Motorola to acquire Terayon for $140 million

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Motorola plans to acquire Terayon Communication Systems for about $140 million in a bid to boost its video technology capabilities.

The deal is expected to close in Motorola's second or third quarter, when Terayon will become a wholly-owned subsidiary and integrated into the company's Connection Homes Solutions arm.

By acquiring Terayon, the company hopes to benefit from technology that lets service providers offer video based on regional and local interest and allows for the insertion of digital advertising and graphical overlays.

"Operators around the world are looking for a digital video core that will maximise bandwidth and enable the delivery of revenue-generating services," said Dan Moloney, president of Motorola's Connected Home Solutions division.

"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."

The mobile handset giant said it would pay about $1.80 per share in cash for each share of Terayon in a deal that is expected to be neutral to Motorola's earnings per share in the first year, excluding acquisition-related charges.

Struggling with weakness in its mobile phone unit, Motorola has been beefing up its home video and network technology business in the last year as US phone carriers have been launching internet-based video services.

It has also embarked on somewhat of an acquisition spree, snapping up digital video technology developer Tut Systems in March and completing the acquisition of networking firm Netopia in February. These deals followed purchases of video technology firms Vertasent LLC, Broadbus Technologies and Kreatel last year.

The company's biggest recent deal was its $3.9 billion purchase of rugged handset maker Symbol Technologies. It also bought wireless e-mail company Good Technology for an undisclosed sum.

Motorola released its first quarter sales and earnings report last week, which boasted sales of £9.4 billion and handset shipments totaling more than 45 million units, marking a drop in volume compared to its usual performance.

"As I said a few weeks ago, the performance in our Mobile Devices business in the first quarter is unacceptable and we are committed to restoring it to an appropriate level of profitability," said Motorola's chief executive Ed Zander.

"However, I am pleased with the continued performance of our Networks and Enterprise and Connected Home Solutions businesses. Despite challenges, the company was profitable for the quarter, excluding the items highlighted above. We also continue to invest for the future, as evidenced by the completion of several strategic acquisitions during the quarter."

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