Arris to Gain Strong CPE Foothold - Analyst Blog
March 28 2013 - 2:00PM
Zacks
Arris Group Inc.
(ARRS) is likely to become a formidable player in the video
infrastructure and customer premises equipments (CPE) for the cable
TV industry after its acquisition of the cable home business of
Motorola Mobility, a subsidiary of Google Inc.
(GOOG). Arris currently has a Zacks Rank #2 (Buy).
A recent report of Infonetics
Research Inc. stated that the combined Arris/Motorola constituted
45% of DOCSIS 3.0 CPE market share in 2012. Individually, Arris
commands 29% and Motorola Mobility commands 16% market share. This
figure is well above the second ranked Cisco System
Inc.’s (CSCO) 15% market share. Total market size of
DOCSIS 3.0 CPE jumped to $1.6 billion in 2012 from $1 billion in
2011 and constituted approximately 66% of the total cable broadband
CPE revenues in 2012.
In Dec 2012, Arris decided to
acquire the set-top box and other related businesses of Motorola
Mobility for around $2.35 billion. The merger is estimated to
generate $100-$125 million in annual cost synergies to Arris and is
expected to be completed by the second quarter of 2013, subject to
the customary regulatory approval.
So far, Arris remains a small
contender in the high-speed video and Internet delivery market.
Together, the merged entity will have an overwhelming global
presence with more than 500 customers in 70 countries. Further,
this deal will strengthen Arris’ patent portfolio and provide a
license to access several patents of Motorola Mobility.
Another research firm, Synergy
Research Group, also stated that the Arris/Motorola tie-up may pose
serious competitive pressure on Cisco, the undisputed leader in the
video infrastructure market. In 2012, Cisco’s market share in this
segment was 21% followed by 12% of the combined Arris/Motorola
market share. Video infrastructure is a lucrative market
opportunity with total revenue of $34 billion in 2012.
Another growth area for Arris will
be DOCSIS 3.0 cable modem enabled video gateways. The Moxi home
gateway is in commercial deployment with 10 customers. The company
is conducting RDK Gateway trial runs with Comcast
Corp. (CMCSA). According to Infonetics, the worldwide
video gateway market size may leapfrog from a mere $97 million in
2012 to around $3.6 billion in 2017.
ARRIS GROUP INC (ARRS): Free Stock Analysis Report
COMCAST CORP A (CMCSA): Free Stock Analysis Report
CISCO SYSTEMS (CSCO): Free Stock Analysis Report
GOOGLE INC-CL A (GOOG): Free Stock Analysis Report
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