Arris (US: ARRS) may need Pace (PIC) more than investors thought. The networking equipment group - which remains in limbo as US competition regulators scrutinise its proposed takeover of the TV set-top box maker - slashed its second-quarter guidance and warned that headwinds could persist in the second half.
Ongoing consolidation among Arris's pay-TV customers has weighed on the group's sales, while a stronger US dollar has dissuaded international customers. Arris now expects sales of up to $1.26bn (£0.81bn) in the quarter to end-June, down from its previous forecast of $1.31bn. It has also lowered its top-end forecast for adjusted EPS by 5 per cent to 55¢.
Management is counting on Pace to help counter the challenges by generating cost savings, and diversifying its customer base and product portfolio. The deal also promises to lower Arris's tax rate by a quarter to around 27 per cent - a coup that has drawn attention from antitrust regulators. But Arris has already gained regulatory approval in Germany and South Africa, and management expects the deal to close in the fourth quarter.
Broker Numis expects EPS of 60.2¢ in the year to December (FY 2014: 63.6¢).
