05.06.2010 04:20 PM
Harmonic Agrees to Buy Omneon for $274 Million
OmneonExSUNNYVALE, CALIF.: Harmonic has agreed to buy its neighbor, Omneon, in a cash and stock deal valued at $274 million, the broadcast vendor said today. Both companies are headquartered in Silicon Valley, just five minutes apart. The deal combines Harmonic’s video processing technologies with Omneon’s high-level servers and peripherals.

The combined companies had $425 million in revenues last year. Harmonic’s totaled nearly $320 million, down from $365 million in 2008. Omneon’s were $105 million compared to $126 million in 2008, before the recession hammered the broadcast industry. Omneon nonetheless achieved a 58 percent gross margin.

Together, the companies have more than 2,000 customers across 100 countries, with two-thirds of Omneon’s business coming from outside the United States last year. The combined workforce will include 450 engineers working in research and development, and 580 in sales and service--a total of 1,030 people. Harmonic now has 840 employees, Omneon has 280 for a grand total of 1,120.

There was no mention of layoffs in the Harmonic’s announcement. It said only that “most of the Omneon executive management team is expected to join Harmonic at closing,” including Lawrence Kaplan, a founder of Omneon, and Suresh Vasudevan, its CEO.

Under the terms of the agreement, which has been approved by the boards of directors of both companies, Harmonic will pay $190 million in cash and issue approximately 17.1 million shares of Harmonic’s (NASDAQ: HLIT) common stock at closing price May 5. The value is estimated at $274 million net of Omneon’s anticipated cash balance at closing of $32 million.

Omneon stockholders have to vote on the deal. Investors include Norwest Venture Partners, Accel Partners, Advanced Technology Ventures, Meritech Capital Partners, Invesco Private Capital and Lucent Ventures. Omneon filed for an IPO in December of 2006 but abandoned the plan last year during the economic downturn.

Harmonic’s 100 percent acquisition of Omneon is subject to regulatory approval and is expected to close the third quarter of 2010.

Harmonic’s acquisition comes a little more than a year after it closed on Tel Aviv-based Scopus in a deal valued at $50 million. It acquired Santa Clara, Calif.,-based transcoder Rhozet in 2007 for $15.5 million. The next year, Harmonic acquired Entone, a San Mateo, Calif., video-on-demand specialist, for $45 million.

Harmonic also reported its first-quarter results today, posting net revenues of $84.8 million, up 25 percent from the same period last year. Total bookings for the quarter ending April 2 were $91 million, up 60 percent. Net income was $5.3 million, or 5 cents a share, compared to a net loss of $18.8 million or 20 cents a share a year ago, when it took charges on the Scopus acquisition.

Cash and equivalents as of April 2 were $267.8 million versus $271.1 million Dec. 31, 2009.

Harmonic said it expects net revenues for the second and third quarters of 2010 to be $180 million to $190 million, excluding financial impact related to the Omneon acquisition.

Deborah D. McAdams

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