October 11, 2011

CCAP The Impetus Behind ARRIS/BigBand Deal

In a conference call today announcing ARRIS' purchase of BigBand Networks, ARRIS executives cited the work being done on a Converged Cable Access Platform (CCAP) as a big synergy between the two companies.

ARRIS will purchase BigBand for approximately $172 million in cash. The transaction is projected to close before the end of the year, at which time the BigBand assets will become part of ARRIS' broadband communications segment.

"The strategic rationale for this is fairly straight forward," said ARRIS Chairman and CEO Bob Stanzione. "We gain an accomplished team who are the leaders in broadcast video services. They're essentially the inventor of the delivery of switched digital video (SDV) services on a large scale.”

He continued, “They're a key supplier for both cable and telco service providers. We gain significant road map synergies and market expansion potential with the combination of our E6000 converged edge router platform and the Big Band MSP video processing and QAM platform, which should lead to increased share in this CCAP opportunity that's coming up in the next several years."

In addition to speeding time-to-market on CCAP, ARRIS noted synergies in other product areas, including local and targeted advertising, IP video distribution, and advanced video processing and compression. ARRIS also believes BigBand's patent portfolio and digital video networking technology will be a bonus as service providers move to an all-IP converged network architecture.

Although BigBand has struggled the past couple of years, in July the company won a deal with AT&T to provide IPTV ad splicing technology with its Media Services Platform (MSP). (For more, see BigBand Scores Ad Coup With AT&T Win). BigBand also counts Verizon FiOS as a customer.

Bruce McClelland, ARRIS' president/Broadband Communication Systems, reiterated, "One of the real key areas of synergy" is with ARRIS' E6000 converged edge router product line in combination with BigBand's MSP. The combination will offer technology for both integrated and modular CCAP products.

"We're working with lead customers with trials on the E6000 as a highly dense and scalable IP video and high speed data application platform," said McClelland. "On the MSP, a lead application is the highly dense edge QAM for VOD, SDV broadcast video and CMTS applications. The combination of these two platforms will evolve in such a way that we support both a fully converged and integrated architecture as well as a more modular architecture. This will provide our customers with a graceful migration from today's parallel networks for video and high speed data to a fully converged architecture."

ARRIS plans to quickly save money "through meaningful operating synergies such as the elimination of public company costs and the alignment of sales, marketing, and R&D initiatives," according to its announcement.

The acquisition will be conducted by means of a tender offer for all BigBand outstanding shares, expected to start within 10 business days. The deal also needs to go through all the customary closing conditions, including the acquisition by ARRIS of a majority of BigBand's shares and possible antitrust clearance.

-Linda Hardesty