Optical/IP Networks

Riding the Cable Consolidation Wave

Why should telecom players have all the fun? The cable industry continued with its own wave of consolidation late last month as Motorola plunged into the video-on-demand (VOD) market through its announced acquisition of startup Broadbus Technologies on July 25. There could be more to come.

Cisco Systems turbocharged the cable rollup race by gobbling up Scientific-Atlanta in February. Now Lucent/Alcatel is eyeing a major push into cable following its IPTV and FTTP success with U.S. telcos. Nokia/Siemens could also make a move in an effort to unseat incumbent Nortel, given Siemens' presence in the PacketCable softswitch market.

Classic cable pure-plays like Arris and C-COR are logical takeover targets. Or they may opt to buy other, smaller firms to beef up against their larger brethren. Other players include cable incumbents Harmonic, Terayon, and Vyyo; VOD suppliers SeaChange International and Concurrent Computer; and billing and OSS players CSG Systems and Convergys.

Who's next to buy and what will they be buying? Below, we took a look at the major incumbents and their cable equipment portfolios. Let's take a look at what is stocked and short in each gorilla's cupboard.

Cisco/S-A and Motorola, the two largest cable vendors, have the broadest product portfolios for MSOs by far. Their lineups include everything from digital set-tops to DOCSIS modems and CMTSs, plus HFC infrastructure and optical solutions. Cisco has a PacketCable CMS (softswitch) and service control platform, both of which Motorola now lacks. But Moto has beat Cisco into VOD through its purchase of Broadbus. Neither has a PacketCable Multimedia (PCMM) Policy Server. Arris has the next most complete product suite for cable and could prove a nice fit for either Lucatel or Nortel.

There is also a cadre of cable startups that could become tasty morsels for the growing infrastructure gorillas. Here's our top eleven list (top tens are so passe):

Most of these startups contend that they are working to build sustainable businesses, not just building to sell. That is to be expected. At the end of the day, though, venture capitalists want their money back. And then some. That requires a liquidity event either through a merger, a sale, or an initial public offering (IPO).

Over the course of the next two weeks, we'll publish a profile of one of these companies each day and explain which make good acquisition bait and for whom.

Ñ Michael Harris, Chief Analyst, Cable Digital News

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