Comcast wants to be sure Motorola Mobility’s Home unit stays in the cable family.
The MSO met with Arris to offer its support for a Motorola Home bid, before the equipment vendor formally made its $2.35 billion offer to Google, according to Arris chairman and CEO Bob Stanzione, speaking at a Needham & Co. investment conference last Tuesday (Jan. 15).
“From the outset, when it became known that Google was thinking about divesting this asset, we received a lot of encouragement from customers — including Comcast — to go after it,” he said.
Last week, Arris announced that Comcast would buy $150 million in stock upon completion of the Motorola Home deal, giving the MSO a 7.85% stake in the vendor, the same as Google.
“We met with Comcast, and this was before the process even began, and we were conjecturing over how to do it, and they offered their help,” Stanzione said. “I think it’s a very strong signal from them that they believe this is an asset that’s not only important to the industry but has an upside, too.”
Comcast is Arris’ largest single customer, representing 33%, or $117.7 million, of third-quarter 2012 revenue. Following the Moto deal, Comcast will represent a smaller overall percentage of sales but clearly will remain a key account. Besides endorsing Arris’ plans to buy Motorola Home, the Comcast ownership stake may signal additional sales are in the pipeline, Raymond James communications equipment analyst Simon Leopold wrote in a research note: “[W]e see an additional incentive for Comcast to increase their purchases with Arris.”
Comcast is expected to start trials of Arris’s MG2402 hybrid media gateway, based on the operator’s Reference Design Kit (RDK) middleware, in the first quarter. If Arris were to win orders for just 500,000 of Comcast’s 21 million digital video subscribers, that could result in more than $200 million in additional revenue, according to Leopold.
Arris’s acquisition of Motorola Home is expected to close by the second quarter of 2013, pending regulatory review. Neither Comcast nor Google will have a board seat with Arris.
Other customers also were interested in investing in Arris, Stanzione said at the Needham conference, but they decided to not participate as equity holders.
“It is a very unusual structure to have a customer come in [as an investor],” he said.
