The acquisition of Israeli VoD server specialist Bitband into the Motorola Home & Networks Mobility business, is one of the strangest deals we have seen in 8 years of following IPTV. Bitband, which perhaps didn’t actually have a ‘For Sale’ sign up has effectively been interested in hearing offers for the past three, possibly four years.
But why would a division of Motorola which has suddenly begun to lose market share, and which is part of the division that is now rumored up for sale itself, need to go out and buy such an asset?
To make sense of this we have to put one of two interpretations on the deal. Either Motorola realized that in order to make the Video Networks part of the business attractive enough for future development, it had to fill out its portfolio of VoD server offerings, or it had a problem at a specific client. Anyone buying Home and Mobility Networks, we are sure, will break it up. It consists of wireless access systems, including cellular infrastructure and wireless broadband, and the business it has built up around cable, based on what it acquired from General Instrument a decade or so ago.
For the most part that is set top boxes, conditional access systems, cable head ends, and Cable Modem Termination Systems, and DOCSIS cable modems and CPE. In the last few years, with acquisitions which include IPTV set top maker Kreatel and Broadbus, Motorola has taken this division into IPTV, on the back of know how it picked up at AT&T’s U-Verse installation, and its partnership with Microsoft Mediaroom, and has used it to create a international IPTV operation. This is primarily a European business, and to cement that business, it needed perhaps a conventional non-American VoD supplier like Bitband. Broadbus VoD is based on solid state memory and the market never really went that route because it was expensive. Instead Flash memory VoD servers from companies like Edgeware is the new frontier. Prior to that, distributed appliance-style VoD servers with inherent content management and distribution from a central hub, a technology invented by Bitband, was dominant in IPTV.
The only company in the world where all three of those businesses (cellular, cable and IPTV) might stay together is at Motorola, and if this division is sold, then someone will want its cellular capability, another US company will want the cable base and a third company will want the international IPTV base.
Industry insiders have suggested that the Broadbus team was trying to build a disk based replacement VoD server for a key client account, but had not been able to complete the work and the service had to be bought in.
We don’t buy that idea, because Motorola has long been happy working with smaller players, as it did for several years with Modulus, before it became strategic and the company acquired the US encoder maker. So it could have partnered out of any customer mess, which makes us think this is a ‘shaping’ maneuver, for subsequent resale.
Broadbus in truth is more of a cable VoD system anyway, so prior acquisition product lines, such as Kreatel, Modulus, another encoder maker Tut Systems, with DSL gateway supplier Netopia, may all form a kind of Telco supplier nucleus, while Broadbus sits closer to the old cable set top business.
But even here it is hard to imagine the type of buyer that each grouping might attract. Cellular networks needs to go to one of the companies that already had its fill sifting through the Nortel assets. The Cable business is the one that has gone ex-growth and which carries with it the resentment of trapping the entire US cable industry into expensive equipment in a conditional access lock in for ten years (a bit like Apple’s iPod Fairplay lock-in).
The IPTV arm is a mixture of old world and new world IPTV, with customers in Mediaroom and pre-Mediaroom accounts, stretching right around the world. This latter is set fair for a Chinese or other Asian buyer, while the cable business could go to a smaller US firm, Arris springs to mind if it doesn’t have too many product overlaps, or a larger company like Cisco to merge with its Scientific Atlanta offerings.
But all of that makes little or no sense if the successful cellular networks business does not find a home. Motorola could in fact be thinking in terms of selling off only part of the Home and Networks Mobility business, the part in cellular networks, and may keep either, or both of the other businesses, which would position the Bitband deal as spending some of the money it expects to get for cellular prematurely, on growing IPTV.
Bitband brings with its 60 IPTV deployments made over the years we understand that the deal value, though not announced was only in the region of its accumulated VC funding, around $20 million, a relatively low price, but not in the current times.
BitBand is best known for its deal with Fastweb in Italy where it put IPTV on the map ahead of other regions of the world and apart from VoD it has technology in adaptive streaming and content delivery networks.