Motorola Pondering RiverDelta Purchase

7/22/2001 8:00 PM Eastern

Motorola Inc. is mulling the acquisition of RiverDelta Networks Inc. following an on-again off-again courtship that started to heat up again just prior to last month's National Show in Chicago, industry sources said.

A Motorola spokeswoman declined comment.

A RiverDelta official said it was company policy not to comment on rumors and speculation Though, in previous interviews, RiverDelta confirmed that it has received acquisition offers from "very recognizable names" within the cable industry.

RiverDelta, a start-up based in Tewksbury, Mass., makes advanced cable-modem-termination-systems and routing equipment, including its flagship chassis, the Broadband Services Router-64000, and a smaller, pizza-box sized routing box called the BSR-1000. Both chassis have been qualified for DOCSIS 1.0.

If a deal were to come together, RiverDelta's equipment would likely be folded into Motorola's Broadband Communications Sector division, which also makes and markets CMTS products.

Such a marriage would make plenty of business sense for both parties, said Kinetic Strategies Inc. president Michael Harris. A combination of RiverDelta's gear and Motorola Broadband's well-connected sales channels could give market-leading Cisco Systems Inc. "a run for their money," he said.

The level of Cisco's support to the cable industry has been questioned recently following layoffs in May that affected 5,000 workers worldwide. A source familiar with the layoffs said a high percentage of Cisco's cable sales force was affected.

A Cisco spokeswoman confirmed that cuts affected the company's cable group, but would not comment when asked how many in the unit were let go.

"Cisco is more committed than ever to the cable industry," said John Mattson, director of marketing for Cisco's cable business unit. "The layoff is over and done with, and we're moving forward." Cisco's high-density uBR1000-class CMTS is in limited field deployments today, Mattson said.

RiverDelta's equipment and Internet-protocol edge-routing potential could springboard Motorola Broadband into markets outside of cable, including fixed-wireless, Harris said.

A Motorola-RiverDelta merger could spark an expected consolidation of the struggling CMTS sector, which will be hard-pressed to match last year's $638 million in revenues, according to Gartner Dataquest projections. Cadant Inc., another fledgling CMTS vendor based in Illinois, also has been party to acquisition inquiries.

Broadband Access Systems Inc., yet another CMTS startup, went off the table on Oct. 2, 2000 when it sold out to ADC Telecommunications Inc. At the time, the stock deal was valued at $2.25 billion and ADC stock traded at $27.18 per share. ADC stock closed last Monday (July 16) at $6.55 per share.

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