High-tech manufacturer Motorola Inc. yesterday said it struck a definitive agreement to buy Broadbus Technologies Inc., a privately held Boxborough start-up, in a deal that could speed the growth of video transmitted from outside networks to televisions or cell phones.
While the parties didn't disclose the sales price, insiders put it at $186 million, making it one of the larger acquisitions of a Massachusetts company at the intersection of technology and entertainment.
``It really is our first foray into content aggregation and delivery of on-demand content to consumers," said Geoff Roman , corporate vice president for strategy and business development at Motorola.
Roman said Broadbus, which provides video-on-demand technology, will be integrated into Motorola's connected home solutions business based in Horsham, Pa., near Philadelphia. He said Motorola expects to retain the bulk of the Broadbus management team and employees. The company, which has raised $57 million in venture capital since 1999, has most of its 130 workers in Boxborough.
Motorola, which builds television set-top boxes, cable modems, and digital video recorders, will use the Broadbus acquisition to extend its video delivery capabilities and tap the expanding market for mobile video and video on demand, Roman said. While more than 80 percent of cable television consumers have access to video on demand, fewer than 5 percent of cellphone users have such access.
Broadbus builds computer servers that its customers put in central offices to store videos and stream them to televisions in homes. While the first wave of video streaming was done through digital video recorders, like TiVo, which sit in the home and store content on hard drives , video on demand has been moving to outside networks.
``This deal is a validation of the new emphasis being put on network-based on-demand content," said Adi Kishore , director of the media and entertainment team at the Yankee Group research firm.
Unlike most of its competitors, which store videos on hard disks in their servers, Broadbus uses a solid-state memory technology called digital random access memory, or DRAM, which it says saves on power and serves more files at one time.
But the company has trailed rivals like SeaChange International of Acton in signing up customers.
``Broadbus's technology was way ahead of the market, so it's had a hard time building up a customer base," said Bruce Leichtman , president and principal analyst at Leichtman Research Group in Durham, N.H. ``If it's part of a major company like Motorola, that could ease the concerns of providers that have gone with the lead players."
The deal, which is expected to be completed in the third quarter, will generate substantial returns for Broadbus investors, including venture capital firms Battery Ventures of Wellesley and Charles River Ventures of Waltham. Venture capitalists Todd Dagres of Battery and Santo Politi of Charles River, who originally funded the start-up, have since left those firms to form Spark Capital in Boston, a venture firm specializing in technology and entertainment deals.
Dagres said Broadbus considered going public but determined it didn't have the visibility and cash flow for a successful initial public offering .
``Right now the public markets are very fickle," he said. ``And, frankly, as an investor, you don't want to take a company public before its time. This is a good outcome."
Robert Weisman can be reached at firstname.lastname@example.org.