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CommScope Lays Out Plan to Spin Off Struggling Set-top and Gateway Biz

A legacy Arris set-top box
(Image credit: CommScope)

CommScope is moving forward with the broad-sweeping reorganization plan announced during its fourth quarter earnings report, announcing this week that it will spin off its Home Networks division, which makes pay TV set tops, routers and modems.

The Hickory, N.C.-based technology company expects the spinoff to be completed by the end of the first quarter of 2022. Joe Chow, who has led the Home Networks segment since late 2019 under a senior VP title, will be the CEO of the new publicly traded company. 

“We looked at the differences between Home Networks and the rest of our segments, and those differences were pretty stark,” said CommScope CEO Jeff Treadway, speaking during a conference call with investor analysts on Thursday. “You’re looking at 10%-plus margins vs. much higher margins on the other side. And in terms of manufacturing volume, you have tens of millions of units vs. hundreds of thousands.”

Treadway also noted that manufacturing is done in-house for most of CommScope’s other divisions, while Home Networks releases on contract manufacturing. 

Notably, Home Networks—which sells modems, gateways and pay TV set tops to both operator and retail channels—saw a 31% Q4 sales decline to $571 million. Cord-cutting continues to have an impact in the pay TV sales chain beyond the operator level. 

CommScope

(Image credit: CommScope)

Home Networks was one of the pieces brought into the CommScope fold with the acquisition of Arris, which was announced in October 2018 and completed in 2019.

Home Networks accounted for 28% of CommScope’s $8.4 billion in revenue in 2020. It was the company’s second biggest unit behind Broadband Networks. 

With the spinoff, CommScope will retain not only its Broadband Networks division, which supplies technology infrastructure to telecom operators all over the globe and saw sales increase by 17% to $789 million in the fourth quarter, but also its Venue and Campus Networks division, and its Outdoor Wireless Networks unit. 

Treadway described the plan as being in the “early innings,” and it could be interrupted by a variety of factors, a sale among them. 

The spinoff is the first major move under the company’s CommScope NEXT initiative, which Treadway described as a “comprehensive set of company-wide actions designed to take CommScope to the next level of profitability.”

Also included in that initiative will be a series of “cost reductions actions,” which will be announced at a later date.