Motorola Inc.’s deal to buy next-generation on-demand video-server vendor Broadbus Technologies Inc. for about $186 million in cash could be the start of a Darwinian shakeout in the ranks of VOD vendors.
Motorola did not release the sale price for privately held Broadbus. The deal is expected to close late this quarter.
Broadbus backers — including Battery Ventures, Charles River Ventures and Comcast Interactive Capital — had invested about $57 million, according to the firm’s Web site.
This was the first sale of a major on-demand technology supplier since C-COR Inc. bought Larry Ellison’s nCUBE Corp. in January 2005 for about $89.5 million.
Next might well be a long-rumored deal bringing privately held Arroyo Video Technologies Inc. into the Cisco Systems Inc. fold.
Cisco, which is said to have been interested in Broadbus earlier, and Arroyo representatives declined to comment.
Another possible acquisition target is on-demand vendor Concurrent Computer Corp., a public company with a market value of about $132 million. Its stock closed last Thursday at $1.83, up 6 cents from before the Broadbus deal was announced Tuesday. Motorola closed Thursday at $22.11, up 99 cents from Monday’s close.
Motorola now enters the highly competitive on-demand video systems market. Broadbus is among a group of next-generation on-demand vendors, offering a server technology based on dynamic random-access memory rather than traditional disk storage. It claims more than 60 deployments with operators including Comcast Corp., Charter Communications Inc., Time Warner Cable and Adelphia Communications Corp. (being acquired by Comcast and Time Warner).
Its open-standards based technology fits well with systems Motorola is developing, and can help lead to content delivery that bridges traditional television and wireless systems, according to Geoff Roman, corporate vice president of strategy and business development for Motorola’s Connected Home Solutions Business.
“We see this as something that works with mobile devices and it’s going to work with a new range of devices that are going to link in through Wi-Fi hot spots or over WiMAX, plus taking advantage of the existing installed base and growing that base over the conventional cable and telco environments,” Roman said.
Motorola will integrate Broadbus into the Connected Home Solution group, maintaining the Boxborough, Mass., headquarters and facilities in China.
Broadbus has a work force of about 130, and most of them — including most of management — will shift to Motorola, Roman said.
Josh Bernoff, vice president with the devices, media and marketing unit at Forrester Research, said a challenge is that U.S. cable companies have mostly made their on-demand technology choices and deployed systems to serve their digital-cable customers. “So where is a company like that going to find growth?”
GAINED A FOOTHOLD
But Broadbus has gained a cable foothold, despite competing against incumbents SeaChange International Inc., Concurrent and C-COR with nCUBE. Its dynamic random-access memory architecture does set it apart, but “it’s not clear if that is sufficient to get people to turn over their systems to something new,” Bernoff noted.
Arroyo is a younger company that hasn’t raised as much in private equity or spent as much on technology development. Comcast was an initial investor, and Kip Compton, Comcast’s former vice president of video and media architecture, is now director of business development in Cisco’s cable-products group.
A supplier of software that oversees how video is delivered and stored in networks, Arroyo would align with Cisco’s network-centric business and could add key technology planks for next-generation television systems, particularly network-based digital video recording services (such as Cablevision Systems Corp. is developing with Arroyo).