Upgrades Boost MSO Vendors

Cable operators' deployment of advanced services is
trickling down to their vendors' bottom lines.

A handful of cable-technology companies released earnings
reports last week, and by and large, all of them reported record periods of revenue and
earnings, giving credence to claims by cable operators that deployment of advanced
services is moving forward.

About nine cable-tech companies reported earnings last
week, and all but one -- Com21 Inc. -- showed decent increases in revenue and earnings.

That growth also was reflected in their stock prices, which
rose an average of 1.5 percent -- except for Antec Corp., which saw its share price fall
more than 20 percent last Wednesday after missing its earnings forecast by a few cents.

Harmonic Inc. saw the biggest leap -- $6.12 per share, to
$73.75 -- the day after its earnings release. The vendor's already high-flying stock
came back a bit the next day (Oct. 21), to $72.81.

"If you look at the results, the area of consistent
strength is in the transmission business -- the [hybrid fiber-coaxial]
infrastructure," Warburg Dillon Read LLC analyst Nikos Theodosopoulos said.
"They had good revenue growth, good orders growth."

Theodosopoulos added that cable-modem companies like
General Instrument Corp. and Tellabs Operations Inc., which makes telecommunications
equipment and routers, are also starting to see significant growth in sales and orders of
those products.

GI reported earnings of $48.9 million, up 24 percent for
the quarter, on revenue of $544 million, up 5 percent.

During the period, GI said it shipped 60,000
"SURFboard" DOCSIS (Data Over Cable Service Interface Specification) modems,
doubling the total shipped in the second quarter. The company said it shipped 800,000
interactive digital set-top terminals during the quarter, an increase of more than 35
percent over the same period in 1998. In addition, it also began volume shipments of its
more advanced "DCT-5000+" terminals during the quarter.

GI's stock was up 62 cents per share on the day of the
earnings announcement, closing at $49.31 Oct. 21.

Tellabs reported its best quarter ever, with sales up 38
percent to $594.5 million and earnings up 73.4 percent to $144 million.

Theodosopoulos pointed to Tellabs'
"Cablespan" universal-telephony-distribution product, which reported sales of
$28 million for the quarter, up from $17 million in the previous year.

Tellabs shares rose $2 each after its earnings were
released, closing at $61.06 Oct. 21. "The [cable] networks are being upgraded and new
services are being rolled out," Theodosopoulos said.

Harmonic -- a maker of fiber optic systems based in
Sunnyvale, Calif. -- led the pack by reversing its losses from the previous quarter,
posting a profit of $7.7 million, or 23 cents per share, compared with a loss of 4 cents
per share in the prior year.

The company doubled its revenue in the period to $52.6
million. Harmonic attributed the revenue rise to increased shipments of its fiber optic
equipment to AT&T Broadband & Internet Services. Harmonic is participating in an
AT&T Broadband cable-telephony trial in Salt Lake City.

SoundView Technology Group analyst Kevin Slocum said that
although AT&T Broadband was a big boost to Harmonic, it wasn't the only factor in
the company's increased quarterly results.

"Obviously, AT&T was a huge factor in their
business, but if you stripped out AT&T, the business grew 68 percent
year-over-year," Slocum said. "If you look at it further, the international
business grew 30 percent. I think the significant activity suggests that the upgrade of
these networks is broadening out. I continue to think [Harmonic is] well-positioned."

C-COR.net Corp., another participant in the Salt Lake City
trial, also saw a hefty revenue increase in the first quarter of its 2000 fiscal year,
which ended Sept. 24 -- 86 percent to $64.5 million. The company also rebounded from a net
loss of $1.1 million a year ago, reporting a profit of $3.1 million in the most recent

At Antec, earnings rose 116 percent to $10.8 million, or 27
cents per share. Revenue at the company -- which designs and engineers HFC networks --
increased 58 percent to $237.2 million.

At Amphenol Corp. -- which designs and manufactures
electrical, electronic and fiber optic connectors; coaxial and flat-ribbon cable; and
interconnect systems for the cable industry -- earnings rose 41 percent to $11.6 million,
or 65 cents per share. Revenue was up 12 percent in the period, to $256.9 million.

CommScope Inc. -- a GI spinoff that makes high-bandwidth
cables for video, data, and other telecommunications applications -- showed earnings of
$19.7 million, or 38 cents per share, up 73 percent. Revenue rose 35 percent to $202.3
million. The company said cable-TV and video sales were $148.6 million during the period,
a 24 percent increase.

Cable-modem chip-maker Broadcom Corp. increased net
earnings more than fivefold, from $5.2 million to $27.2 million. Revenue at the company
was $138.4 million.

Com21 reported a net loss of $2.5 million, or 12 cents per
share, even with last year's deficit. However, revenue shot up 85 percent to $25.3
million in the quarter.

The company added that it sold 80,000 cable modems in the
third quarter -- a 239 percent increase -- and it shipped 91 headend units.