Arris (Nasdaq: ARRS) was the top bidder for Google's (Nasdaq: GOOG) Motorola Home business unit, and will pay $2.35 billion to effectively combine two of the industry's legacy equipment vendors.
Google acquired the business unit when it purchased Motorola Mobility for $12.5 billion earlier this year; the business also makes Motorola's line of smartphones. The search engine giant had made it clear throughout the past few months that it didn't want to be in the telecommunications equipment business and was willing to sell off the Motorola Home unit, which traces its roots back to the earliest cable TV equipment vendor, Jerrold Electronics.
It was believed that Pace Plc (LSE: PIC.L), which also said it was bidding on the unit, would be the leading contender in an effort to add Moto's set-top boxes to its product lineup, but Suwanee, Ga.-based Arris swooped in to complete what Chairman-CEO Bob Stanzione described as a "transformational combination of two complementary business (that) will create a leading end-to-end provider of today's video, data and voice products and tomorrow's next-generation IP-based broadband products."
While there are a ton of redundancies in the two companies' product lines, including headend gear and cable modem products, Arris is grabbing a new foothold in the set-top box business for IPTV and cable operators. Arris will also acquire "engineering expertise to accelerate best-in-class end-to-end solutions to a broader customer base," Stanzione said.
The combined company is expected to generate between $100 million and $125 million in annual cost synergies, Arris said.
"Our Home business has been a vibrant part of Motorola Mobility's portfolio, innovating while delivering strong financial performance," said Dennis Woodside, Motorola Mobility CEO. "The industry faces its biggest technology transformation and together Arris and Motorola will be able to accelerate related innovations such as the introduction of the IP connected home environments that service providers need and that their customers crave."
Google had placed former Charter Communications (Nasdaq: CHTR) CTO Marwan Fawaz in charge of Motorola Home, in part to calm nervous telecom service providers about the direction the overall company was taking. The combination with Arris, he said, "promises to transform how service providers deliver the smart, simple connected home to consumers throughout the world."
If all goes well, the transaction will close by the second quarter of 2013.
For more:
- Arris issued this press release
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