Arris Buys DVR Maker Digeo For $20 Million

Arris announced Tuesday that it will acquire the assets of Paul Allen's Digeo digital video recorder venture for about $20 million in cash, marking the cable-technology firm's entry into the set-top market.

Arris said that Digeo, along with the recently announced acquisition of encoding-systems vendor EG Technology (EGT), will give it "an innovative multimedia services delivery platform" that the company will use to "accelerate the introduction of next-generation IP-based consumer video products and services." The new products will let cable operator customers integrate and distribute new forms of personalized multimedia content throughout the home, according to Arris.

"Several years ago we laid out a strategy to establish Arris as a leader in video networking," Arris chairman and CEO Bob Stanzione said in announcing the deal. "Our strategy includes both organic development and strategic acquisitions. The Digeo acquisition, along with our acquisition of EGT last month, has enhanced our ability to aggressively pursue end-to-end video delivery initiatives."

Arris said it will continue to develop and market the current line
of Digeo DVRs, including the Moxi Cable DVR and consumer HD DVR,
promising current Moxi customers "uninterrupted service and updates."

Digeo, founded by Allen in 1999, originally aimed to distribute DVRs through cable operators but found limited success. In January 2008, the company laid off half its workforce of 160 and canceled plans for two products to focus on the direct-to-consumer Moxi HD DVR. Priced at $799, Digeo has positioned the product as a high-end competitor to TiVo.

With the Diego acquisition, Arris will gain approximately 75 employees located in Kirkland, Wash. The addition of the Digeo engineering team will raise Arris's research and development spending by approximately $3 million per quarter. Arris will acquire not only the products and employees but also Digeo's intellectual-property portfolio in technologies covering DVR, home networking, e-commerce, and multimedia.

"As the global leader in broadband technology for the cable industry, Arris delivers the market position necessary to take the Moxi vision to the next level," Digeo CEO Greg Gudorf said in a statement. "Arris recognizes the value of adding Digeo's highly innovative technology to its portfolio, allowing the company to integrate the Moxi line of products and services as core to its expansion into the digital home. Further, Arris recognizes the value Digeo's highly-talented people bring to the equation. I am extremely pleased that the Digeo team will continue to drive the evolution of the Moxi platform."

The transaction is expected to close early in the fourth quarter of 2009. Arris plans to host a conference call discussing the transaction on Wednesday morning.