A new era for the Harris broadcast business begins

As these situations usually go, the sale of the Harris Communications division to The Gores Group, a venture capital firm in Los Angeles, announced last week followed months of intense negotiations, PowerPoint presentations and customer uncertainty about whether the company would continue to operate. Now that the deal is done and The Gores Group has agreed to pay $225 million in cash and stock, people like Harris Morris, former president of Harris Communications (who will lead the new venture in the same capacity), can breathe a sigh of relief.

“What’s exciting is to move past this period of disruption and distraction that is inevitably true in these types of situations,” Morris said. “We’re anxious to get back on track and focus on our customers’ needs and do what we can to delight them again.”

Morris said as part of the deal, Harris Corporation has allowed The Gores Group to use the “Harris” brand within the broadcast sector for a period of three years; then it must then choose a new name, one that that reflects its core business — automation, traffic and billing, video servers, playout, routing, and RF transmission. It might be called “Harris Broadcast” or “Harris Media,” he said.

“At some point during that three-year timeframe, we’ll make sure all of the brand values — the promise, commitment, innovation and service that the Harris name stands for — are clearly understood and articulated,” he said. “Then, we’ll change the name to a new brand, but making sure all of the core elements that our customers value remain intact.”

Some say the agreed to sale price is perhaps a bit low based on Harris’ significant global reach and extensive customer list of loyal buyers of Harris products. Morris would not comment on the sale price but did say the real value is in Harris’ people, and the Gores Group recognizes that.

“A lot of things determine price, but price does not define this [Harris] business,” he said. “We think our products and the people define our business. That’s what makes it valuable.”

Historically, the Gores Group has shown interest in mature businesses like Harris, and then moved in to streamline operations, reduce headcount, and make them more profitable than before. The situation appears similar here.

“Going forward, The Gores Group plans to bring our intellectual property into new spaces; upstream into certain parts of production (like news, mobile video and live production) as well as downstream for things like multichannel distribution,” Morris said. "That’s sounds very appealing to me. The Gores Group will bring its functional expertise to bear. They have some great operations talent and have a lot of skill in helping companies like ours streamline and evolve things like the supply chain and manufacturing operations. So that as we simplify our products and share more cost between platforms, The Gores group can help us improve quality and brings products to market faster. These things are all necessary not only to improve our margins, but also lower customers’ total cost of ownership.”

Morris said the new Harris Communications, or whatever it’s to be called, will operate differently than before, when it had to answer to a larger company with diverse goals.

“I think we’ll have more freedom working under The Gores Group to try new things than perhaps we could under the Harris Corporation banner, which is a big company whose strategy increasingly pointed it in a different direction than where we, as Harris Communications, wanted to go,” he said. “At the end of the day, what will be really good for us is to just focus on what’s good for our customers. We’ll now spend all of our time thinking about how do we solve our customers' toughest problems, whether that’s generating money with more content or reaching their consumers at lower cost and better efficiency.

“I also think having a small group of people running the company, including a Board of Directors that includes Karl Vogel (a senior advisor at Gores and a former vice chairman and president of the DISH Network), and other at Gores who will lend their management support, will give us a good footing as we get started on the next phase of our evolution as a separate company. I’m really looking forward to that collaboration.”

Many of the current Harris broadcast products will continue to evolve, and we’ll see evidence of that at the NAB Show in April.

“We’ve been pretty consistent in saying that our growth platforms are focused around key areas of what we call WIN (workflow, infrastructure and networking), but that’s not to say we won't identify other areas that are of interest to customers across the broadcast value chain,” Morris said. “As customers’ workflows evolve, how do you solve their problems in unique and powerful ways? We’ve already been doing a lot of the optimization of our existing product lines and are now looking to make bigger bets. However, we will also look at all of our technology and identify areas that perhaps are not as profitable and ratchet back the R&D investment there.”

So, what would Morris say to his competitors about the new ownership situation? Should they be worried about what’s to come?

“I’d say to them, ‘Watch out!’” Morris said. “I think we’ve made some changes to our business already that make us a real competitor to this space, and we’ll continue to do that. We’ve gone through a period of uncertainty the past year where our customers loved what we’re doing, but they also wanted to make sure we’d be around and support them over the long haul. That’s behind us now. We’ve got a well-capitalized and committed buyer who is just as excited as we are about finding new ways to delight customers and meet their most important needs. As one of our loyal and forward-looking customers said to me recently, ‘If we [the new Harris Communications] do everything we say we can, it will be tough for anybody to keep up.’”