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CommScope to Realign Business Operations to Optimize Costs

Zacks Equity Research

CommScope Holding Company, Inc. COMM recently announced that it is realigning its businesses to better reflect the strategic value of its operations. The company will restructure its business into four segments — Venue and Campus Networks, Broadband Networks, Outdoor Wireless Networks and Home Networks. Effective first-quarter fiscal 2020, the restructuring is likely to reduce the operational costs and optimize the overall cost structure of the global tech frontrunner.

Reinforcing the benefits of revenue and cost synergies, the realignment is primarily aimed at creating a diversified portfolio of products with a broader access to new and growing markets. It also intends to expand its manufacturing operations and distribution footprint by creating an integrated supply chain organization to tap new opportunities and proactively respond to dynamic market conditions. Moreover, with the acquisition of ARRIS and Ruckus Networks, the company is now better positioned to capitalize on long-term industry growth trends, including network convergence, fiber and mobility everywhere, IoT, demand for additional bandwidth, low latency and ultra-high reliability.

Incorporating the existing Ruckus Networks, Venue and Campus Networks will offer distributed antenna systems, enterprise fiber and copper infrastructure, and switching solutions in various campuses and data centers through public and private networks. Broadband Networks will offer converged cable access platform, passive optical network, and network intelligence and automation solutions to telecom and cable providers. The segment incorporates Network Cable and Connectivity business with the Network and Cloud business. Outdoor Wireless Networks will offer integrated solutions, including microwave and base station antennas, with cell-site cabling and connectivity solutions. Home Networks will offer various avant-garde in-home solutions like video systems, cable broadband and telco broadband services.

With the enterprise market moving toward more cloud-based and hyperscale data centers, the tech behemoth is actively in talks with numerous key customers. This augurs well for its long-term prospects, as the company is rolling out unconventional solutions to meet the proliferating demand for bandwidth. Also, CommScope is actively pursuing cost and debt reduction initiatives to improve balance sheet position.

In addition, CommScope is focused on sound technology, highly efficient supply chain and continuous improvement. This will potentially make it a preferred partner for all telecommunications businesses, as the industry shifts to 5G. With operators moving toward converged or multi-use network structures, combining voice, video and data communications into a single network, CommScope is actively developing solutions designed to support wireline and wireless network convergence, which is crucial for the success of 5G technologies. The company also continues to be one of the leading suppliers of intelligent antenna platforms for FirstNet deployments.

CommScope has long-term earnings growth expectation of 12.5%. The stock has lost 19.9% against the industry’s growth of 18.5% in the year-to-date period. The wireless and broadband network technology company is dealing with weak performance in connectivity solutions business. However, it is poised to benefit from favorable networking market dynamics and expects to witness improving trends in the first half of 2020, while creating shareholder value.



CommScope currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader industry are Perficient, Inc. PRFT, CACI International Inc CACI and LogMeIn, Inc. LOGM. While Perficient sports a Zacks Rank #1 (Strong Buy), CACI and LogMeIn carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Perficient exceeded the Zacks Consensus Estimate in each of the trailing four quarters, the average positive earnings surprise being 10.3%.

CACI outpaced estimates thrice in the preceding four quarters, the average positive earnings surprise being 7.1%.

LogMeIn exceeded estimates in each of the trailing four quarters, the average positive earnings surprise being 3.2%.

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