TE Connectivity's communications solutions segment was a mixed bag in the fourth-quarter as growth in its SubCom submarine cable unit continued offsetting future declines thanks to repositioning data and device segments.
SubCom revenues for the quarter were $202 million, showing what the company said was a strong performance in the submarine cable segment.
Speaking to investors during its fourth-quarter earnings call, Tom Lynch, CEO and chairman of TE Connectivity, said that TE SubCom has laid the foundation for new growth in the coming years.
"2015 was the beginning of a multiyear growth cycle for SubCom, with revenues just above $700 million," Lynch said, according to a Seeking Alpha transcript. "Based on the timing of the ramps of new projects, we expect to generate annual revenues between $700 million and $1 billion through this multiyear growth cycle."
TE SubCom has been the submarine cable supplier of choice for a number of high profile submarine cable projects, including Hibernia's Hibernia Express low latency submarine cable system.
Hibernia Express is a 4,600 km cable that provides a low latency fiber path between New York and London, connecting Halifax, Nova Scotia and Brean, U.K., with terrestrial fiber to extend connectivity to major metro areas.
The company has forecast that TE SubCom sales in 2016 are expected to rise in the high single digits year-over-year, driven by new project timing.
TE Connectivity's total communications segment revenue rose 1 percent to $684 million.
Within the communications segment, Data & Devices declined year-over-year due to what the company said were weak conditions in China, as well as product exits and inventory corrections. It reported $323 million in Data & Devices revenue and $159 million in Appliances revenue.
Meanwhile, the Appliances markets saw varied results with organic growth in EMEA and North America offset by softness in China.
"Our data and devices and appliance businesses were both affected by China slowing and the supply chain adjustments by our distribution partners, which are expected to last through our March quarter," Lynch said. "Additionally data and devices growth was impacted by product exits initiated in 2015 as part of the repositioning effort. These product exits will impact revenue by approximately $30 million per quarter in the first half of 2016 and then trail off in the second half."
From an overall financial perspective, TE Connectivity net revenues dropped 3 percent from the year before to $2.98 billion due to negative forex effects. In constant currency, they rose 6 percent. Organic revenues were flat year-on-year.
The company's adjusted earnings per share (EPS) from continuing operations rose to 90 cents, up 15 percent.
For more:
- see the earnings release
- here's the earnings transcript
Related articles:
Hibernia, TE SubCom faced environmental challenges when building submarine cable system