Motorola to Buy Tut for $39M

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Motorola is adding another piece of hardware into its Internet-protocol-TV tool kit, announcing plans Thursday to acquire Tut Systems, a maker of IPTV video-encoding and processing equipment, in a deal worth $39 million.

The deal marks the third IPTV-related acquisition this year by Motorola’s Connected Home Solutions group. Last month it bought Netopia, a maker of digital-subscriber-line equipment, for $208 million in cash. In January, it acquired Kreatel Communications, a Swedish IP set-top-box and middleware vendor.

Upon completion of the transaction, Tut will become a wholly owned subsidiary of Motorola and be integrated into its Connected Home Solutions group. Motorola will maintain Tut’s operations in Lake Oswego, Ore.; and San Diego and Pleasanton, Calif.

Tut, founded in 1989, originally targeted broadband-networking products for providing high-speed-data access for homes and multiple-dwelling units. More recently, the company has focused on the IPTV market, and it now counts more than 160 IPTV-service providers worldwide as customers.

For the first nine months of 2006, Tut reported revenue of $27.8 million and a net loss of $9.1 million.

"This transaction brings together the telco-aware IPTV-processing capabilities of Tut Systems with Motorola's proven video-delivery expertise,” Dan Moloney, president of Motorola’s Connected Home Solutions business, said in a prepared statement. “Together, our combined portfolio will provide service providers with next-generation solutions for delivering rich video experiences into the connected home and out into the world."

Tut’s equipment supports MPEG-2 and MPEG- 4 AVC video compression, as well as other features such as ad insertion and conditioning of video and audio.

Motorola’s offer for Tut of $1.15 per share is a 19% premium over Tut’s closing share price Wednesday. The companies expect the acquisition to close in the first quarter of 2007.

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