Arris snaps up BigBand Networks for $172M
Arris is acquiring BigBand Networks for $172 million in cash. Arris, long tightly focused on the cable industry, bought itself an instant expansion into the telco market and positioned itself to take advantage of cable's evolution toward converged networks.
The purchase price is $2.24 per share in cash. The company explained it will end up laying out about $53 million net of estimated BigBand cash on hand.
BigBand is a key supplier of video processing systems and QAMs for Verizon FiOS and has deployed IP ad splicing equipment with AT&T.
The two companies have largely complementary product lines. Arris executives explained that as service providers converge their networks and gradually migrate to all-IP, Arris expects to be able to leverage the combination of its VIPr transcoder line with BigBand's video processing platforms. Arris executive commentary was from a recording of a conference call with financial analysts recorded earlier this morning.
Similarly, Arris' XMS video delivery system, largely used for ad delivery, should work well with BigBand's ad splicing systems.
The one major area of product overlap is that both companies sell QAMs. Arris actually expects this to be an opportunity to evolve QAM products, especially in light of cable's adoption of the CCAP (Converged Cable Access Platform) concept – the convergence of CMTS and QAM technology to improve network efficiency as traffic.
Bruce McClelland, president of Arris' Broadband Group, noted that evolution in cable network technology is only "just barely starting today." Very few operators are converging MPEG and IP on the same QAM channel today, he noted. That opportunity may kick in, maybe in 2012 or 2013, he said. "It'll happen over time; it won't be a flash cut."
That said, Arris believes it may have a bit of a jump on the market because the system it expects to exploit for that opportunity is BigBand's newer MSP platform, and that platform is already being deployed (at AT&T).
Arris execs also noted that BigBand had been working on interesting concepts in pushing network capabilities, such as caching and video processing, farther out along the edge of the network. To that end, there might be opportunities for evolving Arris' gateway product line. Not coincidentally, BigBand's position in the telco market might open a new market for Arris gateways.
"We'll see how that goes," McClelland said.
Arris executives expressed the opinion that BigBand might have been missing out on business because of its size. They said that simply being able to sell BigBand products through Arris' sales channels in Europe and Asia should be a significant opportunity.
Arris execs also noted that it will be picking up a valuable set of assets in BigBand's patent portfolio. The company has 70 patents either granted or in the process of being granted.