Dow Jones Newswires -- July 2, 1997
Cable Companies' 2Q Growth Hinges On TCI Spending
By Brian Steinberg
NEW YORK (Dow Jones)--Even the slightest growth among cable-TV-equipment companies in
the second quarter seems to depend on their ability to maneuver around the frugal spending habits
of industry big brother Tele-Communications Inc. (TCOMA).
The Englewood, Colo., cable-service provider accounts for 25% of the nation's subscriber base,
analysts said. After clamping down on spending last October, TCI has made little attempt to open
its money sluices, leaving cable-equipment companies to wait until it and other service providers
decide to upgrade their systems.
How much a cable-equipment company grew in the second quarter is ''just what percentage of
your business is non-TCI,'' said Eric Buck, who follows the industry for Donaldson Lufkin &
Jenrette Securities Corp.
No company may recognize this better than Antec Corp. (ANTC), an optical-equipment maker
based in Rolling Hills, Ill. Historically, the company derives about 20% of its revenue from TCI,
said Nikos Theodosopoulos of UBS Securities.
Antec is the only major cable-equipment company expected to post a decline in earnings from the
year-ago quarter. According to a First Call Inc. consensus of five analysts, Antec should earn 7
cents a share for the quarter, compared with 13 cents a share a year ago on sales of $162.8
million.
Still, most companies should see a better second-quarter compared with the first period, when
TCI's curtailed spending also dampened the equipment makers' results.
''For the most part, things should improve from the first quarter in terms of orders and revenues and
so forth,'' he said.
Although Antec's situation directly reflects the TCI problem, upward turns in earnings at industry
heavyweights General Instrument Corp. (GIC) and Scientific-Atlanta Inc. (SFA) show what
happens when cable concerns can angle around their troubled customer.
Not every cable provider needs the same supplies. ''Analog is still here,'' said A.G. Edwards &
Sons analyst James E. Jungjohann. ''Time Warner and US West still stand on an analog model.''
That bodes well for Scientific-Atlanta, which supplies other service providers in addition to TCI.
Analysts expect the Northcross, Ga., company to have one of the best quarters in the industry.
A First Call consensus of 13 analysts expects earnings per share of 25 cents for its fourth fiscal
quarter ended June 30. Analyst Jungjohann expects earnings of 28 cents a share on sales of $330
million, based on a deal the firm has with Comcast Corp. (CMCSA) to supply cable modems.
In the year-ago fiscal fourth quarter, the company posted a loss of 20 cents a share after charges
on sales of $272.2 million.
General Instrument is expected by a First Call consensus of 13 analysts to post earnings of 28
cents a share. Last year, the Chicago-based company reported a loss of 45 cents after charges on
sales of $675.2 million.
Wallingford, Conn.-based Amphenol Corp. (APH) is expected by a First Call consensus of two
analysts to earn 44 cents a share, compared with 37 cents a share on sales of $198.9 million in
second quarter 1996.
Among the smaller companies, Harmonic Lightwaves Inc. (HLIT) of Sunnyvale, Calif., is poised to
do well as the year unfolds, UBS' Theodosopoulos said. Analysts expect the large cable providers
to begin system upgrades in the second half of the year - a trend all the companies await.
''If cable operators start spending, (Harmonic Lightwaves) should be benefiting the most,''
Theodosopoulos said.
A First Call consensus of five analysts expects Harmonic Lightwaves to earn 15 cents a share for
the second quarter, compared with 10 cents a share on sales of $13.5 million a year earlier. |
