Arris in Deal to Acquire Digeo for $20 Million in Cash

Communications technology company, Arris, announced last week that it has reached a deal to acquire Digeo, the Paul Allen-backed set-top box company best known for its flagship Moxi product line's Emmy-winning interface (which replaces the standard "spreadsheet" EPG interface with a so-called "cross-hairs" configuration, consisting of two intersecting animated lines at right angles to each other: customers use the left and right arrow keys on their remote control to scroll through a series of customizable categories--dubbed "filters" by the company--on the horizontal line: e.g. HDTV, sports, news, movies, photos, games, MP3 Jukebox, etc.; they then use the remote's up and down arrow keys to scroll through the sub-listings of the currently highlighted category, which appear as a vertical line intersecting the line of categories), for approximately $20 million in cash. Digeo--which last year underwent a major restructuring (see the article published on itvt.com, May 3rd, 2008) that saw then-CEO, Mike Fiedler, leaving the company, along with half of its staff, and president and COO, Greg Gudorf taking over his role, and that also saw the company focusing its product-development efforts on just two devices--is believed to have raised around $110 million since its launch, primarily from Paul Allen's investment vehicle, Vulcan Ventures. According to Arris, the Digeo acquisition (which is slated to close early in the fourth quarter), along with its recent acquisition of EG Technology, will provide it with substantial technical expertise in video networking, as well as an "innovative multimedia services delivery platform." The company says that the engineering talent and intellectual property it has acquired via the two transactions will be combined with its own internal development efforts, in order to accelerate the launch of "next-generation IP-based consumer video products and services," which it says will allow end-users to "cost-effectively integrate and distribute new forms of personalized multimedia content throughout the home."

Arris claims that it will continue to develop and market the current line of Digeo DVR products, which includes boxes targeted at cable operators and directly at consumers respectively. It promises that Moxi customers will "continue to enjoy uninterrupted service and updates." "As the global leader in broadband technology for the cable industry, Arris delivers the market position necessary to take the Moxi vision to the next level," Digeo CEO, Greg Gudorf, said in a prepared statement. "Arris recognizes the value of adding Digeo's highly innovative technology to its portfolio, allowing the company to integrate the Moxi line of products and services as core to its expansion into the digital home. Further, Arris recognizes the value Digeo's highly talented people bring to the equation. I am extremely pleased that the Digeo team will continue to drive the evolution of the Moxi platform." Added Arris chairman and CEO, Bob Stanzione: "Several years ago we laid out a strategy to establish Arris as a leader in video networking. Our strategy includes both organic development and strategic acquisitions. The Digeo acquisition, along with our acquisition of EGT last month, has enhanced our ability to aggressively pursue end to end video delivery initiatives."

According to Arris, the Digeo acquisition will see it gaining approximately 75 employees, located in Kirkland, Washington (note: an Arris spokesperson told the Seattle Times that the company expects to lay off around 10 of those employees). The company says that the addition of the Digeo engineering team will increase its R&D overheads by approximately $3 million per quarter. In addition to providing it with "a highly talented work force and award-winning products and technology," it is billing the acquisition as giving it access to an extensive portfolio of IP in such areas as DVR, home networking, ecommerce and multimedia. (Note: for more analysis of the strategy behind Arris's acquisition of Digeo, see Jeff Baumgartner's article in Cable Digital News, and Brier Dudley's article in the Seattle Times.)

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