Here's how GIC presents the digital future and Q results.......They did better than SFA, can't wait for Canal+ and DIVI to give the MSOs a little more choice.
Record Results Include Orders of $575 Million, Revenue of $518 Million,Operating Margin of 11.7% and Earnings per Share of $0.22
580,000 Digital Set-tops Shipped in the Quarter
Stock Repurchase Exceeds 6 Million Shares to Date
Horsham, PA (October 27, 1998) -- General Instrument Corporation (NYSE: GIC) today announced record orders, revenue, operating margin and earnings per share for the third quarter ended September 30, 1998. Earnings per share grew approximately 29.4% year over year to $0.22 from $0.17 per pro forma share in the third quarter of 1997. Net income for the third quarter was $39 million compared to pro forma net income of $25 million for the third quarter of 1997.
Operating income increased to $61 million in the third quarter, from $37 million for the same period last year. Operating margin of 11.7% in the third quarter of this year compared to 7.9% in last year's third quarter and 10.1% for the second quarter of 1998.
Sales grew to $518 million for the quarter from $465 million in the third quarter of 1997 and $489 million for the second quarter of 1998. Record revenues in the quarter reflect strong shipments of interactive digital cable TV systems, partially offset by anticipated analog and international sales declines. Transmission sales grew sequentially, in line with expectations, while sales of satellite products were slightly ahead of expectations.
Orders for the third quarter of 1998 totaled a record $575 million, up from $442 million in the third quarter of 1997 and $550 million in the second quarter of 1998. The Company's backlog on September 30, 1998 stood at $632 million, compared to $472 million a year ago.
"The tremendous success of the interactive digital cable rollout by our customers has helped to drive General Instrument to a record-setting quarter, from orders to earnings per share," said Edward D. Breen, Chairman and CEO. "The acceleration of our digital shipments coupled with our continued focus on operational efficiency contributed to operating income growth in the third quarter of more than 65% over the same quarter last year, marking the third consecutive quarter of more than 50% year on year growth in operating income."
Cash generated from operations during the quarter exceeded $100 million, driven by improved operational performance and working capital management. Cash balance on September 30, 1998 was $116 million.
The Company had repurchased approximately 3.7 million shares by the end of the quarter bringing the weighted average common and common equivalent>b>shares outstanding to 179 million. General Instrument has repurchased more than 6 million shares to date under the share repurchase program announced in September of this year.
DIGITAL SHIPMENTS EXCEED EXPECTATIONS
Digital set top terminal shipments for the quarter exceeded 580,000 units, 38% above second quarter 1998 shipments of 420,000 units. General Instrument began volume shipments of interactive digital set top terminals in 1996, and as of this year's third quarter, GI had shipped more than 2 million of these terminals.
During the quarter, 40 digital systems were launched, bringing the total number of active headends to 640. By the end of the third quarter, approximately 1.5 million digital set tops had been deployed in subscriber homes.
"Shipments of digital set top terminals and systems exceeded our expectations for the quarter" said Breen. "We expect digital shipments to continue to accelerate driven by the attractive economics of digital services such as video and audio tiering, expanded pay per view, and electronic program guides. These growth dynamics have caused us to increase our shipment expectations for the coming quarters. We now expect to ship 2 million digital terminals in 1998 and approximately 3 million units in 1999."
General Instrument began volume production of the DCT 2000 set top terminal during the month of October. The DCT 2000 offers faster processing, better graphics and more memory than its predecessors, the DCT 1000 and DCT 1200. GI expects to ship approximately 200,000 DCT 2000s during the fourth quarter of 1998.
MIGRATION FROM ANALOG TO DIGITAL CONTINUES
While General Instrument continues to lead in advanced analog systems, third quarter shipments of approximately 600,000 CFT advanced analog units represented a decline from the second quarter of this year and last year's third quarter. Advanced analog shipments for the nine months ended on September 30, 1998 exceeded 2.1 million units.
"Analog sales have been impacted by international economic conditions, as well as a more pronounced shift to digital deployment in North America," said Breen. "Once international conditions start to re-bound, we should begin to see a corresponding strengthening in analog revenues."
TRANSMISSION REVENUES STRENGTHEN
"Third quarter revenue for transmission systems grew by more than 20% relative to third quarter 1997," said Breen. "This strength in our transmission sales reflects increased spending as North American cable operators continue to upgrade their networks for data and voice services."
Earlier in October, General Instrument began shipping Dense Wave Division Multiplex (DWDM) products. "DWDM represents a small segment of the transmission equipment market today, however, the use of this technology is expected to grow as operators launch new data and voice services in coming years," said Breen.
SATELLITE SALES SEQUENTIALLY FLAT; AHEAD OF EXPECTATIONS
"Satellite sales for the third quarter were flat sequentially and slightly ahead of expectations," said Breen. "Relative to last year's third quarter, sales declined as expected."
In early October, General Instrument announced awards from HBO, CBS and San Francisco's KRON-TV related to the delivery of high definition and standard definition television. "While these awards are early indicators of an emerging business opportunity for General Instrument, we do not expect that the broadcast digital opportunity will reach critical mass until the year 2000 or later," said Breen.
GI CREATES NEW BUSINESS UNIT FOCUSED ON IP NETWORKS
On October 22nd, General Instrument announced the creation of a new business unit chartered with establishing GI as worldwide leader in Internet Protocol (IP) networking solutions over broadband networks. This organization will develop and market IP networking systems and will manage the integration of General Instrument's technology with the components, elements and systems offered by GI's IP partners.
"This new organization brings together technical and business talent already working on IP solutions in other parts of General Instrument," said Breen. "The significant opportunity afforded by Internet Protocol voice and data in years to come encouraged us to consolidate these resources under one management team focused exclusively on IP networks."
Visit General Instrument at our Web Site - gi.com
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General Instrument Corporation (NYSE: GIC) is a leading worldwide provider of integrated and interactive broadband access solutions, teaming with its business partners to lead the convergence of the Internet, telecommunications and video entertainment industries.
This press release contains "forward-looking" information and, accordingly, the cautionary statements contained in Exhibit 99, under the caption "Forward-Looking Information" in General Instrument Corporation's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1998, are incorporated herein by reference. Actual results might differ materially from those projected in the forward-looking statements.
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