C-COR.NET THINKS GLOBAL WITH DOMESTIC CABLE BUY

Veteran cable TV vendor C-Cor.net eagerly paid a small price to instantly triple its international business last week by acquiring Royal Philips Electronics' U.S.-based cable TV transmission group, Philips Broadband Networks.

Despite a cable technology slump among all the top-tier vendors, C-Cor.net will shell out approximately $79 million for PBN, which Royal Philips operated as an incorporated business unit. C-Cor.net gets 500 worldwide employees, a manufacturing plant in Manlius, N.Y., and more than $1.5 billion of installed equipment. More than half of that installed based is in international operators' networks. It also will roll PBN's optical and RF product lines into existing business units when the deal finalizes before the end of the year.

PBN is the relatively unglamorous transmission business, but according to Cynthia Brumfield, president of Broadband Intelligence, the acquisition fits well with C-Cor.net's core competency. “It makes a lot of sense with businesses for sale at fairly depressed prices to grow through acquisition,” she said.

C-Cor.net's domestic business has been stung by the financial scandal at its largest customer, Adelphia Communications, which owes the State College, Pa.-based vendor $40 million.

While acknowledging these hard times, C-Cor.net Chairman and CEO David Woodle said the company could not pass on the opportunity to move into international markets where its presence has been miniscule. “The challenge and responsibility of management is to figure out a way to grow and be profitable when there is a down market,” said Woodle. “It's always easy to grow in a growth market.”

The down market also makes it a good time to buy. “Deals like this are available on the cheap,” said Charles Dougherty, vice president and general manager of the transmission network systems business unit in Motorola's Broadband Communications Sector. “Take a look at the market [capitalization] of some of the traditional players and how low they are. It's a buying opportunity.”

Dougherty wouldn't say whether Motorola was in the running to acquire PBN. However, Philips was shopping the unit around to a limited audience.

With PBN, C-Cor.net steps up the ladder to join Motorola and Scientific-Atlanta as top-rung transmission equipment vendors. Royal Philips Electronics, meanwhile, can concentrate on its consumer electronics products.

“It's certainly the end of being involved in this kind of specific technology, the network infrastructure,” said a Royal Philips Electronics spokesman. “From our perspective, it's pretty clear that this is not core business.”

Ironically, several years ago Royal Philips came close to acquiring General Instrument, which later succumbed to Motorola's blandishments. That deal, though, centered on GI's digital set-top boxes, where Royal Philips continues to play as Philips Digital Networks.

“We chose to go ahead with C-Cor so the business could have a better chance of being part of a focused player,” said the Royal Philips spokesman.

C-Cor's immediate focus will be on meshing the two companies and waiting for things to improve in Europe and Asia, where the big opportunities lie. The company also will work to create “a company that is sized to produce profits based on today's spending, not yesterday's spending,” said Woodle.