In a widely expected move, Motorola Inc. narrowed the number of players in the cable-modem-termination-system (CMTS) sector by announcing the acquisition of RiverDelta Networks Inc. for $300 million.
According to the merger agreement, which is subject to various closing conditions, Motorola will acquire all of RiverDelta Networks' capital stock in exchange for shares of Motorola's common stock. The final exchange ratio will be fixed immediately prior to the closing and based on the average trading price of Motorola's common stock at that time.
The Motorola/RiverDelta accord leaves Cadant Inc. as a potential acquisition target as the CMTS sector continues to consolidate. The arena narrowed last October when ADC Telecommunications Inc. purchased Broadband Access Systems Inc. Terayon Communications Systems Inc. remains a player, as does Pacific Broadband Communications, which is expected to release a product this fall.
RiverDelta, one of the few pure-play CMTS companies in the industry, has two DOCSIS 1.0-qualified boxes — the Broadband Services Router-64000 and a smaller, pizza-box-sized router, the BSR-1000. The 64000 is a high-density port, chassis-based device, while the 1000 is a modular box. "We expect [the 64000] to become our flagship CMTS product," said Motorola BCS vice president and general manager of network infrastructure solutions business Peter Sherlock.
Motorola's existing CMTS, the DCM 2000, is a modular device, and with both modular and high-density products in its portfolio, Motorola will be able to offer operators units for both large and small headends. Both the modular and RiverDelta's high-density CMTS include an RF switch connecting the CMTS cards to a spare card.
Motorola intends to merge the product lines, which will allow its customers to tie together metropolitan and regional networks delivering several types of services — the 64000 features SONET, Fast and Gigabit Ethernet interfaces. Part of the integration will be to create a platform with common software and user interfaces.
According to Patti Reali, senior broadband telecommunications analyst for Gartner Dataquest, Motorola has been No. 2 in CMTS market share behind Cisco Systems Inc., but it was clear Motorola lacked a CMTS that could be classified as "next-generation." RiverDelta and the 64000 fulfill that need and Motorola's acquisition "fundamentally threatens the dominant position of Cisco," she said.
Both companies have submitted products to Cable Television Laboratories Inc. for Data Over Cable Service Interface Specification (DOCSIS) 1.1 qualification. In addition, with RiverDelta under its wing, Motorola will continue the development of voice-over-Internet-protocol and PacketCable products.
"Motorola has been leading in its implementation of PacketCable protocols and architectures," said Sherlock.
Reali noted CMTSs are quickly evolving: "It's not just about CMTS [functionality]," she said. Instead, CMTSs, especially with multiple ISP and tiered data services around the corner, are becoming part of a larger Internet protocol routing and switching platform, capable of network management and ensuring quality of service.
Assessing the sector, Reali expects the CMTS market to soften a bit from last year's shipments, which totaled $645.9 million. To date, the sector is on track to hit between $400 and $500 million, she forecasted. Importantly, "at least 50 percent of that market will be outside of North America," said Reali. At the same time, Reali said the CMTS market could hit the $1.5-billion plateau in 2005.