Cable Tech

Arris Bids $730M for C-COR

Still rebounding from a failed Tandberg Television bid, Arris Group Inc. (Nasdaq: ARRS) has agreed to acquire C-COR Corp. (Nasdaq: CCBL) for $730 million in cash and stock. (See Arris Acquires C-COR.)

The deal, announced Sunday night, amounts to $13.75 per share, or about a 39 percent premium over C-COR's closing price Friday. C-COR is coming off a down month, however; Arris's press release notes the price is just 19 percent higher than C-COR's 30-day trading average.

The deal would give Arris a foothold in video on demand and potentially, in switched digital video (SDV). (See C-COR Sets Sights on SDV.)

While C-COR might be a worthy acquisition target, Arris has to feel like it was nominated for an Oscar and wound up with a Grammy. In February, Arris had seemingly wrapped up a purchase of Tandberg TV, only to get outbid by Ericsson AB (Nasdaq: ERIC). (See Ericsson Offers $1.4B for Tandberg TV.)

At that point, some analysts expected Arris to chase smaller game. One possibility could have been Terayon Communication Systems Inc. -- but Arris had stopped courting Terayon once the Tandberg TV deal looked solid. Terayon ended up in the hands of Motorola Inc. (NYSE: MOT) instead. (See Motorola Seals Up Terayon .)

An acquisition still seemed a likely route for Arris, which had been hoping to branch out from cable TV equipment into the world of video. C-COR was on the shortlist of candidates. (See Arris Mulls Next Move.)

Arris and C-COR have both seen their stocks slide since July. Arris closed at $14.26 Friday, compared with a 52-week high of $17.89. C-COR has fallen more dramatically, with shares down nearly 40 percent from a July peak of $16.00.

C-COR, in particular, has seen growth stall lately.

For its first quarter, which ends this month, analysts polled by Reuters Research expect C-COR to report revenues of $74 million. That's up from $69.6 million in last year's first quarter, but down from $74.4 million in the June quarter and $82.7 million in the March quarter.

C-COR remains profitable, with analysts predicting non-GAAP net income of 18 cents per share, up from 17 cents the previous quarter. To help the bottom line, C-COR sold its outside plant business in June and handed off some OSS assets to Sigma Systems last year. (See C-COR Divests Outside Plant Unit.)

Arris and C-COR have scheduled a press conference for 8:30 a.m. Eastern time Monday, at which time executives are expected to address crucial questions, such as who will pick the catering for that swank Global IP Summit. (See Slideshow: C-COR Global IP Summit .)

— Craig Matsumoto, West Coast Editor, Light Reading

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Pete Baldwin 12/5/2012 | 3:02:09 PM
re: Arris Bids $730M for C-COR Early returns are in: C-Cor stock up 25%, Arris down 11%.

What's your opinion?
Jeff Baumgartner 12/5/2012 | 3:02:09 PM
re: Arris Bids $730M for C-COR My first reaction beyond the expanded video play is that it gives Arris some necessary ammo to remain competitive with Motorola and Cisco/Scientific Atlanta.
materialgirl 12/5/2012 | 3:02:08 PM
re: Arris Bids $730M for C-COR The ultimate question may be what scale is really needed to be viable in this market. Without a truly disruptive solution, can Arris feed its R&D machine enough to truly run with the pack? Maybe ALU can add them to their mess.
spelurker 12/5/2012 | 3:02:08 PM
re: Arris Bids $730M for C-COR It seems like a good move for Arris. I might want a higher price if I were a C-COR stockholder.
Pete Baldwin 12/5/2012 | 3:02:06 PM
re: Arris Bids $730M for C-COR Agree with MG that scale is the issue -- and considering C-Cor was very clearly Arris' *second* choice, does it provide enough scale? It sounds like you were kidding about an eventual ALU buyout, but it might not be too far-fetched.

(That's pure speculation there, not a sourced/researched comment.)

Arris certainly had to do something, though, so give them credit for making a move.
Kshitij_Kumar 12/5/2012 | 3:02:05 PM
re: Arris Bids $730M for C-COR This one is a tough one to call.

Arris and C-COR have no product overlaps, so that's very good. Arris makes CMTSs, C-COR probably still sells the Alopa policy management gear, so that's synergistic (think Packetcable).

The HFC business is very complementary - Arris gets a cash cow to milk forever (if they leave it alone).

All positive so far.

The question is - will Arris be able to do something interesting with the VOD business (nCube) at C-COR? There could be some interesting possibilities there, but do both these companies have the guts to do something really innovative there?

There are great guys on both sides. It's a question of how well management can handle the merger so Arris doesn't get indigestion!
delphi 12/5/2012 | 3:02:04 PM
re: Arris Bids $730M for C-COR Both were very good companies who lost out when Cable went main stream. These were relationship based sales companies whose founders and execs are good friends with the old cable execs. The Cable industry will keep them around to ensure price control from market leaders; giving them just enough to stay competitive. They need to break this cycle.

They need to figure out a future for themselves other than the whipping post for the lowest price.
Jeff Baumgartner 12/5/2012 | 3:02:02 PM
re: Arris Bids $730M for C-COR Innovative use of the on-demand assets is probably a challenge faced by all the vendors...even those that specialize only in that, but the former ncube was always a proponent of the nDVR, so we'll have to see how that product continues to evolve. Also, Arris did a pretty good job with the Cadant buy a few years ago...now they're the No. 2 CMTS provider. But C-COR is a much bigger company so it will require much more integration work. Part of the challenge will be handling that significant integration once the deal closes, but keeping the eye on the ball
Kshitij_Kumar 12/5/2012 | 3:02:01 PM
re: Arris Bids $730M for C-COR Yup, and the companies are fairly distributed geographically. I know the C-COR side well (I was there through the Lantern acquisition) and they are distributed between State College PA, Connecticut, Oregon, Denver CO, etc. Arris is located in Atlanta GA, but may have other key locations too.

How do you bring together such a distributed company is going to be an interesting challenge.

Or maybe you don't bring them together. You let them keep working as they are now! Leave well enough alone, I guess.
Jeff Baumgartner 12/5/2012 | 3:02:00 PM
re: Arris Bids $730M for C-COR maybe there's something to be learned from C-cor's buy of nCube. Didn't ncube remain fairly anchored in Beaverton? Seemed they got that deal done and kept the talent intact.
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