Motorola buys RiverDelta for $300 million

In another sign of cable-industry consolidation, Motorola has acquired RiverDelta Networks, a Massachusetts-based start-up that builds cable-modem termination systems (CMTS), for $300 million worth of Motorola common stock. The two companies will consolidate existing Massachusetts’ facilities and product lines when the acquisition is complete.

RiverDelta was among several smaller companies started during the last five years to serve cable television’s growing high-speed Internet access business. The cable-modem termination system (CMTS) is the network piece that guides and controls packetized high-speed data traffic in a two-way cable system. Advanced level CMTS also handle voice over IP (VoIP).

Motorola has its own CMTS product aimed at small to medium-sized systems.

“We were lacking a high-density platform with similar capabilities,” said Pete Sherlock, Motorola’s vice president/general manager of Network Infrastructure Solutions. “That represents a pretty good piece of the market for larger metropolitan systems, [and] that’s why we looked in particular at RiverDelta as opposed to any of the other start-ups out there.”

Another of those start-ups, Broadband Access Systems (BAS), was acquired last year by ADC, leading to speculation that the cable industry, through consolidation, was locking out opportunities for smaller players.

“I think there’s still room for innovation,” said Sherlock. “Can a small start-up come in and take over a huge portion of that cable business? That’s not likely, but there are an awful lot of companies out there doing some innovative stuff.”

Increasingly, though, those companies are discovering they have to give up the entrepreneurial ghost and return to the corporate fold.

“Customers certainly liked the technology that RiverDelta was doing, but at the end of the day, they’re looking for a financially stable, long-term financially viable company that can provide end-to-end solutions. There’s no better company out there than Motorola to provide that in this area,” said Jeff Walker, RiverDelta’s marketing vice president. “This is a trend you’ve seen in every industry. I don’t think it’s unique to the cable industry.”