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CommScope Holding Is Maverick Capital’s New 4Q14 Position

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Maverick Capital and CommScope Holding

Maverick Capital started a new position in CommScope Holding (COMM) in 4Q14. The fund bought 7,059,452 shares worth $161 million. According to the latest 13F filings for 4Q14, CommScope accounts for 2.53% of the hedge fund’s total portfolio.

Communication services has 4% exposure to the SPDR S&P 500 ETF (SPY) as well as the iShares Core S&P 500 ETF (IVV). The ETF tracks the performance of 500 publicly listed companies in the growth sector.

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Highlights of CommScope’s 4Q14 earnings

CommScope’s 4Q14 net sales fell by 2% year-over-year to $828 million. GAAP (generally accepted accounting principles) net income rose to $48 million compared to a net loss of $9 million in the same period last year. Meanwhile, its peer Ericsson (ERIC) reported a meager 1% increase in its Q4 net sales, and peer Amphenol Corporation (APH) posted a 15% increase in Q4 net sales.

As stated in CommScope’s press release, “Growth in the Enterprise and Broadband segments were more than offset by lower North American wireless sales. Foreign exchange rate changes negatively affected sales by 2 percent in the quarter compared to the prior year period.”

Wireless segment sales in the fourth quarter declined 9% year-over-year to $485 million due to a slowdown in North America.

Full year 2014 overview

For full year 2014, CommScope’s sales increased 10% to $3.8 billion, driven by growth in the Wireless segment. According to CommScope, “Wireless sales increased significantly in North America, Asia-Pacific and Europe as a result of 4G/LTE rollouts in developed markets and 3G coverage buildouts in emerging markets….For full year 2014, Enterprise segment sales increased 3 percent….Broadband segment sales in 2014 rose 5 percent.”

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Outlook for 1Q2015

CommScope expects a slowdown in 1Q2015. In its earnings release, CommScope said, “The company’s outlook reflects a temporary slowdown in North American wireless carrier spending, the negative impact of foreign exchange rate changes and on-going product line trimming in the Broadband segment.”

Proposed transaction with TE Connectivity

On January 28, 2015, CommScope announced an agreement to acquire TE Connectivity’s Telecom, Enterprise, and Wireless businesses. TE Connectivity is a world leader in fiber optic connectivity for wireline and wireless networks. CommScope expects the transaction to be completed by the end of 2015.

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About CommScope Holding

CommScope Holding (COMM) helps companies design, build, and manage their wired and wireless networks. The company’s network infrastructure solutions help customers increase bandwidth, maximize existing capacity, improve network performance and availability, increase energy efficiency, and simplify technology migration.

CommScope is a provider of wireless, business, and home network solutions with a market cap of $5.5 billion.

Other competitors in this market are Ericsson (ERIC) with a market cap of $41 billion and Amphenol Corporation (APH) with a market cap of $18 billion. Ericsson also recently reported its 4Q14 results and missed earnings estimates. Amphenol, on the other hand, beat both on 4Q14 revenue and earnings estimates by $60 million and $0.04, respectively.

In the next part of this series, we’ll look at Maverick Capital’s position in Priceline Group.

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