Motorola acquires Tut Systems

Motorola has agreed to acquire video systems vendor Tut Systems for $39 million in cash, or $1.15 per share.

The move is only the latest acquisition meant to bolster Motorola’s growing presence in the residential video market. Already a vendor of passive optical networking access systems to Verizon Communications and video set-top boxes, Motorola last month acquired Netopia, a vendor of DSL customer premises equipment and remote management software, for about $208 million in cash. In September, Motorola acquired Vertasent, a vendor of resource management software for video-on-demand (VOD) applications, for an undisclosed sum. In July, it acquired VOD equipment vendor Broadbus. In April it announced a deal to jointly develop IP home gateways with Amedia Networks. And in January it acquired Swedish set-top vendor Kreatel.

Tut reported nearly $28 million in revenue for the first nine months of this year (a 4% increase from 2005) and a net loss of $9 million, or $0.27 per share (a 44% improvement from 2005). At the end of September, it had about $4.6 million in cash and equivalents. The company stumbled this year as delays in the availability of video set-top boxes employing the newest compression technology, MPEG-4, lowered earnings. But it has been bullish about demand for high-definition versions of its products in particular.

Last year, Tut acquired access equipment vendor Copper Mountain for about $10 million in stock to get the company’s engineering talent rather than its broadband remote access server and DSLAM businesses.

Motorola’s rival in the space, Cisco Systems, is also using acquisitions to gain power. Cisco’s $7-billion acquisition of Scientific Atlanta last year instantly made is a household name in set-top boxes. It also acquired video software vendor Arroyo Video Solutions in August.