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Scientific-Atlanta wins $550 million contract

The cable set-top box maker says it will provide $550 million worth of digital set-top boxes, cable modems and other gear to Adelphia Communications over the next few years.

    Cable set-top box maker Scientific-Atlanta announced a big order today, saying it will provide $550 million worth of digital set-top boxes, cable modems and other gear to Adelphia Communications over the next few years.

    Scientific-Atlanta said it will provide Adelphia with 1.6 million digital interactive set-tops by the end of next year and 250,000 DOCSIS (Data Over Cable Service Interface Specification) modems by end of 2002, subject to certain conditions. Scientific-Atlanta also will provide 40 digital head ends, the back office gear needed to communicate with the subscriber boxes.

    The Atlanta-based equipment maker also said it will boost its output of digital set-top boxes to 1.3 million units per quarter beginning next year. Current production is approximately 60,000 units a week, with plans to increase capacity to 80,000 units a week in July 2000.

    The news could be good for component makers such as Broadcom, which makes the bulk of chips used in cable modems and digital set-top boxes.

    Merrill Lynch analyst Michael Ching predicted the increased capacity will allow the company to produce 4.3 million digital set-top boxes in fiscal 2001, up from an earlier forecast of 3.8 million units. Ching also upped his revenues projection to $2.36 billion from $2.2 billion and his earnings estimate to $1.15 per share from $1.07 per share for fiscal 2001.

    "We remain very bullish on opportunities in the cable industry, as operators build out networks for digital video, voice and data," Ching wrote in a research note. "We continue believe that Scientific-Atlanta, with its leading position in transmission and growing share in set-tops, is one of the best ways to play the growth in this market."