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March 8, 2007
As expected, Arris Group Inc. (Nasdaq: ARRS) has dropped out of the bidding for Tandberg Television , leaving the prize for Ericsson AB (Nasdaq: ERIC).
In a brief announcement early this afternoon, Arris said it "will not extend or increase" its $1.2 billion cash-and-stock offer for Tandberg TV, less than two months after seemingly outmaneuvering Motorola Inc. (NYSE: MOT) and possibly other large suitors for the digital video tech specialist. The move came a day after Tandberg TV's board of directors unanimously endorsed Ericsson's $1.4 billion all-cash offer and withdrew from its earlier agreement with Arris.
In a brief prepared statement, Arris chairman and CEO Bob Stanzione said the typically conservative cable data and voice vendor has no stomach for a bidding war with the much larger Ericsson. "Although the Tandberg Television acquisition was a desirable transaction, our offer was fully priced and we believe a transaction at a higher price would not be in the best interest of our shareholders," he said.
Arris said it would pocket the $18 million termination fee from Tandberg, as well as $11 to $12 million in net gains on the sale of foreign exchange contracts that it had bought to hedge part of the purchase price. The company expects to come out about $20 million ahead, after running up $9 million to $10 million in expenses for the deal.
But Stanzione made it clear that Arris won't just head home with its tail between its legs. In his statement, he said the company "will continue to explore possible acquisitions and partnerships to expand and diversify our products and technologies."
Not surprisingly, the move immediately set off speculation that Arris might re-enter the bidding for Terayon Communication Systems Inc. , now the subject of a three-way contest among Motorola Inc. (NYSE: MOT), Cisco Systems Inc. (Nasdaq: CSCO), and Harmonic Inc. (Nasdaq: HLIT). Industry sources say Arris may have initially been part of that contest before the much larger Tandberg TV opportunity presented itself.
Some industry analysts think Arris could still shoot higher again. In a column late last week, CDN chief analyst Michael Harris suggested that Arris consider scooping up both Terayon and Harmonic to create "its own triple play" and bulk up its product portfolio to match Cisco's and Motorola's.
Similarly, in a recent research note, ThinkEquity LLC analyst Anton Wahlman argued that Arris would likely try to buy Harmonic, Scopus Video Networks (Nasdaq: SCOP), Optibase Ltd. (Nasdaq: OBAS), or another video encoding firm if its Tandberg TV bid failed.
— Alan Breznick, Site Editor, Cable Digital News
Cable/Video Practice Leader, Light Reading
Alan Breznick is a business editor and research analyst who has tracked the cable, broadband and video markets like an over-bred bloodhound for more than 20 years.
As a senior analyst at Light Reading's research arm, Heavy Reading, for six years, Alan authored numerous reports, columns, white papers and case studies, moderated dozens of webinars, and organized and hosted more than 15 -- count 'em --regional conferences on cable, broadband and IPTV technology topics. And all this while maintaining a summer job as an ostrich wrangler.
Before that, he was the founding editor of Light Reading Cable, transforming a monthly newsletter into a daily website. Prior to joining Light Reading, Alan was a broadband analyst for Kinetic Strategies and a contributing analyst for One Touch Intelligence.
He is based in the Toronto area, though is New York born and bred. Just ask, and he will take you on a power-walking tour of Manhattan, pointing out the tourist hotspots and the places that make up his personal timeline: The bench where he smoked his first pipe; the alley where he won his first fist fight. That kind of thing.
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