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Google Sells Off Motorola Cable and Internet Box Business For $2.35 Billion

Looks like Google might have found a way to make some quick cash off of their Motorola acquisition. In a press release from Arris, another maker of cable and Internet boxes, they have reached a deal with Google to take control of that business to the sum of $2.35 billion. The deal is scheduled to be finalized sometime in Q2 of 2013, which will undoubtedly help Arris become a much bigger name in their respective business.

This will obviously have little to zero effect on anything Android-related, but it’s interesting to watch what Google is doing with their new company.

To check out the full press release from Arris, see below. 

ARRIS To Acquire Motorola Home Business For $2.35 Billion In Cash And Stock

Transformative Combination Creates Global Player In Innovative End-To-End Broadband Video Solutions –Acquisition Is Expected To Generate Significant Earnings Accretion For ARRIS, Increase Patent Portfolio, And Accelerate New Products To Market

SUWANEE, Ga. and MOUNTAIN VIEW, Calif., Dec. 19, 2012 /PRNewswire via COMTEX/ — ARRIS Group, Inc. ARRS -0.27% , a global innovator in broadband media technology, and Google Inc. GOOG -0.13% today jointly announced that ARRIS and Motorola Mobility, a Google subsidiary, have entered into a definitive agreement under which ARRIS will acquire the Motorola Home business from Motorola Mobility, for $2.35 billion in a cash-and-stock transaction approved by the Boards of Directors of both companies. The acquisition will be on a cash-free, debt-free basis and is expected to be significantly accretive to ARRIS’ Non-GAAP earnings starting in the first full year after closing.

Under the terms of the agreement, upon closing of the transaction, Google will receive $2.05 billion in cash and approximately $300 million in newly issued ARRIS shares, subject to certain adjustments provided for in the agreement, representing an approximately 15.7% ownership interest in ARRIS post-closing.

Acquiring Motorola Home will enhance ARRIS’ ability to provide next-generation consumer video products and services, supporting a more comprehensive product offering while also accelerating its ability to deliver a comprehensive set of industry-leading new products for broadband to a wide spectrum of customers. The transaction will increase ARRIS’ patent portfolio and provide a license to a wide array of Motorola Mobility patents.

“This transformational combination of two complementary businesses will create a leading end-to-end provider of today’s video, data, and voice products and tomorrow’s next-generation IP-based broadband products,” said Bob Stanzione, Chairman and CEO of ARRIS. “Ever-expanding consumer demand for bandwidth will continue to drive growth across cloud and network technologies we provide that enable innovative home entertainment products and services.”

“Acquiring Motorola Home builds on ARRIS’ rich history, creating a global player with significant footprint, revenue and cash flow. It also adds expertise in video and a larger presence in the home to our core strengths in voice and data, ensuring we are even better positioned to capitalize on and manage the evolution toward multi-screen home entertainment. We look forward to working with the Motorola Home team as we integrate their complementary product portfolio and engineering expertise to accelerate best-in-class end-to-end solutions to a broader customer base and increase value for shareholders,” Stanzione continued.

Together, ARRIS and Motorola Home will have a global presence with over 500 customers in 70 countries, more than tripling ARRIS pro forma combined revenue to approximately $4.7 billion for the trailing four quarter period ended September 30, 2012. The combined entity will offer a wide array of products and solutions and will have an expanded customer base encompassing the full spectrum of broadband content and service providers.

“Our Home business has been a vibrant part of Motorola Mobility’s portfolio, innovating while delivering strong financial performance,” said Dennis Woodside, Chief Executive Officer of Motorola Mobility, the Google subsidiary that is the parent of Motorola Home. “The industry faces its biggest technology transformation, and together ARRIS and Motorola will be able to accelerate related innovations such as the introduction of the IP Connected Home environments that service providers need and that their consumers crave.”

“We share a similar vision and strategy with ARRIS for the industry’s migration to IP. The combination of our solutions, expert technologists and roadmaps promises to transform how service providers deliver the smart, simple connected home to consumers throughout the world,” said Marwan Fawaz, the Executive Vice President of Motorola Mobility who leads Motorola Home.

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.

The transaction is expected to close by the second quarter of 2013, subject to customary approvals and closing conditions.

The cash portion of the consideration to be received by Google at closing will be funded through debt financing commitments from Bank of America Merrill Lynch and Royal Bank of Canada.

Evercore Partners is acting as lead financial advisor and Troutman Sanders is acting as lead legal counsel to ARRIS on this transaction. Bank of America Merrill Lynch is also advising ARRIS. Barclays is acting as financial advisor and Cleary Gottlieb Steen & Hamilton LLP is acting as legal counsel to Google on this transaction.

Conference Call and Webcast Details

ARRIS will host a conference call at 6:30 pm EST today to discuss this announcement. You may participate in this conference call by dialing (800) 299-7098 or (617) 801-9715 for international calls prior to the start of the call and providing the ARRIS Group, Inc. name, conference pass code 92735185, and Bob Puccini as the moderator. A replay of the conference call can be accessed approximately two hours after the call through December 26, 2012 by dialing (888) 286-8010 or (617) 801-6888 and using the pass code 25900440. Live internet access to the call will be available through the Investor Relations section of the Company’s website at www.arrisi.com . A replay will also be made available for a period of 12 months following the conference call on ARRIS’ website at www.arrisi.com .

Via: Engadget

  • KRS_Won

    Ugh. I was hoping Google might had used these for the future of Android /Google TV.

  • spunker88

    I never even knew Google owned that part of Motorola, its a smart move to sell. Google TV based cable boxes would be awesome, but do you really think the cable companies would be okay with that. Customers don’t really get a choice with their cable box.

  • tlennon

    “$100 – $125 million in annual cost synergies.” That word. “Synergies”. Needs to die

  • larry ellison

    All the boxes from the cable companies are terrible. Navigation is awful and usually have ads at the bottom. So you can pay out the ass for cable and get ads even when navigating the channels. If you have hd they don’t even show them by default. I don’t have cable but when I go to my parents I have to train them to not watch the channels with the black bars. I don’t know how much googolra had in the software side of it but glad they selling the stuff off

  • David Hodge

    It might affect Android in that gives google $3 billion dollars to add to the offer to dish for google wireless

    • michael arazan

      Also having an extra $3 billion in cash is also great to invest in another business, like a wireless carrier option with Dish, that could be more profitable in the long run.
      Not to mention what the cost will be to expand the Fiber network of fast internet speeds. I’d like to see them combine both Fiber and a wireless carrier

  • http://www.facebook.com/profile.php?id=100000385600810 Jarrod Smeyers

    They needed money to launch Google wireless

  • brkshr

    Cable TV is going down now. I think this is a great (& profitable) move for Google.

  • justincase_2008

    Well good thing i know people in Arris.

    • http://twitter.com/Belatukadro Justtyn Hutcheson

      Kinda wish I knew people there. Main office is right around the corner, so I’ll keep an eye on their job listings, though I doubt they’ll need more than a handful of ME’s for their work.

      • justincase_2008

        Yeah the company i work for does a lot of work for both Moto and Arris so saw this coming.

  • thecharrr

    Google is dumping the part of Motorola they aren’t interested in, as much as you want Google TV cable boxes it’s way more expensive than low end discrete boxes cable companies love

    • JetRanger

      I read that our local cable company, Cablevision wants to be completely boxless within 5 years. Maybe the demand for cable boxes will be dwindling in the future.

      • thecharrr

        That too, it can just go 100% online to boost service quality cheaply

    • Justin W

      Low-end discrete boxes? My company (a subsidiary of Comcast) uses these massive cable boxes that are larger in length/depth than a 15 inch notebook. Give me one of these discrete boxes you talk about :)

      • http://twitter.com/jdrch jdrch

        The newer ones are a lot smaller.

      • thecharrr

        And the parts in them are stupidly cheap VS a new modern small design

  • JetRanger

    Well. There goes the hope for Google TV native cable boxes proliferating cable TV systems in the future …

  • Silver Veloz

    Google probably has something planned????

    • Kurtis Tamez

      Yup, like Cashing the check Hehe

  • http://twitter.com/jamdev12 jamdev12

    I think this is a dumb move. Build the GoogleTV right into the boxes and sell them. Now everyone has GoogleTV in their homes.

    • http://twitter.com/Belatukadro Justtyn Hutcheson

      The issue is that people are increasingly dropping their cable boxes due to the high overall cost. Why pay $100 /mo for service, and another $30/mo for equipment, when you can get a $100 Roku2, Boxee, etc. and with a $25 antenna get 75%-90% of the programming you were actually watching? Having 450+ HD channels sounds impressive, but when only really watch 10-20, its just doesn’t make any sense, and the masses have begun to notice.

      • http://twitter.com/jamdev12 jamdev12

        Well good point. I definitely like the GoogleTV idea built into the TV. As a matter of fact, why not have a GoogleTV with a Tegra3 chip or Tegra4. Have your phone or tablet connect wirelessly to it and you can use it as a controller for games as well as use the GoogleTV feature to get content from the internet directly to the TV.

    • http://twitter.com/jdrch jdrch

      I was about to say the same. Google sold the golden goose.

    • Daniel Dlugos

      No. This was probably a good move. The actual customers for cable boxes aren’t end users, it’s the cable companies. They buy they hardware, load their own customer firmware & programs, and rent them to the actual end users (pay TV subscribers). This is a walled garden that is going to be very difficult to break into and/or change.

      Google selling this unit off is in the best interest of both the Cable Co’s & Google/Motorola. The Cable Co’s don’t have to worry about Google trying to compete against them by pushing Google services towards their end customers. It also frees up Google to directly compete with the paid TV co’s without the worry of sabotaging their Cable TV box unit. If Comcast/etc. perceive Google as a competitor, they will be less likely to buy Moto boxes (why would you support the enemy?)

      • Brian Williams

        Not to mention that the acquisition had more to do with the patent portfolio they got with the purchase than the actual company.

        It was more like Google bought a bunch of patents and got a company for free.