4 Quotes on the Future of Television

Arris Group's management discusses its fourth-quarter earnings and the future of its business.

Feb 22, 2014 at 11:00AM

Arris Group (NASDAQ:ARRS) reported earnings on Wednesday, beating analyst estimates on both the top and bottom lines. Earnings got a boost from the rollout of Comcast's (NASDAQ:CMCSA) XG1 platform, and Verizon grew to become the company's second-largest customer ahead of Time Warner Cable (NYSE:TWC).

Management answered questions on its fourth-quarter results and outlook for 2014 on the conference call. Here are the quotes you need to hear.

On the Time Warner-Comcast deal
Arris' shares jumped last week when Comcast and Time Warner announced that they've agreed to merge. Comcast taking over Time Warner's households could accelerate the move toward Arris' set-top boxes. When asked about the opportunity, CFO David Potts said:

Both Time Warner and Comcast are following similar technology paths. ... Competition is not lessening but it's increasing, it's escalating in the business. ... With the competition and the similarities that Time Warner and Comcast have in their game plans, I see it as a pretty good year coming up and it could result even in more business for us.

Time Warner is following the same path as Comcast -- higher bandwidth, moving toward IPTV, better user experiences -- so it likely would have continued tapping Arris for set-top boxes. It already has plans to roll out a six-tuner set-top box manufactured by Arris.

With the potential for Time Warner's 11 million subscribers to fall under control of Comcast, however, it all but guarantees Arris will be making the set-top boxes. Comcast has a 7.7% stake in Arris, and tapped the company to make its XG1 box. After all the investment Comcast has put into Arris, it wouldn't make sense to switch to a different manufacturer.

On XG1
Management was light on the details regarding how the XG1 rollout affected earnings. Note that Comcast was able to increase its video subscribers for the first time in six-and-a-half years last quarter. The X1 platform likely had something to do with that. The platform received excellent reviews and put it a step ahead of other cable providers in terms of IPTV capabilities and user interface.

Comcast offered numerous statistics about its X1 customers on its conference call. Arris' management was much more humble about the impact of the new product. According to Larry Robinson, president of customer premises equipment: "We absolutely did have a nice quarter with respect to completing the XG1 product qualification and beginning shipments for that product. But we also did see ongoing demand or improvements quarter-over-quarter for some of our what I would call more traditional non-video gateway set tops to some of our key customers, but certainly the XG1 played a nice factor in the quarter."

It's nice to see its other set-top products are continuing to see strong demand, but it's leading-edge products like the XG1 that will keep Arris ahead of the competition.

On the future of television delivery
A lot of TV these days is not consumed through a television set. Arris wants to help facilitate video on every connected household device. According to Robinson: "I see gateways becoming more and more present in the marketplace as operators continue to roll out really an entertainment hub within the home that's capable of serving not only you know more traditional set top devices but also we would call customer owned and maintained equipment tablets, Smart TVs, things of that nature. Leveraging the portfolio that we have I think positions us well to help operators through that multi-year migration that we're just beginning to embark on."

Arris' strength is in the cloud and networking, and integrating that with video and the set-top box business it acquired through Motorola Home. As more television moves through the cloud, Arris' portfolio lends itself to this migration and could lead to further growth as it adds another device to the home.

Cable is differentiated through the set-top box now
CEO Bob Stanzione's final words show the tremendous opportunity that lies ahead for Arris. As cable companies try to differentiate their products, they're focusing more on what they can bring to customers through their set-top box and other in-home technology. "Two of our major customers featured in their Super Bowl advertisements the in-home devices that they were offering, indicating to me that the in-home device is an important part that they offer to their customers, and the performance of those in-home devices is dependent upon the network equipment that we have."

Arris, as the leader in set-top boxes, is poised to capitalize on this trend. Although shares climbed another 12% on Thursday, you can also capitalize on this trend by investing in Arris.

How to profit from the future of TV
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple.

Adam Levy owns shares of Arris Group. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information