C-COR puts up $89.5 million for nCUBE
C-COR Inc. became a high-ranking player in the video-on-demand game literally overnight after striking an $89.5 million deal to acquire nCUBE Corp.
The acquisition automatically positions C-COR as one of cable's "Big Three" suppliers of on-demand servers and software, joining the ranks of SeaChange International and Concurrent Computer Corp.
The deal's total value is comprised of $20 million in cash, $35 million of senior unsecured five-year convertible notes, 4.5 million shares of C-COR common stock, and the assumption of undisclosed liabilities. The companies expect to close the deal in the second quarter of C-COR's 2005 fiscal year.
It's been rumored for months that Larry Ellison would sell nCUBE for the right price as the cable MSO sector continued to consolidate. It is anticipated that Ellison, as a large C-COR shareholder, will sit on the C-COR board. Needham & Company speculated in a research note that losses accrued by nCUBE over the years were a driver in the sale to C-COR.
With nCUBE in the picture, C-COR will find itself with VOD relationships with several major MSOs, including Adelphia Communications, Bresnan Communications, Charter Communications, Mediacom Communications, Shaw Cablesystems and Time Warner Cable.
C-COR said its expects the acquisition to add roughly $50 million in net sales in the 12 months following the closing.
C-COR said it plans to fold the Beaverton, Ore.-based VOD and ad insertion company into its software business unit. nCUBE President and CEO Michael Pohl will stay on to become president of the unit, and operate it out of Beaverton. Doug Engerman, who has been running C-COR's software business, will become COO of the division.
Pohl said the pairing of nCUBE's nABLE platform and C-COR's suite of OSS, network and workforce management software offers a "logical extension of this business."
C-COR's focus on nCUBE's software portfolio has opened up speculation that it will eventually phase out nCUBE's server/hardware business. But C-COR isn't saying when that might happen.
"We will continue to support [nCUBE's hardware] product line," said Ken Wright, C-COR's chief technology officer.
Still, nCUBE's nABLE backoffice package "is a very strategic fit with what we do in the OSS cable space," he added. "nCUBE has developments going on for a next-generation hardware platform for on-demand. They're well down that road. We're not going to just shut that off and walk away from the hardware."
C-COR, Wright added, will also continue to support nCUBE's ad insertion business because it provides a diversification of customers and another revenue stream.
On the VOD front, C-COR will continue the work nCUBE has done in hammering out interops with other server vendors. To date, nCUBE has announced integrations of nABLE with servers from Kasenna Inc. and MidStream Technologies.
"There's a lot more to be written on that," Pohl said, alluding that nCUBE has several others in the pipeline.
That strategy will place C-COR in direct competition with N2 Broadband, a VOD backoffice supplier and system integration specialist based in Atlanta, Ga.
For its part, N2 has announced OpenStream integrations and/or deployments with servers from nCUBE, SeaChange, Concurrent, Broadbus, Kasenna, Arroyo Video Solutions Inc., Entone, MidStream and InfoValue.
SeaChange and Concurrent, meanwhile, have not yet announced integrations with any third-party server makers.
The addition of nCUBE is the latest in a string of acquisitions by C-COR, which is reinventing itself as a supplier of next-generation broadband equipment and software for cable operators and other service providers.
nCUBE marks C-COR's fifth acquisition in this year alone. In 2004, the State College, Pa.-based company has snapped up Alopa Networks, a provisioning and OSS specialist; Stargus Inc, a network management software company; and two IP transport firms: Lantern Communications and Optinel Systems.
"If you look at where the industry is going...all of these [acquisitions] fit the strategy we have for an end-to-end solution for operators building a next-generation network," Wright explained.