Arris, Charter Nab ActiveVideo for $135M

An acquisition is in the air -- or in the cloud, to be more exact.

This morning, Arris Group Inc. (Nasdaq: ARRS) and Charter Communications Inc. announced they are forming a new joint venture with the intent to acquire set-top virtualization company ActiveVideo The purchase price is listed at approximately $135 million. Arris will own 65% of the new JV and will act as the sales channel for ActiveVideo's technology. The deal is expected to close, according to an Arris spokesperson, within the next 30 days.

ActiveVideo has followed a long road to success with its virtualization software. The company's CloudTV platform makes it possible to deliver web-based user interfaces, video content and interactive advertising to both legacy set-tops and modern IP-connected devices.

Despite key customer wins with the likes of Charter, Cablevision Systems Corp. (NYSE: CVC) and Liberty Global Inc. (Nasdaq: LBTY), however, service providers as a whole have been cautious with ActiveVideo's technology. The fact that both Charter and Arris are putting their money behind the CloudTV platform should go a long way toward building industry confidence.

For Charter, the investment emphasizes just how serious the company is about extending its Spectrum user interface across its customer footprint, and across many generations of set-top boxes. ActiveVideo is one of the primary technology providers behind the cloud-based guide along with Zodiac Interactive. Charter President and CEO Tom Rutledge has already said he expects to have Spectrum running on set-tops for about 1.5 million subscribers by the end of 2015. (See Charter Rides Video, Data Growth Wave .)

"ActiveVideo's CloudTV platform is one of the enabling technologies behind Spectrum Guide. We have worked very closely with ActiveVideo on the development of this technology, and now, as a 35% shareholder, are uniquely positioned to support the continued innovation and marketplace adoption of ActiveVideo's solutions," said Rutledge.

Perhaps more interesting than the spread of the Spectrum Guide, however, is the possibility that Charter could also use ActiveVideo's platform to experiment with delivering its pay-TV services on new non-set-top devices. At a press event in January, the cable operator showed a demo of the Spectrum Guide running on a Roku box. There is no current relationship between Charter and Roku, but the technology certainly makes one possible. (See Charter Thinks Outside the 'Worldbox'.)

From an Arris point of view, the new joint venture is significant in a number of ways. As Bruce McClelland, president of Network & Cloud and Global Services, explained it in an interview, the partnership with Charter is evidence of the strength of Arris' relationship with the company, and represents an opportunity to get in "on the ground floor on how they think about evolving their network."

This is despite the fact that Arris has so far been left out of Charter's Worldbox set-top initiative, where the cable operator has already announced vendor deals with both Cisco and Humax. (See Arris Likes Its Charter Chances Too.)

The investment in ActiveVideo also shows that Arris is hedging its bets in the set-top market. While continuing to promote and sell high-end gateway devices, the company is also making room for virtualization and a future where more and more services are likely to reside up in the cloud.

"I do think it's pretty complementary," said McClelland. "It's easy to get lost in the buzz over this stuff and think about set-tops going away or furthering commoditization. We don't think of it that way. We think it's very complementary that the functionality that makes the most sense to put in the network gets put in the network, and the functionality that makes the most sense to go in the home stays in the home."

Want to know more about video technologies? Video is sure to be one of the hot topics at Light Reading's second Big Telecom Event on June 9-10 in Chicago. Get yourself registered today or get left behind!

As for ActiveVideo, the company will remain an autonomous entity in the new joint venture, and CEO Jeff Miller will stay on in his leadership role.

"This joint venture gives us the ability to take ActiveVideo's vision to the next level by partnering with two industry forces such as Arris and Charter. This is a great opportunity to extend the promise of ActiveVideo's solutions," said Miller.

— Mari Silbey, special to Light Reading