Arris is putting its shoulder into developing IP video gateways for cable operators. As part of that strategy, this week it picked up Paul Allen’s DVR venture, Digeo, for $20 million in cash (see Arris Buys DVR Maker Digeo For $20 Million).
That’s a steal, considering Digeo’s revenue run rate was about $20 million annually (around $5 million per quarter, Arris executives told investors yesterday) and that Allen reportedly sank more than $110 million into Digeo.
Virtually all of Digeo’s revenue comes from cable operator customers, including Charter Communications, which of course represents Allen’s biggest investment. Around 300,000 Moxi DVRs to date have been deployed with seven operators (others include Time Warner Cable, Comcast and Oregon’s BendBroadband).
So what does the deal do for Arris?
Bruce McClelland, president of Arris’s Broadband Communications Systems business unit, said on a conference call with reporters that a new line of IP-enabled gateways will “blend Internet content with service-provider content… giving the subscriber a rich entertainment experience.”
Analysts see the move as a long-term play, rather than a short-term win.
In a note to clients this morning, Jefferies & Co. analyst George Notter writes, “We believe it makes sense for Arris to increase its strategic position in video networking. Nonetheless, the Digeo and EGT deals won’t significantly move the needle relative to Motorola, Cisco, and the consumer electronics companies which are well positioned for the emerging IP Gateway space.”