Scientific-Atlanta Surges

Updated from Jan. 22

Scientific-Atlanta (SFA - Cramer's Take - Stockpickr) surged 12% Friday morning after beating Wall Street expectations for its second-quarter earnings.

The rise came a day after the Lawrenceville, Ga., company posted a second-quarter profit as surging sales of high-definition products offset a flat performance in satellite boxes.

For its second quarter ended Dec. 31, the maker of set-top boxes for cable and satellite broadcast television posted a profit of $51 million, or 33 cents a share, up from the year-ago $15 million, or 10 cents a share. Revenue jumped to $417 million from $352 million a year earlier. Earnings and revenue figures beat the Thomson First Call analyst consensus estimate, which called for a 28-cent profit on sales of $413 million.

Scientific-Atlanta's numbers come as the cable industry focuses on selling more high-end digital services to consumers in an effort to overcome a sharp slowdown in growth of basic cable service sales.

"We have remained focused on a strategy to address some of the most significant competitive and technical challenges that our customers face in delivering video, data and voice services, and we are focused on extending the capabilities and capacity of their infrastructure," CEO Jim McDonald said. "The strong performance of both our subscriber products and transmission products this quarter provides evidence that our strategy is working."

Sales of subscriber products rose 29% to $296.2 million, as the company sold 958,000 Explorer digital set-tops and 226,000 WebStar cable modems. Transmission products sales were $120.3 million, down slightly from last year and flat sequentially. Compared with last quarter, sales of land-line transmission products were up slightly, and sales of satellite products declined, Scientific-Atlanta said.

The company also said it shipped 260,000 Explorer 8000 set-tops, a sequential increase of 47%. In the quarter, the company began shipments of its second-generation digital video recorder product, the Explorer 8000HD set-top. Scientific-Atlanta shipped 10,000 of those in the quarter.

Demand for high-definition products accelerated in the second quarter, the company added. Scientific-Atlanta shipped 101,000 high-definition set-tops, a sequential increase of 69%.

On Friday the stock rose $4.01 to $37.79.