S-A, stung by Adelphia, posts fourth-quarter loss

Adelphia Communications’ financial boondoggle--topped by bankruptcy--has cable TV equipment vendor Scientific-Atlanta reeling. S-A posted a loss of $15.7 million, or 10 cents a share, compared with $73.4 million or 44 cents a share in the fourth quarter a year ago. Without a $55 million charge related to bad debt expense of Adelphia, and other one-time items, the company posted a fourth-quarter profit of 28 cents a share.

Revenues for the fourth quarter dropped 37% to $390.1 million vs. $619.6 million a year ago, indicative of a general slowdown in cable operator equipment buying. At least part of the blame for the business slowdown is an overflow of the woes impacting the telecommunications space, even though data is a very different business, said Jim McDonald, S-A’s chairman, president and CEO.

“The technology and overcapacity problems plaguing the telecom industry are not fundamental problems in cable,” he said. “Demand is stable, and the MSOs appear to have some pricing power.”

Nevertheless, business slowed enough that S-A last month eliminated its third shift at its Juarez, Mexico, manufacturing facility, and the company is “currently evaluating the need for any additional restructuring in other parts of the company.”

Even with current difficulties, McDonald was optimistic that business would regain its strength based on new consumer products to handle on-demand services and high definition television and the ongoing need to bulk up system capacity to battle the satellite threat.

“We have leading-edge products in the field right now. Integrated personal video recording, a one-box solution for high-definition and on-demand television are available,” McDonald emphasized. “We intend to continue to lead.”

McDonald also laid out the way things will be in the future, as cable operators look more closely at their budgets before placing equipment orders.

“Our customers are less likely to make long-term commitments in this environment because they know they can order and get shipments in a relatively short time frame,” he said.