Anaheim, Calif. -- General Instrument Corp. and Sony
Corp. last week finally agreed to definitive terms on the deal announced this past January
that called for Sony to invest $187.5 million in GI as part of a broader
digital-television alliance.
GI CEO Edward Breen had told analysts in October that the
Sony transaction was taking longer to complete because the companies had expanded the
scope of the original deal, which was originally expected to close about three months
after it was announced. The two companies said "customary closing conditions"
will still apply to the actual stock transaction.
The delay had led to some speculation that there were
problems with the deal, or that GI was talking to other strategic players. GI did not say
last Tuesday what changes, if any, were made in the companies' strategic alliance.
But GI did not highlight the aspect of the relationship
that it had previously stressed: Sony's manufacturing and retail clout as digital set-tops
move toward the world of consumer electronics. Instead, GI emphasized the flexibility of
Sony's software in transmitting high-definition signals and offering interactive
applications to viewers.
The financial terms of their deal remained the same: Sony
will get 7.5 million new shares of GI for $25 apiece, or about 11 percent below GI's
closing price last Monday of $27.94. That works out to about 4.5 percent of GI's
outstanding share base.
GI shares closed at $27.50 last Tuesday -- down 44 cents,
or about 2 percent.
Over the past year, GI has aggressively used equity to
solidify alliances with Sony and with key cable customers. Nine MSO customers were issued
warrants for about 16 percent of GI stock, tied to digital set-top deliveries under orders
that could amount to $4.5 billion in business for the vendor.
Tele-Communications Inc. and its affiliated MSOs had the
lion's share of that order, and TCI separately picked up about 10 percent of GI equity in
a sale of the security portion of its Headend in the Sky.
Meanwhile, GI's stock, except for a dip in September, has
held up strongly. And the company's earnings have done so, too. In the third quarter, GI
reported record results, as an increase in digital-cable-system sales overcame
international and analog weaknesses.
At the Western Show here last week, as they did at the
National Show in May, GI and Sony demonstrated some joint technology applications.
The presentations featured a GI DCT-5000 advanced set-top
running Sony's "Aperios" real-time operating system and "Home Networking
Module" middleware. Applications included video telephony and on-screen management of
various home-electronic appliances.
