Motorola Inc. has disclosed that it has concluded a definitive merger agreement to buy all the outstanding common stock of video processing solutions provider Terayon Communication Systems Inc. at a total equity worth of approximately $140 million or $1.80 per share. The takeover, the latest in a series of Motorola acquisitions, would provide it technology that lets service providers offer video based on regional and local interest and allows for the incorporation of digital advertising and graphical overlays. Evidently, the move was taken with a view to encourage its video technology.
The acquisition is likely to be nonaligned to Motorola’s earnings per share in the first year, excluding acquisition-related charges. Motorola, which is under pressure with weakness in its mobile phone unit, has been trying to boost its home video and network technology business in the last year as US phone carriers have been launching Internet-based video services.
Terayon was one of numerous public companies mushroomed during the technological boom of the late 1990s. However, after the boom ended in 2001, Terayon struggled to bring back any touch of its success days. In the meanwhile, the company’s accounting practices have been probed by federal regulators and Terayon has been pestered by shareholder lawsuits, forcing the founder to leave in 2004.
Terayon’s products include CherryPicker that permits cable operators to place in digital advertisements on different channels in their networks and manage how those ads are scheduled and billed. The company also has video processing products, which help enhance bandwidth and deliver localized content to viewers. Other products deal with motion and graphical overlays and channel branding.
Motorola in its official communique has said, ‘Terayon will become a wholly-owned subsidiary and integrated into Motorola’s Connected Home Solutions business, which deals with high-definition video on IP (Internet protocol) networks, among other areas. Terayon’s headquarters will not move’. Further, Dan Moloney, president of Motorola’s Connected Home Solutions division said over the deal, ‘The acquisition of Terayon will enhance Motorola’s end-to-end portfolio for the delivery of next-generation services such as targeted advertising and program insertion solutions’.
According to Motorola, the acquisition is expected to be completed by the third quarter of this year. Motorola executives hope that the firm can turn a profit in 2007; a target that some analysts believe will be difficult to achieve.
