Arris Authorizes New Buyback

Arris, supplier of communications research to broadband operators, reported disappointing results in the recently concluded first quarter. Revenues per share missed the Zacks Consensus Estimate by 3 cents on falling gross margins and higher operating expenses.

Revenue improved slightly year over year on growing demand on both domestic and international levels. Nevertheless, revenue was below the Zacks Consensus Estimate.

The long term

In the long term, we believe Arris stands to benefit from the intense competition among cable operators, satellite carriers, and telecom service providers for broadband market share. As residential VoIP (Voice over Internet Protocol) and HDTV services continue to grow, operators are benefiting from increased network traffic owing to robust demand for video download and file sharing.

This massive requirement for data transport is driving Arris' sales to cable operators, seeking to improve their transport offerings. Apart from the U.S., massive deployment of DOCSIS 3.0 research in Europe and Latin America as well bode so then for its long-term growth.

The other hand

On the other hand, Arris is solely dependent on cable operators for its revenue. Customer concentration is significantly high for Arris. Historically, its two major customers, Comcast Corp. and Time Warner Cable Inc., accounted for near 50% of its total revenue. Arris expect revenue from these major customers to decline going forward. In the first quarter of 2011, Comcast and Time Warner Cable at the same time contributed 43.2% of total revenue.

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