Motorola has emerged as a second supplier of cable-voice modems to Comcast, stealing share away from incumbent Arris, according to a research note from Wall Street analyst firm Collins Stewart.
Collins Stewart analyst John Vinh said “checks indicate” that Comcast has awarded Motorola an order for DOCSIS 2.0 embedded multimedia terminal adapters (eMTAs) “in the magnitude of 50-100K units with anticipated shipments beginning in Q1'09.”
Motorola and Arris declined to comment on the report. Comcast did not provide immediate confirmation or comment.
Arris has previously warned investors that the company does not anticipate being Comcast’s sole supplier. However, Vinh wrote, “we do not believe share loss to a second source provider is currently reflected” in current Wall Street earnings estimates.
As such, Collins Stewart is cutting its revenue estimates for Arris for the first two quarters of 2009, dropping its Q1 estimate to $278 million from $282 million and its Q2 estimate to $274 million from $277 million. For the calendar year 2009, the firm is lowering revenue projections to $1.13 billion from $1.15 billion previously and its 2010 estimate to $1.21 billion compared with $1.22 billion. Collins Stewart maintains its “Hold” rating on Arris.
Arris shares were off 30 cents, or 4%, to $7.45 a share Tuesday afternoon while Motorola shares trimmed 13 cents, or 3%, to $4.37.
“We anticipate that [Comcast] will likely take a more conservative approach toward transitioning to a 2nd-source vendor, given the technical issues Comcast encountered previously with the ramp of Thomson,” Vinh wrote.
Paris-based Thomson announced in July 2007 that it had signed a purchasing agreement with Comcast for its DHG535 eMTA.
According to Vinh, technical field failures associated with Thomson eMTAs resulted in their recall. Comcast subsequently returned to Arris as a sole-source provider.
Thomson issued a statement saying "the analyst report is incorrect in its assumptions about Thomson's eMTA supplier relationship with the MSO" and said "the idea of a recall is inaccurate, posing serious questions as to how the analyst is collecting/confirming this data."
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