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.”

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.”

Apps that deliver the pay TV experience on Roku boxes and other retail devices are poised to broaden, not replace the market for operator-supplied set-tops and gateways, Bruce McClelland, Arris’s CEO, said.

“I don’t think of it as an experiment as much as an augmentation to the offer they [MVPDs] have today,” McClelland said Wednesday at the Goldman Sachs Technology and Internet Conference in San Francisco. “We don’t see it as a replacement approach as much as an augmentation of what they do today.”

The question about the impact of those apps emerge soon after Comcast started to beta test an app for Roku devices, and will soon offer on Samsung smart TVs and will likely support on a broader range of retail platforms in the months to come.

RELATED: Roku, Comcast Kick Off Xfinity TV App Beta Trial

That trend is important to Arris, which now leads the set-top market following acquisitions of Motorola Home in 2013 and of U.K.-based company Pace plc last year.

Though the retail model for MVPDs will certainly grow, operators tell Arris that they “like controlling the technology in the home,” as it helps them differentiate their offer, predict how their services evolve, and enables them to keep tabs on the overall customer experience, said McClelland, who succeeded Robert Stanzione as CEO at Arris  last fall.

RELATED: Stepping Up to the Plate

But he doesn’t expect this gradual trend to alter the core fundamentals of a video CPE business that has been moving to gateway/client architectures that use Lightweight IP devices as well as more powerful boxes with storage and other advanced features. He also sees Arris well-positioned to benefit from “product refreshes” that occur with CPE for video and broadband.

McClelland was also asked about the logic of Arris’s recent warrants agreements with Charter Communications and Comcast.

While noting that such agreements are somewhat unusual, they are beneficial to both sides because they “align our interests” and help to ensure that Arris is investing in the right areas, he said.

RELATED: Charter, Arris Ink Warrant Agreement

“We felt like with acquisition completion of Pace last year that, given the concentration of spend, finding a way to incent our customers to …get comfortable with the level of spend with us was important,” McClelland said.

And they aren’t as unusual as he was letting on, as both Harmonic and Universal Electronics have similar deals in place with Comcast, which also took a small stake in Arris when Arris was pursuing its Motorola Home acquisition.

RELATED: Harmonic, Comcast Strike Warrant Agreement

McClelland also said Arris is ready to pivot as access architectures become more virtualized, disrupt the market, and open the door to new competition.

The challenge for Arris, he said, is to support a graceful migration to new approaches and to be “disruptive to our own business…if the technology takes us in that direction.”

Arris, a top supplier of broadband and video gear to the cable and telecom industries, said its board has appointed Bruce McClelland as the company’s new CEO, effective Sept. 1, 2016.

McClelland, who is also joining the Arris board, succeeds long-time company CEO Bob Stanzione, who has been appointed executive chairman of Arris. Stanzione will continue to serve as chairman of the board at Arris.

Stanzione will continue to serve as chairman of the board. In his new role, Stanzione will focus on strategic planning and customer engagement while also supporting McClelland in his new CEO role. Stanzione is the founding president and CEO of Arris Interactive, a joint venture of Nortel Networks and Antec that was created in 1995. Antec bought out Nortel’s position in the J.V. in 2000 and went forward with the Arris name. 

The shifts up top are coming into play about nine months after Arris salted away its $2.1 billion acquisition of U.K.-based Pace plc, cementing Arris’s position as the world’s largest maker of set-top boxes. Arris, again with Stanzione at the helm, began to add true scale, expand market share and broaden its international presence when it acquired Motorola Home in April 2013 for $2.35 billion.  

Arris said the appointment of McClelland followed a formal CEO succession process started in early 2016 by the board. The Arris board retained the firm of Spencer Stuart to assist with an "extensive search process."

Arris ultimately did not have to look very far. 

McClelland, currently president, network and cloud and global services, is a vet of Arris and the industry. He joined Arris in 1999 as vice president of engineering, and later being upped to roles that include group president for products and services and GM of Arris’s customer premises equipment division.  Prior to Arris, McClelland spent 11 years at Nortel Networks/Bell Northern Research (BNR), and sarted his career with BNR in Ottawa, Canada, where he was key to the development of Nortel's SS7 switching products. McClelland has a Bachelor of Electrical Engineering degree from the University of Saskatchewan.

McClelland has also been tied to the FCC’s pursuit of controversial new set-top box rules aimed at spurring a retail market for video devices that can support MVPD services. He served on the Downloadable Security Technology Advisory Committee (DSTAC), an FCC-appointed group that provided the Commission with multiple, potential paths toward a post-CableCARD world for cable operators and other types of MVPDs.

"Since its formation, ARRIS has grown from a small joint venture to a global leader in entertainment and communications technology," Bob Stanzione, said in a statement. "With integration efforts from the Pace acquisition substantially complete, now is the right time to transition the role of CEO to a new leader who will continue ARRIS's growth and success. Bruce has played an integral role in transforming the Company since he joined the ARRIS Interactive Joint Venture more than 16 years ago. He will provide leadership and strategic vision to keep ARRIS and our customers ahead of today's rapid pace of change and will ensure we remain at the forefront of tomorrow's connected world."

"It is often said that a company takes on the personality of the CEO, and ARRIS is a perfect example of this adage,” McClelland added. “Bob Stanzione's relentless focus on 'Customer First' has become the motto for the company," said Bruce McClelland. "His belief in the people of ARRIS and his tireless drive to innovate and to exceed customer expectation has led ARRIS to where it is today. Our 'on demand, always connected' society will continue to fuel exponential Internet traffic growth, and ARRIS is in a strong position to continue to grow and deliver results for our employees, shareholders and customers.  I am honored to have the opportunity to lead the ARRIS team at this exciting time in our history, and I look forward to continuing this tradition of commitment."

While Arris and Charter Communications are putting up $135 million to acquire ActiveVideo through a new joint venture, they intend to keep it on a relatively long leash and let the cloud video tech specialist operate relatively independently.

“It will run as a separate company with the two partners…and the idea is to keep the [ActiveVideo] team nimble and able to innovate,” Bruce McClelland (pictured), president of Arris’s network and cloud and global services division, said in an interview.

San Jose, Calif.-based ActiveVideo has about 100 employees.  “For the most part, the team will stay intact; at least that’s our hope, anyway,” McClelland said.  Arris and Charter have already said that Jeff Miller, ActiveVideo’s current CEO, will continue to lead the company.

McClelland said the acquisition is “pretty strategic for us,” noting that it will give Arris the opportunity to work more closely with what will be the second-largest North American cable operator in the wake of several pending transactions, including the Comcast-Time Warner Cable merger and Charter’s planned $10.4 billion acquisition of Bright House Networks.

But beyond that, McClelland said interest in acquiring ActiveVideo has increase as the company proved in recent years that its technology has matured and proved to be scalable at an enterprise level following deployments with MSOs such as Cablevision Systems, Liberty Global and, most recently, with Charter.

“They’ve kind of turned the corner,” McClellan said of ActiveVideo. “We expect to be able to scale that business and take the technology and deploy it more ubiquitously around the world.”

While ActiveVideo’s original claim to fame was the ability to refresh the experience on legacy, lower-end boxes by stitching the interface to the video and delivering it to QAM-based boxes in a single MPEG-based transport stream, their technology also plays well on newer IP-capable devices, such as Charter’s new Worldbox, McClelland said.

He said Arris is also eager to help MVPDs integrate OTT apps such as YouTube and Netflix to set-top boxes at a higher rate of speed using StreamCast, a new component for ActiveVideo’s flagship CloudTV platform.

Integrating those native clients, even on next-gen IP devices, is still not an easy task. “Using HTML browsers as a unifying technology is nice on paper, but it still presents a challenging implementation,” McClelland said. He knows that from experience, as Arris has successfully been able to weave Netflix and other OTT apps into its own set-top platform for operators such WideOpenWest. 

ActiveVideo’s virtualization engine to run OTT services and other apps in the cloud in tandem with a small software client app running on a set-top, Roku box, or even a smart TV “makes that integration effort much simpler,” he said.

Although ActiveVideo’s technology can help virtualize the functions of a set-top, Arris views it as “very complementary” to the company’s traditional set-top/CPE business.  “They are not mutually exclusive,” McClelland said.