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We reiterate our long-term Neutral recommendation on Arris Group Inc. (ARRS - Analyst Report). The company continues to benefit as several cable MSOs upgraded their customer premises equipments with high-speed DOCSIS 3.0. Arris is a leading provider of infrastructure solution for broadband network. However, its success is mostly dependent on the cable MSOs decision to install new networks or upgrade their existing networks. The company just missed the Zacks Consensus Estimates in the third quarter of 2012.

If the cable TV operators fail to compete effectively with other pay-TV service providers, then it will significantly affect Arris’ future growth. Customer concentration remains high for Arris. In the reported quarter, the two major clients, viz, Comcast Corp. (CMCSA - Analyst Report) and Time Warner Cable Inc. (TWC - Analyst Report) accounted for 52.2% of its total revenue.

Arris is hopeful that its upcoming E6000 converged edge router and its newly lunched Moxi gateway will receive huge market traction in 2013. In the last quarter, Arris shipped majority of customer premises equipments for cable TV industry, which are DOCSIS 3.0 (Wideband) enabled. In the third quarter, Arris shipped a record high 2.626 million CPEs. Out of this, 88% devices were DOCSIS 3.0 enabled. The company also shipped 81,364 C4 CMTS downstream ports. Total order backlog of Arris, at the end of the reported quarter, was $185.5 million compared with $155.3 million at the end of the year-ago quarter.

Meanwhile, the stock price soared nearly 40.3% in the last year. We do not find any above market growth potential for the stock anytime soon. Arris currently holds a Zacks #3 Rank (Hold) on its stock.

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