Google sells Motorola’s set-top box biz for $2.35 billion to Arris

2 Comments

Google (s GOOG) has followed through on its plans to sell Motorola Home, the set-top box business part of its recent Motorola Mobility acquisition: Fellow set-top box maker Arris (s ARRS) has agreed to pay $2.05 billion in cash as well as $300 million in shares for Motorola Home, which will give Google a 15.7 percent ownership stake in Arris.

Motorola Home produces cable and IPTV set-top boxes for companies like Verizon (s VZ) and Comcast (s CMCSK). Google acquired the hardware vendor when it closed the acquisition of Motorola Mobility for $12.5 billion earlier this year. The press release announcing the Arris deal reads, in part:

“Motorola Home is a profitable business that generated revenues of $3.4 billion for the trailing four quarters ended September 30, 2012. The combination is expected to generate approximately $100 – $125 million in annual cost synergies.”

In other words: Motorola Home is likely going to see some significant layoffs.

When that deal was first announced some 18 months ago, some speculated that Google might want to use Motorola Home to kickstart its Google TV efforts, adding the Android-based living room platform to set-top boxes deployed by cable operators. However, it quickly became clear that the Comcast’s of this world aren’t interested in an open set-top box with an app store operated by Google.

The other reason that Google wanted to get rid of Motorola Home is that set-top boxes itself are slowly disappearing, as our own Stacey Higginbotham pointed out earlier this week:

“Already pay TV providers are eying channel guides and video on demand shows in the cloud instead of on a box. The set-top box in most cases provides three things, authentication, channel guides and a hard drive to store content. But as cable providers look for more interactive channel guides or recommendation technology, moving those off the box makes sense.”

The big question now is whether investors still think that $12.5 billion Motorola acquisition made any sense at all. We might get a clearer answer once the markets open again Thursday morning.

2 Comments

Matt Eagar

There goes the only profitable part of the acquisition. Still, I can’t say this is particularly surprising. The set-top box business isn’t driving new technology, and if STBs went away altogether, I don’t think anyone (other than employees and shareholders) would shed a tear.

Even so, it’s still hard to figure out what Google saw in Motorola — $12B (or 6B if you prefer @jhesr’s math) is a lot to pay for a book of patents, and price aside, integrating Mobility post-acquisition has to be putting a drag on internal development efforts. The success of the Nexus partnership program to date more or less makes the case for why Google doesn’t need an in-house hardware team. What’s to gain? Or is this simply a case of Google being so fat and happy that they just don’t care?

jhesr

I don’t remember the exact amounts, but I believe that when Google bought Motorola, that Motorola had around $6 billion in cash. So the true price for Motorola was around $6 billion.

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