Optical networking equipment provider Aurora Networks has reached an agreement to buy Harmonic’s Cable Access unit for $46 million in cash.
The deal is subject to the customary closing conditions but is slated to close by the end of the first quarter. Harmonic’s Cable Access portfolio includes optical transmitters, amplifiers, receivers and nodes.
Aurora said the acquisition would increase its market share lead in the optical transport market by significantly increasing its installed base for next-generation service-providing products and create long-term strategic growth opportunities.
“Acquiring the assets of Harmonic’s optical transport business extends our access leadership position by adding to our footprint within the cable industry,” said Guy Sucharczuk, chairman, president and CEO of Aurora Networks. “We are dedicated to the evolution of cable infrastructure. This strategic move is an opportunity for us to further accelerate our innovations, continue to grow, and ensure that the networks of current customers and expanded customer base from Harmonic can meet challenges today and well into the future.”
Harmonic said it was exiting the Cable Access space because it wasn’t a market leader in that area, and there was limited strategic synergy between Cable Access and the company’s other higher-growth product lines.
Instead, Harmonic will focus its energies on the company’s Video Production and Playout, Video Processing, and Cable Edge product areas, where it claims to currently hold market share leadership.
“The sale of the Cable Access business enables us to sharpen our focus on our largest growth opportunities,” said Harmonic CEO and President Patrick Harshman. “Cable Access was Harmonic’s lowest-margin product line, and through this transaction and the increase in our authorized share repurchase program, we will continue to drive growth in our core markets, expand our gross margin, reduce our outstanding shares and position our business for stronger long-term earnings.”
In addition, Harmonic’s board of directors approved an increase to its current share repurchase program to include the net, after-tax cash proceeds from this transaction of approximately $35 million, contingent upon its closing.
For the calendar year, Harmonic’s Cable Access business generated $52.9 million of net revenue, with a gross margin of approximately 30 percent. Harmonic said that the sale of the business would be neutral to diluted earnings per share for this year, excluding the impact of the share repurchase program.
After 11 years without a major acquisition, two years ago Aurora Networks bought GoBackTV for an undisclosed sum. Later that same year, Aurora Networks purchased the Trident7 unit from Enablence Technologies for $5.1 million, which was comprised of $2.75 million in cash and the assumption of certain liabilities and contingent liabilities.
