Arris Group Management Discusses Q1 2013 Results - Earnings Call Transcript

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 |  About: Arris Group Inc (ARRS)
by: SA Transcripts

Operator

Good day, ladies and gentlemen, and welcome to the Q1 2013 ARRIS Group, Inc. Earnings Conference Call. My name is Laura, and I'm your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Mr. Bob Puccini, ARRIS Investor Relations. Please proceed, Sir.

Robert Puccini

Thank you, Laura, and welcome to the ARRIS conference call with management. This afternoon, we will be discussing our first quarter 2013 financial results, which were released after the close of markets today. As usual, we will be using a series of slides during our webcast, which are also posted on the ARRIS website in the Investor Relations section.

With us here at ARRIS are Bob Stanzione, ARRIS Chairman and CEO; David Potts, Executive Vice President and Chief Financial Officer; and Bruce McClelland, Group President.

There will be a replay of this entire call available several hours after the conclusion of the call, and a replay of the call and slides will be available on our corporate website for the next 12 months.

Before we begin, please go to Chart 2. During this call, we may be making forward-looking statements, including our outlook and expectation of our industry in general, estimated revenue and earnings, certain financial operating metrics, the timing and introduction of new products and technologies, anticipated spending patterns by some of our customers and expected sales levels of various product categories. It is important to note that actual results may differ materially from those suggested by any forward-looking statements, which may be made during this call.

For further information in this regard and for specific examples of risks that could cause actual results to differ materially, please see our recent filings with the SEC.

Now if you could go on to Chart 3. Bob and Dave will provide their comments on the quarter results, after which, we'll open it up for questions. Over to you, Bob.

Robert J. Stanzione

Thanks, Bob, and good afternoon. Let's go on to Chart 4. I'm sure you want to hear about our closing of the Motorola Home transaction last week, but first, let me make a few comments about the ARRIS Q1 results, which were very good, and landed toward the top end of our guidance.

Non-GAAP sales of $366.8 million were the highest level in our history. They were up 21% from the first quarter of last year and up 7%, sequentially. Earnings per share of $0.25 were up $0.06 from the prior year and down $0.03 sequentially, due to a combination of mix and an increase in expenses.

International sales were very strong, representing about 31% of the total and sales to Time Warner Cable were also up in the quarter. Sales of our C4 CMTS and the Wi-Fi-enabled EMTAs and cable modems led the way to the growth in sales. The backlog of $282 million and the book-to-bill of $117 million were reflective of continuing strength in the business going forward.

And finally, cash generation of over $50 million reflects the good earnings and working capital performance of the business.

Now let's take a look at Chart 5 and some of the highlights with BCS.

BCS sales were up 23% year-over-year and 10% sequentially. Gross margin was down slightly from the fourth quarter due to the mix. In the CMTS category, we shipped 122,700 downstream ports, which was another new high, but we did see a reduction in upstream shipments from the previous quarter.

Of course, the big news in BCS is the successful launch of our E6000 Converged Edge Router. We're aggressively ramping up production and expect to be shipping significant volumes in Q2.

Customer engagement is very high, with strong interest in allocating more network bandwidth to IP in order to handle both increases in high-speed data traffic, as well as managed IP video services as envisioned by the CCAP architecture that our customers have defined as the network of the future. The E6000's ability to provide immediate DOCSIS capacity expansions and converged MPEG video when it's needed is a major differentiator, and achieves the original vision set out by the CCAP specification. We expect to see significant footprint installed by the end of this year.

CPE unit shipments of almost 2.9 million units set another record high, as the demand for Wi-Fi-enabled DOCSIS 3 devices remain strong across the world, as service providers increased leads and bandwidth.

In the Video Gateway area, the demand for our Moxi Video Gateway has increased significantly, and we posted a strong quarter with increasing momentum as we enter the second quarter. And we're very pleased with the success of this program. And as you know, we reached a key milestone in the quarter with our RDK Gateway program with a successful showing at CES. And we've now begun in-home trials of the product.

Interest in the RDK architecture has spread around the world, and we're now engaged with 3 Tier 1 operators and evaluating potential deployments. Both our Moxi and RDK Gateway solutions are very complementary with the set-top Gateway initiatives that are underway at Motorola Home, and you'll be hearing a lot more about this as we combine the teams and strengthen the joint roadmap.

So Bob, we'll turn to Chart 6, please and talk about ATS and MTS -- MCS. ATS is off to a good start this year, with the best Q1 sales in the past 5 years. Although margins were off slightly from the fourth quarter, we see accelerating momentum in this segment throughout the year as operators increase investments in their access networks for items such as head-end optics, fiber nodes, RF gear as well as Metro Wi-Fi equipment.

MCS revenues were down in the quarter. While the on demand and assurance revenue levels were based on timing -- are -- vary based on timing of license and service cycles, overall demand has just not been robust. So we've adjusted our expenses and are focusing our efforts in areas such as workforce management and advertising, where we do see opportunity to strengthen the business.

So overall, we're off to a great start for 2013. While many of us were focused on the task of planning for the integration of Motorola Home, ARRIS employees remain focused on delivering these fine results, and I'd like to thank them for that.

Now let's turn to the new ARRIS and talk about that for a minute. We're very pleased to have completed the transaction on Wednesday of last week. A lot of work has gone into the planning for the transition of approximately 5,000 employees into ARRIS, and I can say, so far, so good. As you know, the Department of Justice cleared the transaction on April 12 and we closed the deals very soon thereafter.

During the review period, we did much to prepare for the employee transfers, the IT infrastructures, the finance functions and so on. However, due to legal constraints, we were not able to do any product roadmap planning or detailed forecast reviews prior to the closing. As a result, we're not prepared today to give you Q1 -- Q2 guidance. I can tell you, though, that ARRIS alone will be forecasting another good quarter, similar to, if not better than, the one we're now reporting.

Motorola Home's first quarter was down somewhat from the fourth quarter of 2012. It appears revenues would be about $740 million. However, there are several major product launches in the pipeline. They're expected to have a positive impact in the second half of the year. We've just not had enough time to go through a detailed forecast review with the new team to give you more quantitative guidance at this time.

Therefore, what we'll do is schedule another call to provide an update for you sometime during the month of May.

In the meantime, I want to describe the segment structure that we plan to employ going forward, and introduce the new ARRIS management team. So let's turn to Chart 7.

We're going to be reporting 2 product segments: customer premises equipment and Network & Cloud. CPE will include all of the former Motorola Home device portfolio, as well as the ARRIS CPE products that were part of the BCS segment. Network & Cloud, the second segment, will combine the Motorola Home network infrastructure and Converged Experience portfolios with the Network Infrastructure businesses of the ARRIS BCS segment, along with the ATS and MCS segments within ARRIS.

We're going to have 2 sales and marketing groups supporting the segments. One will concentrate on North America and the other concentrating on the rest of the world. The supply chain operations of the 2 companies will be combined and centralized to obtain optimal cost structure and quality levels. And then, we have all the corporate functions supporting the business.

So if you move to Chart 8, please. This is the team. The Customer Premises Equipment segment will be led by Larry Robinson, who's been leading the Motorola Home device business. The Network & Cloud segment will be led by Bruce McClelland, who's been the leader of the former ARRIS product group. And North American sales will be led by Rob McLaughlin, the former head of Motorola Home sales, and Ron Coppock, who was head of sales for ARRIS, will lead our international sales team. Jim Brennan will lead our worldwide supply chain, and Dave Potts will continue as CFO and he'll lead the IT functions of the company, also. Larry Margolis will continue as EVP of administration and legal; and John Burke, one of the former Motorola executives, will lead our strategic planning and business development functions, and will also assist Bruce as the head of the Converged Experience portfolio.

So on to Chart 9. As I've been saying since December when we announced the deal, this is a giant leap forward for ARRIS. We'll have a much more diversified customer mix, with more than 1/3 of the revenues coming from international markets. We will more than double our intellectual property portfolio, and this combination will give us the scale to accelerate our speed to market with the technological innovations that our customers need to meet the ever-increasing demands of their subscribers. And most importantly, we expect it to generate earnings accretion and shareholder value.

So with that, over to Dave Potts.

David B. Potts

Great. So thanks, Bob, and thanks, everyone, for joining us this afternoon. Before we get into the numbers, I want to highlight to you that our first quarter GAAP results are significantly impacted by the required accounting related to Comcast investment in ARRIS in conjunction with our acquisition of Motorola Home. You'll recall that I touched on this as part of our earnings call last quarter. I want to knock this up [ph] from the front end with you as it does, indeed, have a significant impact and I'll give you some context for the results.

So let's move to Slide 11, please. So as part of our acquisition of Motorola Home, Comcast was given the opportunity to invest in ARRIS at the same price as Google, $14.11. The agreement with Comcast was signed after the agreement with Google. Our stock price on that date was $15.35. So the accounting rules required that this difference in fair value be recorded in the reduction in revenue and gross margin, and we've done so in the first quarter. The math is 10.6 million shares times $1.24, which equals $13.2 million. The agreement with Google and Comcast also allowed Google to adjust the distribution of the number of shares between them. That created variability. Given that variability existed, the accounting rules required that the arrangement be mark-to-market for the difference between the price on the date that Comcast signed and the end of the quarter. So the math is again, the same, 10.6 million shares times $1.82, which equals about $19.3 million. And this was recorded as other expense in the quarter.

In the second quarter, we owe mark-to-market the arrangement to the closing date. Our stock price on the closing date was $16.72, so we recorded GAAP gain of about $5 million. And that will conclude the accounting for this arrangement.

So with that behind us, let's look at some of the highlights on Chart 12, please.

As you can see, I've laid out for you the impacts of the adjustments related to the Comcast investment in ARRIS. So adjusted sales in Q1 were $366.8 million and GAAP sales were $353.6 million, and I'll take you through the sales by segment in just a moment. Adjusted gross margin was 33.2% in Q1, whereas GAAP margin was 30.7%. And our adjusted non-GAAP EPS was $0.25 per share in the first quarter, which compares to $0.19 in the first quarter of 2012 and $0.28 in the fourth quarter of 2012.

Our first quarter 2013 GAAP loss per share was $0.13, which compares to GAAP income per share of $0.05 in the first quarter of 2012 and $0.13 per share GAAP net income per share in the fourth quarter of 2012. Given that $32 million of adjustments are non tax-deductible, it fell directly to the bottom line and had a $0.27 impact on our GAAP EPS. So had it not been for these adjustments, the $0.13 loss would've been a $0.14 profit. And as always, a reconciliation of our GAAP to non-GAAP earnings is attached to the press release and it can also be found on our website.

Let me touch on taxes for a moment. Legislation extending the U.S. federal tax credit relating to R&D was extended in January 2013, effective back to January 1, 2012. The benefit relating to the 2012 credit is booked in 2013 and is included in our GAAP results but not our non-GAAP results. And that benefit was about $5 million or $0.04 per share.

Cash, short-term and long-term marketable securities were approximately $631 million at the end of the first quarter, and we generated about $50 million of cash from operating activities in the quarter. And I'll touch more on the balance sheet and cash in just a few minutes.

With respect to orders, our order backlog was $282 million at the end of the first quarter and our book-to-bill ratio was $1.01 (sic) [$1.17].

All right. Let's turn to Chart 13 and touch on sales.

Given the insignificant size, we have not historically provided non-GAAP revenue. Given the size of the Comcast adjustment, I have provided a GAAP to non-GAAP numbers for you. The $13 million is essentially spread pro rata to the segment. So the sales before the Comcast impact were as follows: the BCS sales were $299.8 million in the first quarter and compared to $246.3 million in the first quarter of 2012 and $273.1 million in the fourth quarter of 2012.

With respect to the year-over-year comparison, the increase was primarily attributable to higher sales of our CPE products. ATS sales in Q1 were $53.7 million compared to $44.1 million in the first quarter of last year and $54.6 million last quarter. MCS sales were $13.3 million in the first quarter compared to $14.3 million a year ago and $16.7 million in the fourth quarter of 2012.

With respect to the geographic split, international sales were $112.3 million, up from both the first quarter of 2012 and the fourth quarter of last year.

Sales to Time Warner were $93 million and sales to Comcast were $59 million in Q1. And excluding the revenue impacts related to the Comcast investment in ARRIS, sales to Comcast were $72 million.

All right, let's turn to Chart 14 and look at gross margin.

Again, given the Comcast impact, I've provided with and without data for you. Looking at the bottom block of numbers, excluding the impact, our overall gross margin in Q1 2013 was 33.2%, which compares to 36.2% in the first quarter of 2012 and 35.9% in the fourth quarter of 2012. Our gross margin for BCS was 34.2% in the first quarter as compared to 36.9% in the first quarter last year and 36.2% in the fourth quarter 2012. The gross margin percent of our ATS segment was 22.6% as compared to 24.1% in Q1 of '12 and 24.9% in the fourth quarter of '12. And lastly, the gross margin percent for MCS was 51.8% in the quarter, which compares to 60.8% in the first quarter last year and 66.1% in the fourth quarter 2012.

Let's turn to operating expenses on Chart 15.

Total R&D and SG&A was $84.2 million in the first quarter, up from $84 million in the first quarter of last year and down from $84.5 million in the fourth quarter of 2012. Please note that $3.1 million of expense related to an early pension payout program was included in SG&A in the fourth quarter of last year. And that has been adjusted for in our non-GAAP results. So as we expected, excluding the Q4 pension impact, we did see a modest increase quarter-over-quarter in OpEx, in particular, in payroll taxes.

We incurred about $7.2 million of acquisition costs related to the Motorola Home acquisition in the first quarter, and these costs have also been excluded in our non-GAAP results.

All right, let's move forward to Slide 16, and review some of the balance sheet highlights. We ended the quarter with $631 million of cash, short-term and long-term marketable securities, as compared to $567 million at the end of the first quarter of 2012 and $584 million at the end of last year.

Some things to note. We generated about $50 million of cash from operating activities in the first quarter. The elements of that, which were earnings based, were about $31 million and we generated approximately $19 million of working capital. I was very pleased with our cash performance in the quarter. CapEx was about $6.3 million in the quarter, and I will note that we are spending incremental capital on the acquisition at this stage.

So our balance sheet position at the end of Q1 was very strong, with a net cash position including short-term and long-term investments of approximately $399 million. That position includes $232 million of 2% convertible notes due later this year.

Okay, let's move to Chart 17, please. With respect to guidance, as Bob said, at this point, we will not provide guidance for the second quarter given the recent closing of the Motorola Home acquisition. But we do plan on updating the market in the very near future. So with that, thanks. And back over to you, Bob.

Robert Puccini

Thanks, Dave. With that, we'd like to open the lines up for questions. Laura, would you come back on please, and let our participants know how they may ask questions?

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of James Kisner from Jefferies.

James M. Kisner - Jefferies & Company, Inc., Research Division

Congrats on a good quarter and on consummating the acquisition, of course. So just the first question, you talked about Q2 being, at least, as good or better. I mean, I just want to sort of verify first that you do expect sort of a seasonal uptick in June or would you not expect that for some reason?

Robert J. Stanzione

Well, I don't know whether it's a seasonal uptick or not. We do expect business to be better in the second quarter than in the first based on the backlog, the visibility that we have into the quarter. The ramp of the E6000, of course, is critical. That's going quite well right now. The demand for that product is very, very good. The Gateway program is going quite well right now, the Moxi Gateway program is going quite well right now. So we expect fine results from the product lines that constituted the current ARRIS in the second quarter.

James M. Kisner - Jefferies & Company, Inc., Research Division

So again, with respect to Moxi, you guys said it was a very strong quarter and I guess, the economies of the combined company is not usually material, but I just want to kind of understand, has that changed in order of magnitude or is it kind of in this $10 million to $20 million range and just up sequentially? And can you just dimensionalize that a little bit for us, the Moxi opportunity in the near term.

Robert J. Stanzione

I'll ask Bruce to handle that one.

Bruce W. McClelland

So what we're seeing is pretty robust demand on the product and we could ship more if we can build more, so we're really focused on ramping production. It looks like it's certainly going to grow quarter-over-quarter throughout the year at this stage and be at the level that we talked about wanting to be at a year ago and beyond that this year. So pretty positive at this stage.

James M. Kisner - Jefferies & Company, Inc., Research Division

But it's not there now?

Bruce W. McClelland

Again, we could ship more if we had more. So I think first quarter was about ramping production back in the factory and Q2 will be up from Q1 and beyond that in Q3. So --

James M. Kisner - Jefferies & Company, Inc., Research Division

Okay and then, just the last question before I pass. Just want to return to Motorola Home for a bit -- a minute here. I just -- so I believe you said it was $740 million in revenues in Q1. If I just look at the financial filings you guys put out and the various data points you've shared, I think it was $816 million in Q4, I kind of want to verify that and just understand -- just the sequential decline. Do you think your integration or I guess, the deal activity could have an impact on that and if it just -- you think that's seasonal or -- and what drove that decline, just any sort of texture around just -- I mean, we're obviously very focused on the Motorola business and I would just love any texture around that.

Robert J. Stanzione

Right. I'd like to defer the answer to that until the next call, which we'll hold in a few weeks. But we expected the first quarter to be weak. We're not surprised by it. I think Motorola is going through a -- the Motorola Home business is going through the same sort of transition to IP that we've been talking about for a couple of years. This transition from traditional set-tops to Gateways. And so I think that may have played a part. I will say also, and I'll emphasize, that there's some pretty substantial new programs in the pipeline that will have a positive effect on the second half of the year. So we expect the sales to grow as the year goes on.

Operator

Your next question comes from the line of Simon Leopold from Raymond James.

Victor Chiu

This is Victor Chiu in for Simon Leopold. Going off via James' question on Motorola. I kind of -- I just wanted to know kind of what are the overlaps, I guess, in terms of footprints, kind of what are your plans for integrating the ARRIS-Motorola segments, and which products do you plan on keeping and which one do you plan to integrate, I guess, with the 2 companies?

Robert J. Stanzione

Right, Simon. That's an area where we were, for legal reasons, prohibited from doing any work during the DOJ review. That would've been considered gun-jumping and so we have not done that work yet. We obviously have some ideas about what we're going to do based on the due diligence that we did last fall prior to our announcing the transaction, but we have not done anything and we're certainly not ready to announce any product roadmap changes. I will emphasize, one thing that I've been or that I have been public about and that is where either party in this transaction has made a commitment to a customer, we'll follow through on those commitments.

Victor Chiu

Okay. So from -- what I'm understanding is that you're just going to continue the sales of the current product line to the customers and there's no, at this point, you're not giving any color on changes that you're going to make because you haven't figured [ph] yet...

Robert J. Stanzione

There's no color at this point and any commitment that's been made to a customer, for example, a product that either Motorola Home or ARRIS had committed to a customer, we're going to honor those commitments. We will, obviously, be combining the roadmaps and developing joint play-ins and rationalizing product lines as time goes on, but we simply haven't done that work yet.

Victor Chiu

Okay. So you gave some metrics, some targets when you announced the deal. So if you're not going to give guidance, I guess, can you kind of say from a relative point that you're more or less confident in hitting those previous targets? I think, you said combined, full year EBITDA should be [indiscernible] essentially 40, gross margin of around 30% and you gave some of that income targets. Now are you feeling more or less confident seeing that Motorola came in a little softer than I think most people were looking for in the first quarter?

David B. Potts

So remember -- this is Dave speaking. Remember that those targets were anticipated to be once we had completed the integration, which we said would be about a year out. So as a model of the business for the year out, yes, I still believe that that's -- those are very valid targets that we've got.

Victor Chiu

Okay. And I guess, just a very quick housekeeping question. I was a little confused by the revenue adjustment related to the -- to Comcast. Can you just, I guess, just very quickly just kind of go over what that adjustment was for, exactly?

David B. Potts

Sure. So there's 2 parts to it and it really gets into, I'll call it, fair value accounting on one part and then, sort of derivatives on another. But the theory is, is that because the time at which we -- did our deal with Google was different from the time that we ultimately got Comcast signed up to become a shareholder as well, that -- given that time difference and that we gave Comcast the same share price that Google had a couple of weeks earlier, the accounting would suggest that we have to take the difference in that stock price as the stock went up, times the number of shares that Comcast would get, and say that, that will go against revenue and against gross margin. So -- and I mean, it's very difficult to wrap your mind around, but the deal hadn't even closed but it's essentially an implicit liability that we have. And then for various reasons, really related to tax, Google wanted to have the ability to adjust the shares that they needed to a little bit, which frankly, didn't happen. But because that variability existed, then, it says that you have to mark that same instrument to market to the end of the quarter and hence, came the $19 million as other income expense. This is noncash, there's no tax impacts but the accounting, nonrecurring, but it's what the accounting rules say we had to do, so there we are.

Victor Chiu

Okay. So adjustments in revenue that's really not related to sales and revenue.

David B. Potts

No. No.

Operator

[Operator Instructions] And your next question comes from the line of Amitabh Passi from UBS.

Amitabh Passi - UBS Investment Bank, Research Division

I had a couple of questions. Bob, I think you said you still had expectations of getting to the $4.8 billion to $5.1 billion for the combined entity and I guess, just looking at the last couple of quarters, 748, 16, I mean, where do you think sales for the Home business could revert back to -- could we be back to $900 million a quarter? Because I'm just struggling to get to that $4.8 billion to $5.1 billion range.

Robert J. Stanzione

Well, I don't think it's that big a stretch, quite honestly. We indicated the $4.8 billion to $5.1 billion -- I'll just repeat what Dave just said. As a target model, when the integration and the synergies are achieved, if you recall the chart we've presented there. And we indicated that we thought that, that would take about a year, so what we're saying is that a year out, that's the range of sales and then, we also went down and described what we think the range of margins, expenses and earnings would be on an earnings per share basis. And we believe that those numbers are achievable. So if you look at where we are now, we have to get up maybe 10% from where we are to be in that range. And with the visibility we have to the programs that are in the pipeline, I'm still a believer in those numbers. I think that they are achievable.

Amitabh Passi - UBS Investment Bank, Research Division

Okay. Maybe this is overly simplistic, I mean, I was just assuming $800 million a quarter for the Home business and if I assume $5 billion for the combined entity, that would imply ARRIS standalone getting to about $1.8 billion, which seems pretty high, but...

Robert J. Stanzione

Well, you'll never see it that way. Beginning third quarter, of course, we'll operate as one company and we won't be separating the 2. We do, indeed, believe that with the tailwinds in the business right now, with the need of the broadband operators, both cable companies and telcos, to expand their networks to handle increasing traffic and to cope with the competition that they're dealing with, that there is ample opportunity for us to reach those levels. I realize we're not there now. I realize that if you look back a quarter, we're not quite there, we'd would be probably about $4.4 billion or $4.5 billion of sales. Nevertheless, we've got plans in place. We've got work to do, we've got synergies that we've identified that will occur.

Amitabh Passi - UBS Investment Bank, Research Division

Are you able to shed any light on what kinds of programs we can expect to ramp, particularly, in the set-top box area? What are some of the priorities that you're hearing from some of your key customers?

Robert J. Stanzione

Bruce can answer that.

Bruce W. McClelland

Yes, Amitabh. So it's the theme we've talked about, the trend towards more IP contents of these gateways, whether it's a headless triple-play gateway, where we focused the energy in the old ARRIS or enhanced set-top box that supports gateway features, including support of multiscreen distribution in the home. That's the big theme across all the operators and of course, each of them has a different tact on it and they all will kind of look a little bit different and maybe the software architecture is different, but that general theme towards multiscreen, advanced services, refreshed user interfaces, all those are the important themes in the industry. And I think we mentioned back a few months ago, we're pretty excited about some of the design wins and the products in the pipeline within Motorola Home and those are the programs Bob was talking about that we expect are really going to accelerate as the year progresses here.

Amitabh Passi - UBS Investment Bank, Research Division

Got it. Just one final one for me. Dave, any insight you can give us on why margins were down in all 3 segment sequentially?

David B. Potts

So Amitabh, particularly in BCS, we had a strong quarter on CMTS, as Bob mentioned. Actually, pretty positive there, so it's not so much a product mix thing as it was, really, the margins in CPE were lower in Q1 than they were in Q4. This is primarily a lot of new pricing that kicks in at the beginning of the year with some of our large customers that we go through pretty significant negotiations for the year. And so we're certainly working hard to move those back into where they were in Q4, but that's primarily the effect in Q1 that you've seen. So ATS is a combination of having a bit more pro services in there and just a little bit different mix for RF and MCS, partly, it's volume because there is sort of a fixed cost base that goes with that business from a deployment perspective. And given that it's not the robust level of revenues that usually have the most impact on that.

Operator

You have no further questions at this time. [Operator Instructions] We have another question from Amitabh Passi from UBS.

Amitabh Passi - UBS Investment Bank, Research Division

I guess there were no other questions. I've got one more. Just wondering, on the volatility or the variance we saw in Comcast and Time Warner quarter-over-quarter. Time Warner, really strong in the first quarter relative to the fourth quarter; and Comcast, the other away, just maybe you can help us understand what happened there? And then, just finally, international strength, where was that from, any incremental insight you can provide there?

Robert J. Stanzione

Sure. I think if you just look at the numbers of the fourth quarter and the first quarter, as you pointed out, Amitabh, the sales with Comcast were very heavy in the fourth quarter and some of that product was burned off in the first quarter; and just the opposite of that with Time Warner, where they held off and in fact, I think, when we announced our fourth quarter, we remarked that the storm Sandy, the Tropical Storm Sandy affected the Time Warner spending at the end of the year. And so there were some strong order input from Time Warner in the first quarter. On the international side, real good sales in Latin America and in Canada, of course, with the Moxi Gateway program picking up steam.

Operator

You have a question from James Kisner from Jefferies.

James M. Kisner - Jefferies & Company, Inc., Research Division

Yes. I'm just curious if you guys have any thoughts, just -- this is sort of a longer-term question. There's been a few, I guess, sort of competitive entries in the marketplace for sort of set-tops and pay TV like Intel; Amazon, I think announced today; Google Fiber has been expanding. I'm just curious if you have a view about what that potentially means for the Motorola Home business?

Robert J. Stanzione

Yes, I think it's -- I think we're hedged in that regard, in that things like what Intel's announcing or what -- and the growth of Netflix traffic and the like, what Amazon may do with a new box, all put more pressure on the network. That's all IP traffic and that's in our sweet spot. And so where Amazon might sell or Roku might sell a box to a homeowner, it just adds to the traffic that needs to be delivered and it makes our product, I think, more desirable from the standpoint of providing the bandwidth and the speeds that are needed. The other thing that we're seeing, some recent results, and a lot of the people that are buying these boxes are buying them in addition to having premium cable service, not instead of. So there's less cord-cutting going on that might -- than we had envisioned a while back. So I don't see it as a real problem for our business.

Operator

I would now like to turn the call over to Bob Puccini for closing remarks.

Robert Puccini

Thank you, Laura. Bob, any final comments?

Robert J. Stanzione

No. Not that I haven't already made. We're really excited about getting this transaction closed, and we will get back to you just as soon as possible, probably in the next 3 or 4 weeks, with more quantitative estimates of what we think the second quarter is going to look like and an outlook for the rest of the year. So thank you for joining the call this afternoon, and we'll sign off.

Robert Puccini

Thanks, everyone. That concludes the call for this afternoon.

Operator

Thank you. Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a good day.

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