Following the completion Harmonic's $50 million acquisition of Scopus Video Networks, Harmonic's senior director of business development Ovadia Cohen talks about what the merger will mean for the company and how it sees the demand for HD-related products in the run-up to NAB. An edited transcript follows:
Q: What is the acquisition of Scopus going to mean for Harmonic?
A: If you step back for a minute [and look at the history], Scopus was established in 1995. From day one the company was focusing mainly on contribution and distribution applications, encoding and decoding. It was working mainly with television operators, teleport operators, for point-to-point or point-to-multipoint contribution and distribution.
Later, the company decided that in order to grow, it needed to get into what I would call the systems business, which is an area where Harmonic is very strong and has a wide range of products for cable, IPTV, satellite, DTH.
So if you take out the system business, Scopus gives Harmonic a lot of experience, know how, products, and of course a customer base in Western and in emerging markets for contribution and distribution for standard definition and high definition. It had customers like Eutelsat and a lot of broadcasters like the BBC in the U.K., CCTV in China, Doordarshan in India and CBS in the U.S.
In my view, this really gives Harmonic in a unique proposition. As a result of the merger, Harmonic is in a position to offer products and solutions for the whole video chain, including the contribution and distribution area where it was not that strong before. With the Scopus product portfolio fully integrated into the Harmonic product portfolio, it has a full offering for media delivery, which is a major competitive advantage.
Q: What about the client base?
A: We've been speaking only about the product portfolio. The reach of Scopus customers in emerging markets is something that Harmonic didn't have that much before. Scopus' brand in places like Russian and India is well known. Definitely this [deal] puts Harmonic in a position where the company can look worldwide at all tiers, at all customers. That is something that Scopus brought to the table.
Q: How far along are some of these emerging markets in terms of offering high-def programming and demand for HD products and services?
A: It is there. You can see premium channels in HD--maybe not the same amount as in States, but you're starting to see some HD even in places like Africa. In India, for example, there are a number of channels. You see it in Russia, in China. Maybe now with the economic climate it will move slower but you are definitely seeing movement.
Q: How do you see the development of MPEG-4 compression? Is that happening faster internationally than in the U.S.?
A: MPEG-4 is being used more and more internationally. In the U.S. it is a bit different because the cable market has a lot of [legacy equipment] that is MPEG-2. But you can see the move to MPEG-4 by satellite with DirecTV and EchoStar.
In the international market, prior to the Scopus acquisition, we had done MPEG-4 [projects in a number of countries, including] India, Russia and Japan.
Operators that don't have that history of MPEG-2 and specifically operators that are just now moving to digital can go directly to MPEG-4 and really jump into state of the art technologies.
Even the MPEG-2 operators are putting in dual set-top boxes [that can handle both MPEG-2 and MPEG-4.] They are adding premium channels in HD in MPEG-4 that are sitting there side by side with their current content offering.
So this is something that is definitely happening, even in the emerging markets. It is not a question of whether MPEG-4 is ready or getting momentum. It is becoming a de facto replacement for MPEG-2 all over the world.
That of course will take time. You can't change it over in one day. It is not a question of whether it is a mature technology. Everyone is moving in that direction for their infrastructure, starting with HD premium channels, but also with standard-definition channels, because it offers better utilization of capacity.
Q: Is the economic climate changing how people are approaching their HD upgrades on the contribution and distribution side?
A: Overall, there is a slowdown. People are delaying their purchase decisions or deciding to do a little less than what they planned.
But I think HD is really a killer application. It is something that is catching on and operators would like to have it. So, even with the economic situation, I don't think it is suffering as much. HD is still definitely very important.
