Harmonic makes play for Entone

Harmonic has entered into a definitive agreement to acquire the video networking software business of Entone Technologies based in San Mateo, CA, with research and development facilities in Hong Kong.
The Entone software solutions — encompassing content ingest, distributed content management and video streaming — facilitate the provisioning of personalized video services including video-on-demand (VOD), network personal video recording (nPVR), time-shifted television and targeted advertisement insertion. By combining Harmonic’s industry-leading video headend, edge and access network solutions with Entone’s on-demand software, Harmonic will be able to provide cable, satellite and telco/IPTV service providers an advanced and uniquely integrated delivery system for the next generation of both broadcast and personalized IP-delivered video services.

The agreed upon purchase price of $45 million is comprised of $26 million in cash and the value of approximately 3.54 million shares of Harmonic common stock, as determined in accordance with the terms of the definitive agreement. In addition, Harmonic will assume certain liabilities of $1.5 million and invest $2.5 million in the form of a convertible note in Entone’s consumer premise equipment (CPE) business, which will be spun out to Entone’s existing stockholders immediately prior to the closing of the acquisition.

“Our industry is in the midst of an exciting and fundamental transformation to an increasingly on-demand video experience,” said Patrick Harshman, President and CEO of Harmonic Inc. “By bringing together Harmonic’s market-leading encoding and stream processing products and Entone’s innovative software suite for managing and streaming personalized video content, we will create a powerful and integrated solution for the emerging on-demand network. In the cable and satellite markets, where Harmonic enjoys strong customer relationships and a large installed base, this comprehensive solution will be a great benefit to our customers as they expand and extend their offerings with new on-demand services. In IPTV, where both Harmonic and Entone have established early leadership positions in our respective solution areas, the combination of our businesses creates a clear industry leader.”

“Harmonic is an excellent fit for Entone both in terms of the customers we serve and the synergy of our respective product lines,” said Steve McKay, CEO of Entone. “Entone is the world’s most deployed IPTV VOD solution provider, with over 35 deployments including PCCW, the largest IPTV operator. Our success is well matched with Harmonic’s strong position in top tier IPTV, cable and satellite deployments worldwide. The integration of our software suite, which operates on standardized hardware platforms, and Harmonic’s well-established on-demand solutions will provide an even more compelling solution for operators of all types seeking to deploy VOD, nPVR and time-shifted TV services.”

The merger is subject to customary closing conditions, including the spin-out of Entone’s CPE business to its existing stockholders.
Closing is anticipated to take place in October 2006. Excluding charges for the amortization of intangibles, the transaction is expected to be accretive to Harmonic’s earnings per share from the first quarter of 2007. Dresdner Kleinwort acted as advisor to Harmonic in this transaction

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