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ARRIS Throws the Video Gauntlet Down with $1.2 Billion Takeover of TANDBERG TV| January 17, 2007 | Broadband Infrastructure | Competitive Intelligence Report Analysts: Erik Keith, Ron Westfall
On January 15th ARRIS and TANDBERG Television announced that they have reached an agreement to combine the two companies through an acquisition of all outstanding TANDBERG Television shares by ARRIS. Analytical Summary • Current Perspective: Slightly positive on ARRIS’ acquisition of TANDBERG TV, because the move demonstrates ARRIS is finally making the huge, but logical, bet that the company is ready to compete long-term in the overall video and cable space as a major integrator partner that can compete with top-tier rivals such as Cisco and Motorola in an end-to-end solution sense. However ARRIS still must prove it can successfully integrate an acquisition of this magnitude and show the price for TANDBERG TV was worth it. • Vendor Importance: Very high to ARRIS and TANDBERG TV as the merger demonstrates both companies needed to combine into a larger entity with a more diversified portfolio and deeper channel resources in order to win more meaningful strategic bids from major carriers, including top-tier MSOs. The combination of ARRIS’ portfolio assets in areas such as CMTS, cable telephony, and cable modem technology with TANDBERG TV’s video networking assets in areas such as VoD server and head-end video encoding and video processing, position the new company to counter the solution propositions of the top-tier equipment rivals. • Market Impact: High on the overall broadband/cable infrastructure market, as the combination of ARRIS and TANDBERG TV creates a formidable contender within the digital video networking sector, i.e., by bringing together two vendors that already possess strong double-digit market share in their respective target markets (>20% market share for ARRIS in the cable head-end sector; 25% market share for TANDBERG TV in the video processing sector). Recommended Competitor Actions • Major cable infrastructure/video networking rivals Cisco and Motorola need to continue emphasizing that ARRIS faces an overall corporate integration challenge in merging with TANDBERG TV that neither company faces today. • Cable infrastructure/CMTS rivals Cisco and Motorola need to continue stressing that even the merger with TANDBERG TV, ARRIS lacks some key portfolio areas such as STB/PVRs and residential gateways that they possess today. Likewise BigBand possesses media routing platforms while Cisco owns carrier routing platforms and Motorola owns mobile assets that ARRIS/TANDBERG lacks. • Major broadband/IPTV networking rivals such as Alcatel-Lucent, Ericsson, Nokia Siemens, UTStarcom and Huawei need to continue emphasizing that ARRIS still cannot match their in-house portfolio assets in areas such as telco access, IMS/voice switching, and mobile access despite the acquisition of TANDBERG TV. • Video encoding/processing rivals such as Harmonic, Optibase, Scopus, RGB, Modulus and Terayon should stress the best-of-breed aspects of their respective platforms and that the pending merger between ARRIS and TANDBERG TV can cause disruption of focus on product development and service support. • VoD server rivals such as Entone, VBrick, Kasenna, BitBand, C-COR, Concurrent and SeaChange should position themselves as ready to take advantage of any potential fallout from historical TANDBERG and Cisco/Motorola relationships and that they offer cost competitive alternatives to Cisco, Motorola and ARRIS bundled solutions that include VoD server technology. Recommended End User / Customer Actions • Current ARRIS customers that are interested in the TANDBERG TV video networking/processing solutions, e.g., the MPEG-4 encoding/processing platforms, need to find out if ARRIS will offer incentives to their existing customers that are considering the TANDBERG solutions for advanced digital video network deployments/upgrades and move forward accordingly.
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