Shares of Arris, the Suwanee, Ga. video-electronics maker that employs 800 at the former General Instruments/Motorola Home plant in Horsham, Pa., have risen to a 13-year high of nearly $29 a share in recent days since two of its largest customers, Comcast Corp. and Time Warner Cable, announced plans to merge.
Past cable company mergers have led to "order delays and integration disruptions," followed by a rush of higher spending on set-top boxes and other equipment after deals are settled, noted Denver-based cable analyst Brian Coyne, in a note to clients of Dallas-based National Alliance Capital Management last week. But Coyne added that, in this case, much of the order slowdown may have already taken place, as Comcast and rival Charter negotiated with Time Warner over possible combinations over the past few months.
Once the deal wins government and shareholder approval, Comcast and Time Warner will both need 'to aggressively develop new video and data platforms," and Arris is "arguably the most important technology partner for both operators," Coyne added.
Along with set-top cable boxes, Arris makes equipment that enables cable operators including Comcast and Time Warner to put their video transmission through an Internet Protocol (IP)-based network, as Raymond James & Co. analyst Simon Leopold told analysts in a report last week. Comcast expects to shave as much as $400 million off the combined companies' capital equipment spending each year after the merger, but as Leopold noted that's a small fraction of their combined $10 billion capex budget.