Moto Buys VOD Vendor Broadbus
News Analysis Alan Breznick, Cable/Video Practice Leader, Light Reading 7/25/2006
The move by Motorola, forecast in a July 13 Cable Digital News story on the on-demand business, will give the consumer electronics giant a small but growing VOD server vendor to round out its digital video offerings for both cable operators and phone companies. (See Cisco, Motorola Vetting VOD). Several market analysts and other industry experts thought a Motorola-Broadbus marriage might happen because Motorola needed a VOD server vendor and felt more comfortable acquiring another hardware-centric firm.
"As part of our strategic exercise, we identified [VOD] as an adjacent space where we wanted to grow our market presence," says Geoff Roman, vice president of strategy and business development for Motorola. "We took a broad look at the technology players that are out there… We see them [Broadbus] as a very cost-effective, very scaleable platform."
Roman says Motorola officials also see their planned purchase of Broadbus as a catalyst for delving further into the emerging switched digital video, time-shifted TV, and mobile video markets. He envisions incorporating the firm's "flexible, next-generation" technology into Motorola's digital set-tops and other TV equipment over the next 18 to 24 months. "It's really just a systems integration task," he says.
Privately owned Broadbus, which builds customized video servers with loads of random access memory (RAM) to deliver VOD streams, is a startup that has made early inroads into the cable on-demand market. Capturing business from such leading VOD players as SeaChange International, the seven-year-old firm boasts that it has notched more than 60 commercial deployments through pacts with top North American MSOs, including Adelphia Communications , Charter Communications Inc. , Comcast Corp. (Nasdaq: CMCSA, CMCSK), Mediacom Communications Corp. , Rogers Communications Inc. (NYSE: RG; Toronto: RCI), and Time Warner Cable Inc. (NYSE: TWC).
At last month's Cable-Tec Expo show in Denver, for instance, Broadbus announced that such major MSOs as Charter, Comcast, and Time Warner have now deployed its integrated VOD solution with Tandberg Television in more than 30 markets. The company's B-1 Video Server has also earned glowing reviews from technology publications, prompting griping among jealous competitors.
Based in Boxborough, Mass., outside Boston, Broadbus has raised $57 million in venture capital funding over the last couple of years. Key investors include Battery Ventures, Charles River Ventures, Infineon Ventures, Star Ventures, Wolf Ventures, and -- perhaps most importantly as far as Motorola is concerned -- Comcast Interactive Capital. Comcast is a huge customer for Motorola, buying millions of digital cable set-top boxes, cable headends, and other equipment.
The move also increases pressure on Motorola's chief rival in the cable equipment market, Cisco Systems Inc. (Nasdaq: CSCO), to dive deeper into the cable and digital video markets through acquisitions in the VOD space. Sources say Cisco, which has been scouring the on-demand server market in recent weeks, is seeking to scoop up Arroyo Video Solutions Inc.
Market analysts view a Cisco alliance with Arroyo as logical because Arroyo is much more of a software play than Broadbus. It's believed that Cisco, fresh off its $7 billion takeover of Scientific-Atlanta earlier this year, is looking to add software capabilities to its cable roster instead of more gear. The VOD gap is considered particularly glaring for Cisco because, even more than Motorola, the company is seeking to serve both the established cable and emerging IPTV markets with infrastructure hardware and software.
Unlike Broadbus, privately owned Arroyo takes off-the-shelf hardware from IBM for its VOD servers and then adds its customized software solution. But, like Broadbus, it's considered a hot startup and counts Charter, Comcast, and Time Warner as MSO customers as well.
Motorola's letter of intent to buy Broadbus may also spur a smaller player, Arris Group Inc. (Nasdaq: ARRS), to accelerate its purported plans to enter the digital video field. Several analysts and other sources believe that Arris is considering a buyout of Concurrent Computer Corp. (Nasdaq: CCUR), the second biggest VOD player after SeaChange International Inc. (Nasdaq: SEAC), because Arris is now much smaller than its two chief rivals, Cisco and Motorola, and needs to bulk up to compete.
Arris has worked closely with Concurrent in conducting interoperability tests of the former's new modular cable modem termination system (M-CMTS). Plus, Arris officials have also been quite vocal about their ambitions to expand beyond their high-speed data and telephony expertise into video and/or wireless technology.
Even if all these planned and expected deals go through, though, the VOD market will remain crowded with numerous small and mid-sized firms. Besides SeaChange, Concurrent, Broadbus, and Arroyo, today's company roster includes such other server vendors as C-COR Corp. (Nasdaq: CCBL) (through its earlier acquisition of n-Cube), Entone Inc. , Harmonic Inc. (Nasdaq: HLIT), and Kasenna Inc. , among others. Plus, there are such other related cable tech vendors as Tandberg and Modulus Video Inc. that are considered ripe for acquisition.
"I think you're going to see a fair number of acquisitions, not only by us," Motorola's Roman says. "I think there's going to be a lot of consolidation across the overall space that we serve."
— Alan Breznick, Site Editor, Cable Digital News