Light Reading
Who's got $4.5B and wants in on the North American cable market? Sources at TelcoTV had at least one answer

Huawei Seen as Likely Moto Suitor

Craig Matsumoto
LR Cable News Analysis
Craig Matsumoto
11/12/2009
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ORLANDO, Fla. -- TelcoTV -- Speculation around here is that if Motorola Inc. (NYSE: MOT) wants to sell its set-top box and home networking division, the most likely suitor is Huawei Technologies Co. Ltd.

Of course, just because Huawei is the popular pick doesn't mean anything will happen. (See Huawei Seen as Likely Nortel Suitor.)

The rumor, reported by The Wall Street Journal yesterday but unconfirmed by Motorola, is that Moto wants to sell off its home and networks mobility division, which includes its set-top business. The price would supposedly be around $4.5 billion. (See Moto May Be Mulling Set-Top Sale.)

Huawei has that sort of cash, and it's on a big push to crack the North American market on many fronts, including cable. "They want to get into Comcast Corp. (Nasdaq: CMCSA, CMCSK) in a big way," one cable-industry source at the show said.

Huawei still carries a stigma that has carriers and MSOs shying away. But many of them might consider the set-top box to be an innocuous enough play, the source said. Moreover, many set-top models rely on fast, cheap manufacturing, something Huawei is good at.

Huawei already has some cable cred in North America. It's got Digital Terminal Adapter (DTA) and optical equipment deals with two mid-sized MSOs, and a deal to sell wireless gear to Cox Communications Inc. As for those Comcast dreams, Huawei, alongside Ericsson AB (Nasdaq: ERIC), has purportedly won part of the MSO's IMS buildout. Huawei is also angling to get some of Comcast's DTA action. (See Huawei Breaks US Set-Top Seal , Cox, Huawei Make Wireless Connection , and Huawei, Ericsson Get a Piece of Comcast's IMS Action .)

Exhibitors on the TelcoTV show floor late yesterday weren't surprised that Motorola might want to sell the set-top business. They were surprised to hear the business was profitable in the third quarter (operating income of $199 million on revenues of $2 billion), and many said their impression was that the business has been deteriorating. "I'm getting emails, LinkedIns, pings -- morale is s*** over there," the aforementioned source said.

Officials at Motorola's booth declined to comment on the rumor, of course, although Light Reading did catch a joke about the whole booth being for sale.

If Huawei doesn't buy the division, who else might? The price limits the possibilities, but here are some theories that popped up yesterday:

  • Microsoft Corp. (Nasdaq: MSFT): Its cable ambitions go back more than a decade, and many of those early efforts in North America came up short, even after a $1 billion investment in Comcast in 1997. (Microsoft sold off that stake in January 2009.) Microsoft's last meaningful set-top software presence with Comcast ended in 2007 when the MSO switched out the Microsoft TV Foundation platform and guide in Seattle, in favor of a navigation system that Comcast had already deployed in all its Motorola-based cable systems. (See Comcast to Drop Microsoft TV Guide .)

    Industry insiders at TelcoTV said Microsoft, which has turned its Xbox360 into a set-top of sorts using an over-the-top broadband video strategy, has the scratch and the motivation to buy the Moto unit, as it would automatically put Microsoft at the coveted top of the U.S. cable set-top food chain. (See BT Adds to Its IPTV Options, The Xbox X-Factor, BSkyB Offers TV Through Xbox, and Xbox 360.)

  • Ericsson AB (Nasdaq: ERIC): Ericsson outbid Arris Group Inc. (Nasdaq: ARRS) to snare Tandberg Television , giving Ericsson a entrance to the U.S. cable market along with a line of encoders and video-on-demand (VoD) back-office technologies. Snagging Motorola's set-top business would complete the home side of that video picture and counter Arris's recent $20 million purchase of set-top and software specialist Digeo Inc. (See Ericsson Offers $1.4B for Tandberg TV and Arris Digs Digeo .)

  • Cisco Systems Inc. (Nasdaq: CSCO): Cisco came up in conversations yesterday, but it's considered the darkest of dark horses. It's already firmly entrenched in the cable set-top business thanks to its $6.9 billion purchase of Scientific Atlanta almost four years ago (See Cisco to Acquire Scientific-Atlanta.) A Cisco/Moto combo would turn the U.S. cable box duopoly into a virtual monopoly, so such a pairing would have trouble passing antitrust muster, people here predicted.

  • Nokia Networks : Hearing that NSN might be a possible suitor for Moto's set-top business came as a bit of a surprise. But a couple of industry folks here reasoned that NSN may still be smarting after losing the Nortel Networks Ltd. wireless assets to Ericsson, and might view a purchase of the Moto set-top division as a new way to expand its North American presence. (See Nortel Wireless Winner: It's Ericsson!)

    — Craig Matsumoto, West Coast Editor, Light Reading, and Jeff Baumgartner, Site Editor, Cable Digital News

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    Pete Baldwin
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    Pete Baldwin,
    User Rank: Light Beer
    12/5/2012 | 3:52:35 PM
    re: Huawei Seen as Likely Moto Suitor


    So, would you be happy having Huawei as your set-top provider?


    Actually, there's an even more basic question to be asked: Would Moto be making the right move by selling the set-top/home networking business?

    goldenduke
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    goldenduke,
    User Rank: Light Beer
    12/5/2012 | 3:52:33 PM
    re: Huawei Seen as Likely Moto Suitor


    @Craig...What kind of question is that?


     'Would you be happy having Huawei as your set-top provider?'


    It's not like they're babysitting your kids, feeding them plastic-laced milk and making them eat soup with chopsticks.  When was the last time you looked at your microwave and said, ' Am I happy with Whirlpool as my microwave provider?'  It heats my hot pockets, I'm happy. 


    It's an STB, not exactly rocket science. That being said, I think every potential M&A action in the world starts off with you guys screaming, 'Is Huawei interested in Operator/Vendor X?'  With regards to Huawei you guys are pushing the envelope between rhetoric and reporting.  Let's see what happens.


    ciao for now...


     


     

    bollocks187
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    bollocks187,
    User Rank: Light Beer
    12/5/2012 | 3:52:32 PM
    re: Huawei Seen as Likely Moto Suitor


    The difference is the following. Motorola while does not have better technology  it does have a one thing and that is  "US public accountability"


    Huawei has no US 'public' accountability that is why we don't want them or fear then taking a bigger share of the market.  The last chinese company that scammed US folks was UTStarcom who is actually listed/delisted but rode the stock up and made fraudlent claims The NET is there is and contiues to be a  trust issues with Huawei there is no visibility of thier lleader on the web site, who are the accountable executives ? 


    Do not misread into what I am saying the same happen to other folks such as Fujitsu NEC etc until they managed to gain the trust as they took over transport solutions etc. The same road will be  travelled by  Huwawei and we end up buying STB from them - I have no doubt they will learn to be assimilated.


     


     


     


     

    goldenduke
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    goldenduke,
    User Rank: Light Beer
    12/5/2012 | 3:52:30 PM
    re: Huawei Seen as Likely Moto Suitor


    @Bollocks...I guess I can understand your argument in a perfect world.  However, 'No US Public Accountability' is not an argument I can accept in reality.  After the ridiculous lack of accountability by US companies operating in the US and employing US citizens which plunged us into a financial crisis...I think the argument of a 'lack of accountability to the US' just doesn't pack the punch it used to.  To think that this should be a prerequisite for doing business in the US is Utopian at best.

    Cooper10
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    Cooper10,
    User Rank: Light Beer
    12/5/2012 | 3:52:29 PM
    re: Huawei Seen as Likely Moto Suitor
    Wondering if EchoStar Technologies would kick the tires at Moto? Stranger things could happen.
    bollocks187
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    bollocks187,
    User Rank: Light Beer
    12/5/2012 | 3:52:26 PM
    re: Huawei Seen as Likely Moto Suitor
    Golden,

    The reality is if the company execs do wrong then they can and do go to jail, assets are recovered, family shame etc.

    Huwawei execs are immune given their location and residency. (ni implication they are corrupt)

    Today Huawei is a culturally different than the west it is viewed as a "socialist/communist" or anti-wallstreet entity ,if you prefer.

    The question is why do they remain so secrative about their finances and why do they not go Public (A mega IPO I'm sure).

    The Japan tech companies go public in Japan and use an ADR offering in the USA.

    Huawei has something to hide for sure.
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