Just prior to issuing its Q1 earnings release, Harmonic announced that it has signed a definitive agreement to acquire broadcast video server and storage vendor Omneon.
According the press release, Harmonic has agreed to pay $274m in stock and cash for Omneon. The press release also revealed for the year ended December 31, 2009, Omneon’s revenues were approximately $105 million, of which 67% were outside the United States, with no single customer representing more than 10% of total revenue, and that Omneon’s gross margin was 58% in 2009.
I spoke to Omneon SVP Geoff Stedman a few minutes after the announcement was made public. He told me that the deal grew out of partnership talks that Omneon and Harmonic had started more than a year ago. Stedman also said that the Omneon name will continue for the foreseeable future, with Omneon CEO Vasudevan becoming the president of the Omneon division of Harmonic. Much of Omneon’s key leadership team will also remain in place, and continue to report to Vasudevan, who will report to Harmonic CEO Patrick Harshman. In my view, this is a good move. Omneon has a strong, execution-oriented executive team who understands their market well – and there is a very, very big difference between the cable / satellite market (where Harmonic plays) and the broadcast market where Omneon plays.
The two companies have created several documents to help explain the deal.
- An article called “Creating a new Video Infrastructure Leader” is designed to help readers understanding the strategic implications of the deal
- A set of FAQs about the deal was also posted
On the analyst conference call, Harmonic CEO Patrick Harshman and Omneon CEO Suresh Vasudevan discussed the deal.
The two CEOs presented the following slide to highlight how the combination of the two companies creates a unique video infrastructure provider.
Harshman went on to say that the primary thesis behind the deal is revenue synergies, but also said that there are also cost synergies to be realized.
Vasudevan talked about Omneon’s CAGR of 18% since 2005, which he says is sustainable into the future based on market growth and the company’s superior technology. Vasudevan went on to say that the market drivers for Omneon’s past growth continue to be strong– namely the transition to HDTV, the move to file-based infrastructure and the repurposing of content for distribution on multiple platforms.
The companies declined to reveal Omneon’s operating margins.
This is not the first time that Omneon has been “in play”. Omneon filed for an IPO in 2008, but later withdrew the filing.