By forking out $20 million to buy Digeo, Arris not only became a player in the DVR space, where it will compete directly with the likes of Cisco and Motorola, it also found a way to tap into what consumers want in terms of services such as home networking.
In a conference call this morning, Arris’ Bruce McClelland, president of the Broadband Communications Group, and Digeo CEO Greg Gudorf provided additional details on the deal that was announced yesterday.
“We’re very excited about the addition of the Digeo team to Arris and believe the combination will lead to broader adoption of the concepts developed by the Digeo team,” McClelland said. “The addition of the Digeo products and people, we believe, are highly complementary and will prove to be a great partnership going forward for us.”
Digeo’s product line includes the Moxi HD DVR, which was introduced at this year’s Consumer Electronics Show in Las Vegas, and the Moxi Mate, which was rolled out last month and connects to the HD DVR to send video content throughout a residence via a home network. Digeo has a third DVR box that it sells directly to cable operators.
The HD DVR, which sells for $799, and the $399 Moxi Mate are both available to consumers for purchase on Moxi.com and Amazon.com. While Gudorf said the retail devices are a small part of privately held Digeo’s revenues, the retail play will give Arris more insight into consumers.
“Quite frankly, one of the really cool things to this transaction is the foothold that Digeo has created in the consumer direct space with Moxi DVR and Moxi Mate that allows Digeo, and now Arris, to learn what consumers want and how they respond to this converged world of digital cable, Internet and home network coming together,” Gudorf said. “With those learnings, we can turn to the cable operators and say, ‘Look what consumers are wanting, look what consumers are using, look at what consumers are saying.’”
Gudorf said cable operators would be able to use consumer-based information to build their prospective roadmaps as IP over video matures.
Gudorf said Digeo’s board started to consider the sale of the company in the spring of this year after executing on its product line strategy. McClelland said Arris would keep using the Moxi brand, and yesterday’s announcement said that all 75 Digeo employees in Kirkland, Wash., would keep their jobs.
Arris currently spends roughly $100 million a year on research and development, and the addition of Digeo will add $3 million to R&D once the deal closes in the fourth quarter.
McClelland said the acquisition of Digeo would allow it to be a leader in the migration of video over IP to various devices. In the short term, Digeo’s technology will be combined with new voice and data gateways “to create a new category for converged home gateways.” In addition to helping cable operators manage the demand for more bandwidth, the end result of Arris’ converged service platform will also mean a better user experience for cable subscribers, according to McClelland.
McClelland said Arris would be developing and trialing IP video-related products over the next 12 months, but he said it could be up to 36 months before cable operators embark on a meaningful transition to IP-based video services, but that the transition is inevitable.
“These multimedia gateways will blend Internet-based content with service provider content in a seamless fashion [that’s] supported by the proven hosted delivery platform from Digeo for full access and control of the content,” he said. “The ability to kind of unlock that architecture and apply some of these concepts and content from multiple sources in a high-quality fashion to multiple devices is what has us the most exited about the Digeo concept and technology.”
By marrying the two companies’ technologies together, McClelland said Arris hopes to “become a real catalyst for how video is delivered to our service providers.”
Paul Allen-backed Digeo was founded in 1999 before it bought Moxi Digital in 2002. Digeo laid off half of its staff last year, while Gudorf said the company reexamined its product line and strategy.
Arris counts Comcast as one of its largest customers, and over the last 12 months it has done business with 1,000 operators. McClelland said Arris, which has 1,800 employees, currently derives 70 percent of its revenues from North American service providers.