Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : General Instrument Corp.'98 (GIC) -- Ignore unavailable to you. Want to Upgrade?

To: Yogi - Paul who wrote (529)	2/11/1999 6:29:00 AM
From: matt gray	Respond to of 615

Stock of the Day Feb 10, 1999 GI: Profits Soar as Digital Cable Era Arrives General Instrument (NYSE:GIC - news) , which makes set-top boxes, cable modems and other broadband network equipment, reported a better-than-expected profit after the close on Tuesday. Earnings came in at 26 cents per share, beating the consensus by 3 cents and representing a 160% gain from the year-ago period. The company also said it is "comfortable" with analyst estimates of $0.93 per share for 1999. All this sounds pretty bullish for the stock but there is room for negative interpretation, since it translates to slower growth for 1999. This stock has run up in recent months as investors anticipate a big year for the rollout of cable Internet access and other digital cable services, so it will be interesting to see if investors are "comfortable" with the prospects for slower growth now. The numbers work out like this: 1998 earnings came in at $0.80 per share, while analysts were forecasting just $0.77. So if the 1999 outlook remains at $0.93 (as the company suggests), the growth for the year turns out to be only $0.13, not $0.16. In percentage terms, that's 16% growth for 1999 instead of 21%. Analysts will no doubt be impressed that GI turned in a positive earnings surprise for the fourth straight quarter, reversing a history of disappointments. And it is possible that General Instrument was being conservative in saying it is "comfortable" with the 1999 analyst consensus. But the company cautioned that it will probably lose Primestar as a customer for satellite equipment since it sold out to Hughes Electronics (operator of DirecTV) last month. Primestar accounted for roughly $190 million in sales for GI last year. Primestar has been shopping itself around for some time, though, and analysts had anticipated that GI's sales to them would eventually suffer. Most investors haven't been buying General Instrument's stock for the satellite business anyway. It's the blossoming demand for digital set-top boxes and other advanced cable equipment that makes for such a great story, and the news on this front remains very strong. In the fourth quarter, GI shipped 730,000 digital set-top terminals, a 26% increase from the prior quarter. These new digital set-top boxes will not only deliver cable television programming with higher quality video and more premium programming, but also high-speed Internet access, telephony and a variety of interactive services including on-demand audio and video, in surround sound if you so desire. General Instrument is one of a few companies that make end-to-end systems for cable operators, including digital set-top boxes which will allow the cable companies to deliver these expanded services. The new generation of set-top boxes is more computer than signal decoder, and GI's established role in the set-top box market gives it a choice position as the market for digital set-tops is set to explode. Since TCI (Nasdaq:TCOMA - news) is one of its biggest customers, demand for GI's equipment should benefit as the AT&T (NYSE:T - news) acquisition of TCI accelerates the rollout of advanced services like high-speed Internet access and telephony. Already GI has shipped 2.7 million digital set-top units. The cable industry transition to digital is happening faster than anyone anticipated. Predictions by some industry watchers for a total of 11 million digital set-top boxes in place by 2002 hardly seem outlandish given the early ramp seen to date. General Instrument not only makes the set-top boxes, but also the cable infrastructure equipment which must be upgraded to deliver the expanded services, and the network management software to operate it. In the fourth quarter it launched 61 new digital headends, bringing the active total to over 700. As an end-to-end solution provider for the digital cable revolution, General Instrument has a very attractive market position. Going forward, GI's fate remains highly dependent how quickly cable companies can roll out the digital service. So far, deployment has gone faster than expected, but the investment required by cable companies carries a hefty price tag and they may slow things down a bit if consumers balk at paying for expensive equipment upgrades. It may take time to convince the consumer mass market that it's worth paying $400 for a box that replaces the one for which they are used to paying just a few bucks a month. Competition from non-cable alternatives is also a risk to GI's cable business. Phone companies are scrambling to roll out DSL service, which provides high-speed Internet access through the phone line. So far, cable appears to have the edge on DSL both in performance and time to market. Satellite broadcast services are also establishing a competitive foothold against cable, though General Instrument makes digital set-tops for satellite broadcast as well, not to mention satellite uplink and downlink equipment. For bandwidth junkies who want the fastest Internet experience, cable is the holy grail--up to 40 megabits per second (hundreds of times faster than dial-up modems or ISDN, and substantially faster than DSL as well). But the success of digital cable will hinge on whether mainstream America is willing to shell out the extra money for all those enhanced services. Another near-term checkpoint for General Instrument will be the timely delivery of the next-generation digital set-top terminal, called the DCT-5000+. The company expects to ship significant quantities by midyear, so this bears watching as a gauge of GI's execution and of the cable industry's demand for the latest and greatest technology.

To: Yogi - Paul who wrote (529)	2/11/1999 6:50:00 AM
From: matt gray	Read Replies (1) \| Respond to of 615

<<Remember a hard drive is going to be optional on the 5000. Total cost with localstorage around $550.00 (WAG). It will be interesting to see how consumers view that price.>> Who says the consumer will pay? Maybe the local CATV will pay and the consumer gets this added to the monthly bill. The CATV company will cost justify the purchases based upon the following monthly business case. Look at the revenues: - basic TV ($25) - local and long distance telephone calling (>$30) - internet ($20) - Pay per view movies (>$10) - HDTV (???) Also CATV makes more advertising revenue because of advanced services. No wonder AT&T wanted a piece of TCI and Time Warner