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:
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.
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.
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.
“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.
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.
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.
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