Summary:

Broadband is on a steep growth curve, and that is good news for hardware makers! While most of the upside is not reflected in the stocks, there are signs that the demand for ‘broadband’ related gear is going to only increase. According to Q1 2004 market […]

Broadband is on a steep growth curve, and that is good news for hardware makers! While most of the upside is not reflected in the stocks, there are signs that the demand for ‘broadband’ related gear is going to only increase. According to Q1 2004 market analysis by Synergy Research Group (SRG), the market for DSL and Cable Broadband equipment posted 26% and 27% growth, respectively. Furthermore, sales of Broadband Wireless Access (BWA) equipment grew 8%. Alcatel, Siemens, Thomson and Huawei lead in the xDSL equipment, while Motorola, Cisco, Terayon and Arris are leaders in the cable equipment.

Market leaders are a reflection of the regional preferences for broadband. Asia and Europe are tilting more towards xDSL while, US is primarily Cable Broadband. Europeans are fairly strong on their home turf and in Asia, while US companies are unbeatable at home. Synergy points out that notable revenue market share gainers for the first quarter included 2Wire, ADTRAN, AFC, Arris, Alcatel, D-Link, Huawei, NEC, Nokia, Siemens, Terayon, Thomson, and ZyXEL

IRG research of New York notes that, “Despite weakness in cable-equipment shares, deployments of next-generation cable services are accelerating. We believe fundamentals in our cable equipment coverage universe contknue to improve gven as the downturn in the technology market constricts multiples in the group. Over the last three months, the average EV/Sales multiple in our cable-equipment universe has declined from 2.5x to 1.4x. At the same time, 1Q04 MSO results indicate that deployments of next-gener-ation cable services are tracking slightly ahead of our forecast. Also, these services are reducing churn and increasing cash flow among domestic MSOs.”

I think there will be more deployments in the broadband sector and should boost the sales of the cable equipment and related broadband gear. Companies that make broadband data, VOD, HDTV, and cable telephony equipment, as well as vendors of bandwidth- enhancing equipment will see a sharp upsurge in their sales. Why? because cable cos have realized that these bring money, and cut churn. Also the cable cos think that they are ready to eat Bells for lunch, and satellite companies for dinner.

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