Is Arris in Time to Save Motorola’s STB Business?
On Thursday, Google announced it was selling the set-top box division of Motorola to Arris Corporation for $2.35 billion in cash and stock. Google acquired Motorola Mobility Holdings in May of this year for $12.5 billion. The major assets of Motorola at that time (in addition to the substantial set-top division) were the mobile phone business and a large portfolio of patents. As part of the acquisition, Arris also receives some of those patents pertinent to the set-top box business. Pace, the British set-top box maker, was also involved in the bidding for the business but ultimately felt the price was too high and withdrew.
When the deal was first announced in August 2011, much hoopla was made in the press and statements from Google about the patent portfolio. The mobile phone group, which is totally dedicated to the Android operating system, was also lauded as a perfect fit for Google. It would allow Google to “super-charge” the android phone market. However, little attention was paid to the humble set-top box business that was coming along for the ride as part of the deal. Some speculated that Google could put Google TV (then a new product) on the STBs. But this was always a non-starter since the cable companies, the primary customer for the STBs, would never accept Google TV on their networks.
I said at the time that the STB business was a bad fit for Google and that the company should sell it as quickly as possible. Unfortunately, it has been 14 months since the deal was announced and in that time the STB group is considerably depleted. Google laid off 4,000 Motorola employees in May. But more damaging still is the year that competitors (such as Cisco) have had to erode Motorola’s dominance with its core cable customers. When I asked Cisco about the acquisition last year, several executives commented that “their phone was ringing off the hook” with anxious cable executives looking for options. A year is certainly long enough for even the notoriously slow moving cable industry to begin to move away from Motorola as a key supplier.
Notwithstanding the long time it has taken for the deal to close, Arris is a good home for the STB business. The company is well-known and respected by cable companies and has many complementary products including headend equipment and customer premises devices such as cable modems. We can only hope that it is not too late to win back some of the business that has been lost since last August.