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Motorola to Cherry-Pick Terayon for $140M

Motorola plans to acquire Terayon Communication Systems -- the video-processing firm that developed the CherryPicker digital-insertion platform -- in a deal worth about $140 million.

Motorola offered to acquire all of the outstanding shares of Terayon common stock for $1.80 apiece in cash. The bid is about 2% lower than Terayon’s closing share price of $1.84 April 20.

The announcement came after Terayon said it resolved a comprehensive review of its accounting practices for the last year-and-a-half.

Terayon would bring Motorola proven technology for processing video at the edge: The Santa Clara, Calif.-based company said it has deployed more than 7,800 CherryPicker and other digital-video system components to date for inserting ads and other providing other services.

"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," Motorola president of Connected Home Solutions Dan Moloney said in announcing the deal.

Other companies said to have been interested in Terayon included Cisco Systems, Harmonic and Arris Group.

Since November 2005, Terayon had been wrestling with a nagging accounting issue, related to revenue recognition, which affected its financial results dating back to 2000. The company in January 2006 announced layoffs and said it would focus on digital-video applications.

In late December 2006, Terayon filed restated financial results for its previous five fiscal years with the Securities and Exchange Commission. Terayon said an independent audit committee concluded that certain revenues were recorded in incorrect periods, although it added that the employees responsible followed what they understood to be the applicable rules at the time. Earlier this month, Terayon said the SEC terminated its investigation of the company's accounting review.

Motorola and Terayon said they expect the deal to close before the end of September. Terayon will become a subsidiary of Motorola, which said it intends to maintain Terayon's offices in Santa Clara. Motorola said the transaction is expected to be neutral to its earnings per share in the first year following closing, excluding special charges.

The transaction has yet to be approved by Terayon's stockholders, and it must also receive customary regulatory approvals.