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On Jul 4, 2014, we issued an updated research report on Arris Enterprises Inc. (ARRS - Analyst Report). Strong demand for home gateways, large contract wins, coupled with 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. Banking on these positives, the company raised its guidance for the second quarter of 2014.

Arris has delivered positive earnings surprises in the last four quarters, with an average beat of 49.05%. The company reported strong first-quarter 2014 financial results with both the top and the bottom line surpassing the Zacks Consensus Estimate.

Recently, Arris acquired Ontario-based SeaWell Networks, a leading developer of adaptive bit rate (ABR) streaming technologies. SeaWell boasts a powerful portfolio consisting of IP video, multiscreen video, and ad insertion solutions. Arris expects this acquisition to enhance its offerings through accelerated delivery of the personalized TV and advertising solutions, streamlined video distribution across various devices and minimization of costs of multiple IP streaming platforms for various devices.

Moreover, with Motorola Mobility’s Cable Home business in its kitty, Arris is likely to become a formidable player in the video infrastructure and customer premises equipment for the cable TV industry, thus, safeguarding its position against large video infrastructure gear manufacturing companies like Cisco Systems, Inc. (CSCO - Analyst Report).

In first-quarter 2014, the company generated a whopping 246% year-over-year growth in revenues with both the Network and Cloud and CPE segments achieving 84.4% and 378.1% year-over-year improvement, respectively. Arris also entered into a deal with an Austrian cable operator, Liwest Kabelmedien GmbH, for the deployment of its Converged Cable Access Platform (CCAP) equipment. Liwest will utilize Arris’ E6000 converged edge router (CER) to offer Internet services with speeds of up to 250 Mbps. 

Earlier, Arris had struck a deal with Germany’s major cable operator, Unitymedia Gmbh, to deploy its Converged Cable Access Platform (CCAP) equipment. Unitymedia has 6.6 million video, 2.6 million broadband, and 2.5 fixed-line telephony subscribers covering 12.6 million homes. Thus, the deal will certainly boost Arris’ top line while moving ahead.

Arris currently carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Other stocks worth considering in this sector include Equinix, Inc. (EQIX - Analyst Report) and BlackBerry Ltd. (BBRY - Analyst Report). Both Equinix and BlackBerry have a Zacks Rank #2 (Buy).

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