The first big hostile takeover in the IPTV space is shaping up to be quite a fight: Ericsson's unsolicited $1.4 billion bid for Tandberg TV has flustered the chosen suitor Arris as well as Tandberg's management. There's a lot at stake here for all parties: This one could get ugly.
Swedish telecom company Ericsson's $1.4 billion bid is a 10.4 percent premium offer over Arris' $1.2 billion bid for Tandberg Television. Tandberg's management called the Ericsson bid "unsolicited" and still backs the Arris bid. In fact, Tandberg's management had already signed off on the Arris deal before Ericsson made its move--leading many to believe Arris will either make a higher bid or take the company to court if it accepts Ericsson's higher offer. The deal is crucial to Arris' future: The addition of Tandberg TV puts it within shooting distance of Cisco, Motorola and others in the telco TV market, but failing to ink the deal could box the company in as a bit player in cable modem termination systems (CMTS) and provider of embedded multimedia terminal adapters (EMTA). Arris is going to fight this tooth and nail.
Infonetics analyst Jeff Heynen says Ericsson will fight for Tandberg just as fiercely: "[The hostile takeover] is obviously a defensive move since Ericsson already had about 12 percent of Tandberg shares. When the bid came out a few weeks back from Arris, Ericsson realized that the only way to become a true player in the IPTV space was to become an end-to-end player--and it needs to have Tandberg TV's video encoding and processing assets to get that done."
Heynen added that Tandberg's telco TV assets alone are not compelling enough for such a big pricetag, but the company also has presence in the cable headend sector and satellite market. With cable upgrading to switch video and satellite moving from MPEG2 to MPEG4 the overall headend opportunity is pretty significant, according to Heynen.
Ericsson's bid marks the latest billion dollar IPTV-related acquisition by the company, which has already shelled out $2.1 billion for Redback Networks, $2.1 billion for most of Marconi and an undisclosed (though considerably smaller) amount for Entrisphere. The Marconi deal opened up deals for Ericsson throughout Europe, while the Redback and Entrisphere deals are paving the way for IPTV deals in the U.S. Tandberg TV will open up the U.S. market even more since the company's technology services more than 1.5 million IPTV subscribers, according to its corporate site.
So will $6.6 billion in IPTV acquisitions convince operators that Ericsson is serious about IP video? I think it will. And the company's IMS-based approach is sure to win them over as the network architectures migrate in that direction. Ericsson needs to step up its carrier deals: Vodafone Iceland just announced a deal with Ericsson. C'mon, $6.6 billion ought to bring in bigger fish. -Brian
P.S. While we're on the subject of IMS, join me next week as I host the Fierce Live! Webinar: Test for IMS Success, sponsored by Empirix. We'll tackle legacy network issues, multi-vendor interoperability and other complexity issues that IMS brings up. Register for free here.