On Oct 13, 2014, we issued an updated research report on leading video and broadband gear manufacturer ARRIS Group, Inc. (ARRS).
Strong demand for home gateways, major contract wins, and the acquisition of the cable set-top box business of Motorola Mobility has transformed the company into an integrated equipment supplier in the high-speed video and Internet delivery market.
In Sep 2014, ARRIS received a major contract from Chile's largest cable MSO (multi-service operator) VTR GlobalCom S.A. to enhance its high-speed broadband network. VTR, which offers triple-play video, high-speed data (Internet) and residential telephony services in Chile, is a wholly owned subsidiary of Liberty Global plc.
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Prior to that, ARRIS had collaborated with renowned cloud gaming service operator – Playcast Media – to deliver gaming facilities to Portugal-based MEO TV subscribers. Playcast Media offers an extensive collection of cloud-based games to MEO TV customers along with the privilege to choose from different genres of games like racing, shooting, action, adventure and fighting. ARRIS' set-top boxes will provide gamers with a console quality experience and enhanced gaming support, thereby allowing players to save games instead of buying expensive CDs or video game consoles.
In the second quarter of 2014, ARRIS' total revenue grew a substantial 42.9% year over year. Launch of such innovative products and major contract wins should drive the company's top line higher in the coming quarters.
On the flip side, ARRIS remains solely dependent on cable operators for its revenues. Lack of industry diversification may thus limit business prospects. Potential shifts in industry dynamics may adversely impact cable TV service providers. This is evident from the fact that large telecom carriers in the U.S. are increasingly expanding their high-speed fiber-based network while satellite TV providers are upgrading their networks.
Currently, ARRIS carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Some better-ranked stocks worth considering in this sector are Calix Inc. (CALX), Aruba Networks, Inc. (ARUN) and Nokia Corporation (NOK). All three stocks carry a Zacks Rank #2 (Buy).
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