Yesterday, in a major strategic move,
Arris Group Inc.
) announced that it has restructured its business model and
provided the future financial guidance. The restructuring was
necessary after its acquisition of the Home businesses of
Motorola Mobility, a subsidiary of
) in Apr. 2013.
From the second quarter of 2013, Arris will report in two
business segments instead of the current three business segments.
The new segments will be Network & Cloud and CPE (Customer
Premises Equipments). The Network & Cloud segment will
include Arris' existing CMTS EMP, Access, Transport &
Supplies, Media & Communication Systems products. This
segment will also include Arris' Home, Video, head-end, CMTS and
the converged products. On the other hand, the CPE segment will
represent Cable and DSL modems, EMTAs, gateways and set-top boxes
of both Arris and Motorola Mobility.
Management estimated that for the ensuing second-quarter 2013,
non-GAAP total revenue will be $1.028 - $1.078 billion and
non-GAAP earnings per share will be 6 cents - 13 cents.
Management also targeted annual revenues of $4.8 - $5.1 billion
and earnings per share of $2 - $2.15 after one year of Motorola
Mobility acquisition. The merged entity is expected to generate a
cost synergy of $100 - $125 million per annum.
In relation to the above-mentioned proposed merger, in Jan
2013, Arris sold approximately 10.6 million of its common stock
) for a consideration of about $150 million. The Motorola
Mobility acquisition deal worth $2.35 billion was financed in
cash by $2.05 billion. Initially, it was decided that Google will
get the remaining $300 million worth of Arris' common stocks. The
Comcast deal has reduced the total number of Arris' shares to be
issued to Google while raising the cash consideration by $150
Consequently, both Comcast and Google will command 7.85% of
the total outstanding shares of Arris. Importantly, through this
deal, Arris will get two large investors namely, Comcast and
Google. These companies have financial interest in the success of
Arris' cable set top box venture. Notably, Comcast is the largest
customer of Arris.
With Motorola Mobility's Cable Home business in its portfolio,
Arris is likely to become a formidable player in the video
infrastructure and CPE for the cable TV industry. A report of
Infonetics Research Inc. stated that the combined Arris/Motorola
constituted 45% of the DOCSIS 3.0 CPE market share in 2012. This
figure is well above the second ranked
Cisco System Inc.
) 15% market share.
Synergy Research Group stated that the Arris/Motorola tie-up
may pose serious competitive pressure on Cisco in the video
infrastructure market. In 2012, Cisco's market share in this
segment was 21% followed by 12% of the combined Arris/Motorola
ARRIS GROUP INC (ARRS): Free Stock Analysis
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