, 8K currently is “off the charts in terms of price.”

On the broadband side, about 10% of Arris’s CPE for cable operators re DOCSIS 3.1, and Arris sees that rising to the 75% to 80% range in 2021.