& cplSiteName &

Arris Swings for the Fences

Jeff Baumgartner
The Bauminator
Jeff Baumgartner
12/20/2012
50%
50%

11:00 AM -- I was not surprised that Arris Group Inc. emerged as the top bidder for Motorola Home, but I was shocked to learn that it put up $2.35 billion in cash and stock -- near the top of the $1.5 billion-to-$2.5 billion range that Google was expected to fetch for the maker of set-tops, video software and access gear.

After all, this is the same Arris that took its toys and went home when Ericsson AB upped the ante for Tandberg Television. This is the same Arris that paid $60 million for a cable modem termination system (CMTS) startup called Cadant Inc. in 2002, when, just two years earlier, ADC set the market by acquiring a similar startup, Broadband Access Systems, in a stock deal valued at a nutty $2.25 billion at the time. Arris nabbed video processing startup EGT Inc. for a song in 2009. It timed its purchase of BigBand Networks Inc. when the switched digital video (SDV) specialist was scuffling.

So, there's ample evidence that paying top dollar is not the Arris way. It's been known as a careful but shrewd deal-maker, content on taking walks, hitting singles and scoring the occasional double. This week it grabbed Wonderboy off the rack and took a glorious swing for the bleachers.

Arris Chairman and CEO Bob Stanzione didn't let this once-in-a-career, future-altering opportunity pass him by. He unblinkingly went all out to a strike a deal that's not only poised to remove Arris from the long shadows of Cisco Systems Inc. and give it a legitimate shot at becoming a global broadband and video powerhouse, but also to cement Stanzione's legacy.

But we don't know yet how that legacy will play out. The challenges ahead are not anywhere near as small as the deal is large for Arris.

Arris has acquired plenty of companies over the years, but nothing like this. It's now tasked with swallowing one that's more than twice its size, while also taking on nearly $2 billion in loans.

And, despite the talk about "synergies" between the two companies, there are some significant product overlaps that Arris will have to sort through. On Wednesday night's call, Stanzione stressed that Arris doesn't plan to exit any businesses. But it would seem likely that Arris will have to think about selling off the redundant pieces or pitching them altogether. It simply can't swallow Motorola Home whole.

There's going to be an unavoidable shakeout that will involve both people and products. That planning process, Stanzione said, gets under way this morning.

And, if Arris can execute the integration properly, there are good things that could come of the deal. Arris, for example, thinks it can achieve $100 million to $125 million in annual cost synergies.

And it could address one of Arris's historic shortcomings -- its reliance on Comcast Corp. and Time Warner Cable Inc., which accounted for about 50 percent of sales in the most recent quarter. If just one of them sneezes, Arris catches pneumonia, as the saying goes.

That vulnerability shrinks significantly with Motorola Home. Comcast and TW Cable are also the two largest customers of Motorola Home. But, together, Arris and Motorola Home will enjoy a much more diverse customer base that includes a better mix of cable operators and telco customers, with their top five combined customers representing 51 percent of revenues.

Like any acquisition, this one comes with the potential for risks and rewards, amplified by the relative size of Arris's latest prize. Stanzione and Co. did what it took to get the deal. Ahead comes the hard part -- making it work.

For more



— Jeff Baumgartner, Site Editor, Light Reading Cable

(1)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
More Blogs from The Bauminator
Don't expect anything more to pop for a while, but one analyst sees John Malone & Co. as the 'logical, ultimate acquirer of Ziggo' if the price is right
Cable operators will need to free up at least 24MHz of spectrum for Docsis 3.1. But why is that the magic number?
Liberty Media's rumored plan to snag a 25% stake in Charter for $2.5B could aid the MSO's M&A strategy
Top US cable operators lost 1.41 million video subs in 2012, but the bleeding continues to show signs of slowing in a saturated pay-TV market
Aereo streams its 'no cable required' tagline into the video world. Will consumers tune in to the message?
Light Reading’s Upskill U is a FREE, interactive, online educational resource that delivers must-have education on themes that relate to the overall business transformation taking place in the communications industry.
NEXT COURSE
Wednesday, September 28, 1:00PM EDT
Gigabit 101
Will Barkis, Senior Technology Analyst, Orange
UPCOMING COURSE SCHEDULE
Friday, September 30, 1:00PM EDT
Gigabit & the Great Migration
Robert Howald, Vice President, Network Architecture, Comcast
Wednesday, October 5, 1:00PM EDT
Gigabit & Smart Cities
Joe Kochan, COO & Co-Founder, US Ignite
Friday, October 7, 1:00PM EDT
Gigabit & DOCSIS 3.1
Ty Pearman, Director, Access Architecture, Comcast
in association with:
From The Founder
Light Reading today starts a new voyage as part of a larger Enterprise.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Interviews
Global Services: The $40B Face-Off

9|26|16   |   05:53   |   (0) comments


More service providers than ever before are battling it out to win a slice of what is now a $40 billion global communications services pie, explains Ovum Principal Analyst David Molony.
LRTV Documentaries
MEC Congress: The Key Takeaways

9|22|16   |   03:25   |   (3) comments


Three key takeaways from the Mobile Edge Computing (MEC) Congress in Munich, Germany.
Wagner’s Ring
Time to Shut Up About 'Dumb Pipes'

9|22|16   |     |   (12) comments


Service providers can't compete with OTT players. It just isn't in their DNA. Instead, service providers need to embrace what they're good at -- providing reliable, secure connectivity.
Wagner’s Ring
Keeping Your Tech Career Going After 50

9|21|16   |     |   (13) comments


How do you keep your career moving forward when you're past the half-century mark?
LRTV Interviews
Peering Into the Digital Future

9|20|16   |   04:25   |   (0) comments


Nick Thomas, practice leader of digital media at Ovum, talks about how digital transformation in the technology, media and telecom sectors will enable the development of a new range of applications and services for enterprises and consumers and how the upcoming Digital Futures event in London will examine ...
LRTV Custom TV
Napatech Tackles NFV's Major Challenge

9|7|16   |   08:42   |   (0) comments


One of the main challenges for network operators introducing NFV is to combine performance and flexibility in a cost-effective way, but there is a solution, explains Napatech's Dan Joe Barry.
LRTV Custom TV
Huawei Optical Innovation 2016

9|6|16   |     |   (0) comments


Highlights of the 2016 Huawei Optical Innovation forum.
LRTV Huawei Video Resource Center
Are You Ready for Huawei Connect 2016?

8|31|16   |     |   (0) comments


Join us for an exclusive sneak peak of Huawei Connect, an integrated conference for the global ICT ecosystem taking place in Shanghai.
Between the CEOs
CEO Chat: UXP's Gemini Waghmare

8|26|16   |     |   (0) comments


Light Reading CEO Steve Saunders and UXP Systems CEO Gemini Waghmare discuss the strategic importance of digital identity for operators in the midst of transformation.
LRTV Custom TV
F5 Virtual Network Function Integrations With Partner Orchestration Platform

8|24|16   |   6:38   |   (0) comments


F5's Kishore Patnam, product manager for F5's service provider solutions, discusses why service providers are moving towards virtualization and how his clients are utilizing F5's solutions.
Between the CEOs
CEO Chat: Intel's Alexis Black Bjorlin

8|17|16   |   06:23   |   (0) comments


Join us for an in-depth interview between Steve Saunders of Light Reading and Alexis Black Bjorlin of Intel as they discuss the release of the company's Silicon Photonics platform, its performance, long-term prospects, customer expectations and much more.
Telecom Innovators Video Showcase
Accelerating Telecom Digital Transformation With Nominum DNS

8|1|16   |   12:04   |   (0) comments


Light Reading's Steve Saunders gets an update from Nominum CEO Gary Messiana on how his company is helping carriers on the digital transformation journey.
Upcoming Live Events
November 3, 2016, The Montcalm Marble Arch, London
November 30, 2016, The Westin Times Square, New York City
December 1, 2016, The Westin Times Square, New York, NY
December 6-8, 2016, The Westin Excelsior, Rome
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Hot Topics
Keeping Your Tech Career Going After 50
Mitch Wagner, West Coast Bureau Chief, Light Reading, 9/21/2016
Time to Shut Up About 'Dumb Pipes'
Mitch Wagner, West Coast Bureau Chief, Light Reading, 9/22/2016
Comcast Will Go Wireless in 2017
Mari Silbey, Senior Editor, Cable/Video, 9/20/2016
Sprint CEO: We'll Lease Spectrum as Soon as Possible
Dan Jones, Mobile Editor, 9/20/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Light Reading CEO Steve Saunders and UXP Systems CEO Gemini Waghmare discuss the strategic importance of digital identity for operators in the midst of transformation.
Join us for an in-depth interview between Steve Saunders of Light Reading and Alexis Black Bjorlin of Intel as they discuss the release of the company's Silicon Photonics platform, its performance, long-term prospects, customer expectations and much more.
Animals with Phones
You Thought Your Customer Service Was Unreliable... Click Here
Live Digital Audio

A vital part of increasing the number of women in comms is transforming the ways companies can support and empower women. While progressive company policies that support both men and women in achieving work-life balance are a step in the right direction, creating a company culture that supports those policies can at times be more challenging.

During this show, we'll talk to Lynn Comp, Senior Director of Industry and Sales Enabling (ISE) in the Network Platforms Group at Intel, about why those challenges exist and how companies can overcome them. She'll provide insight into how Intel has worked to create a culture that supports work-life balance, and provide steps and guidance for other companies wishing to do the same. We will also leave plenty of time to get your questions answered live on the air.