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Scientific-Atlanta earnings beat Street

Scientific-Atlanta reports second-quarter earnings that exceed analyst expectations, as sales of digital set-top boxes continue to surge.

Scientific-Atlanta today reported that second-quarter earnings rose 53 percent over year-ago results, exceeding analyst expectations as sales of digital set-top boxes continued to surge.

Net earnings from operations for the second quarter of fiscal 2000 were a record of $29.3 million or 36 cents per share, on revenues of $373 million. That compares with earnings of $19.2 million, or 25 cents per share, on revenues of $311 million registered during the same period in 1999.

A survey of analysts polled by First Call/Thomson Financial expected Scientific-Atlanta (SA) to earn 33 cents per share.

Including a one-time $4 million after-tax gain from the sale of stock in WorldGate Communications, SA earned $33.4 million, or 41 cents per share.

At 1 p.m. PST, the close of regular market trading, SA shares were up $2.56 to $72.50, a gain of about 4 percent. The earnings report was issued after the close of regular trading. The share price represents a new all-time high for the company.

SA, which has seen its stock price rise almost 30 percent this month alone, said sales of its Explorer 2000 digital set-top boxes, along with sales of central office equipment, helped drive revenue up 20 percent from year ago levels. The set-tops allow cable operators to offer interactive services such as video-on-demand as well as more channels of programming.

Cable operators have been upgrading networks at a rapid pace in order to offer more services to subscribers in an attempt to keep pace with competition from direct broadcast satellite operators like DirecTV and Echostar, to the benefit of Scientific.

The company said that it increased production of the set-tops during the quarter, while at the same time reducing the cost of the systems by reducing the number of chips needed. There are now more than one million 2000-series boxes deployed, with 267,000 shipped during the second quarter alone.

Scientific's strong earnings closely follows news, first reported by CNET, that the company is working on spinning off its PowerTV subsidiary. PowerTV makes operating system software for interactive cable set-top boxes, primarily SA's Explorer systems. The company also makes software applications such as an email reader and Web browser.

A successful stock offering could significantly add to SA's coffers, if all goes as planned later this year. To that end, Scientific named Steve Necessary, a vice president of marketing at the company, as CEO of PowerTV earlier this week. He had been acting president.

Meanwhile, the company said Charter Communications, the fourth largest cable operator in the United States, would buy $100 million worth of equipment to build out its infrastructure. As part of that order, Charter is buying 126,000 set-tops, about 75 percent of which will be SA's next-generation Explorer 3000 system.

The company also announced this week a significant sales win in Europe, where it will provide set-tops based on European technology standards in a contract worth at least $75 million, according to analysts. U.K.-based NTL said it would order a minimum of 250,000 set-tops over a three year period.

Bloomberg contributed to this report.