Scientific-Atlanta ( SFA) dropped 6% late Thursday after posting a steep second-quarter sales shortfall. For its second quarter ended Dec. 31, the Atlanta-based supplier of cable set-top boxes earned $58.7 million, or 38 cents a share. That's up from the year-ago $51.1 million, or 33 cents a share, and a penny ahead of the Wall Street consensus estimate. Sales rose 6% from a year ago to $442 million, well short of the $478 million Thomson First Call consensus estimate. Sales of subscriber products rose 11% and sales of transmission products dropped 5%, the company said. Scientific Atlanta attributed the rise in sales of subscriber products to a shift toward higher-end digital set-top products and higher sales of cable modems, partially offset by lower set-top unit volumes and the reduction in set-top selling prices for all models. Gross margin fell to 37.1% from 37.8% a year ago, as a result of lower selling prices. Bookings rose 3% during the second quarter, and quarter-end backlog surged 17%. The latest quarter enjoyed a 30% tax rate, down from 34%-35% in recent periods. The company also said it "engaged in substantive discussions" during the quarter with Gemstar-TV Guide ( GMST) regarding a possible settlement and cross-licensing agreement, but no final agreement has been reached. The company said any deal could force it to recognize additional costs for the quarter. For its part, Gemstar said, "Gemstar-TV Guide is currently in settlement and cross-licensing discussions with Scientific-Atlanta to resolve outstanding litigation between the two companies. There can be no assurance that a settlement will be reached or on the specific terms of any settlement. However, based on the discussions to date, Gemstar-TV Guide does not anticipate that any settlement payment Gemstar-TV Guide may receive would have a material impact on the company's operating results or financial condition." In after-hours trading, Scientific-Atlanta fell $1.97 to $29.20.