Video

Arris Strikes Up BigBand In Bid to Bulk Up in Video

10/17/2011 12:01 AM Eastern

Arris Group, in another move to augment
the video side of its business, plans to acquire
struggling video-equipment vendor BigBand Networks.

The deal — expected to be completed late this year
— is worth $172 million in cash, or $53 million net of
BigBand’s cash on hand.

Buying BigBand would give Arris, historically a cable
voice and data gear supplier, a leading switcheddigital-
video platform, as well as its next-generation
Internet-protocol TV, video-processing and advanced
advertising platforms.

Arris said BigBand’s employee expertise and products
are expected to “accelerate time-to-market and increase
opportunities for Arris in several fast-growing
product areas,” including the Converged Cable Access
Platform (CCAP) architecture defined by CableLabs,
local and targeted advertising, IP video distribution,
and advanced video processing and compression. Arris
also cited BigBand’s portfolio of more than 70 issued
and pending patents.

The BigBand acquisition “builds on our stated business
strategy of growing our current businesses into a
more complete portfolio including a strong video product
suite and investing in the evolution towards network
convergence onto an all-IP platform,” Arris chairman
and CEO Bob Stanzione said in announcing the deal.

Arris is offering $2.24 per share in cash for BigBand,
a 76% premium over its closing price of $1.27 per share
on Oct. 10.

Wall Street analysts praised the strategic fit between
the two companies — and the $53 million price tag,
about half of BigBand’s anticipated 2012 revenue.

“In our opinion, BigBand’s significant technical expertise
and deployment experience in video could
prove quite handy as Arris increasingly shifts [its] focus
to helping MSOs deliver video to a diverse set of
endpoints,” George Notter, managing director of communications
equipment equity research at Jefferies &
Co., wrote in a research note.

BigBand had been looking for a buyer for several
years. The company suffered dwindling sales and
ongoing losses over the last two years — posting a
net loss of $31.6 million on revenue of $111.7 million
for 2010 — leading to several rounds of layoffs. The
Redwood City, Calif.-based company also has seen
the departure of a number of senior executives in
the last two years.

BigBand relies on a small number of large MSO customers,
which overall have been spending less on its
flagship switched digital video products as the SDV
market matures.

Arris is aiming to save $7 million in operating expenses
per quarter, starting in the third quarter of
2012.

October