Posts Tagged ‘Harris Morris’

Harris Broadcast Names Charlie Vogt CEO

Top Broadcast Vendor Brands | Posted by Joe Zaller
Jul 09 2013

Harris Broadcast announced it has appointed Charlie Vogt as CEO.

A 25-year veteran of the IT and communications industry,  Vogt joins Harris Broadcast following nine years as president and CEO of GENBAND where he led a company transformation that encompassed six acquisitions, including Tekelec SSG, NextPoint Networks and Nortel’s VoIP Business. Through successful organic innovation, attention to operational integration and relentless focus on customers, GENBAND became no. 1 in VoIP and delivered a compound annual growth rate of ~100 percent during his tenure

Charlie Vogt -- Harris Broadcast CEO

 

Vogt succeeds Harris Morris, who was appointed president of Harris Broadcast when it was a subsidiary of Harris Corporation in 2010, led the company through its divestiture process and guided the transition period to The Gores Group ownership, including the completion of fiscal year 2013.

“Charlie’s proven track record of taking companies with powerful and promising technology to the next level uniquely positions him to lead this business,” said Carl Vogel, Harris Broadcast Chairman and board member of Dish Network. “His decision to join Harris Broadcast as President and CEO likewise reflects the promise and potential behind the company’s market-leading technology, marquee customers and exceptional employees. Charlie will bring to Harris Broadcast vision, leadership, creativity and operational discipline as well as an entrepreneurial and customer-first culture.”

Mr. Vogel added: “The radio and TV broadcasting industry is embarking on a significant transformation from digital to IP. Charlie was a natural choice as his IP domain knowledge and experience gained while assisting global service providers and cable operators transition to IP has uniquely prepared him to lead the company as this industry undergoes a similar trajectory. We thank Harris Morris for his contributions in guiding Harris Broadcast as we acquired the business and transitioned the company to independence – we wish him well as he pursues new opportunities.”

“I couldn’t be more enthusiastic about joining Harris Broadcast, especially at a time when broadcasters, cable networks and multi-channel content distributors are experiencing so much change – from the impact of on-demand to content delivery on multiple screens and the digital transition to video and audio over IP,” said Mr. Vogt. “I have spent my professional career building businesses, fostering an entrepreneurial culture and introducing disruptive technologies that transform business models. I look forward to leading the Harris Broadcast team to accelerate innovation in areas that will enable the company to experience market-leading growth.”

Mr. Vogt added: “Through investments in R&D and strategic acquisitions, Harris has built the industry’s most comprehensive portfolio of content management technology. The company is well positioned in the broadcast market with unique capabilities such as combining automation, digital asset management, playout and sales and scheduling into a single solution. These strategic assets form an ideal foundation upon which we will invest and differentiate.”

Appointed CEO of GENBAND in 2004, Mr. Vogt expanded GENBAND’s operations to more than 50 countries and secured 80 of the top 100 communications service provider and cable operators as customers. While leading an industry wide transition to IP, he also advised the Federal Communications Commission Chairman on matters of technology and spectrum serving on the FCC advisory council. Mr. Vogt has received industry wide recognition for his leadership, operational acumen and tangible accomplishments including Ernst & Young’s “Entrepreneur of the Year,” Dallas Metroplex Technology Business Council CEO of the Year, Global Telecom’s “Power 100” and Light Reading’s top 10 “movers & shakers.” In September 2012, The Wall Street Journal named GENBAND the no. 1 privately funded company in America topping a list of 5,900 companies.

Prior to his tenure as President and CEO of GENBAND, Mr. Vogt served as President and CEO of Taqua, an IP switching company, which was acquired by Tekelec in 2004. Before Taqua, Mr. Vogt was instrumental in the operational and financial growth of four standard-setting technology companies including ADTRAN, Ascend Communications, Accelerated Networks and Santera Systems. ADTRAN, Ascend Communications and Accelerated Networks executed IPOs, while Santera Systems was acquired. Following Lucent Technologies’ $20 billion acquisition of Ascend Communications in 1999, Mr. Vogt became a senior member of the leadership team.

Mr. Vogt has served as chairman of two companies and as a board member of five companies, in addition to serving on the board of Telecommunications Industry Association, the Federal Communications Commission Advisory Council and the Dallas Metroplex Technology Business Council. He holds a Bachelor’s Degree in Economics and Computer Science from Saint Louis University, where he also played Division I NCAA baseball.

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Related Content:

Press Release:  Harris Broadcast Names Charlie Vogt CEO

Harris Broadcast CEO to Part Ways with Company

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© Devoncroft Partners 2009 – 2013. All Rights Reserved.

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Harris Broadcast CEO to Part Ways with Company

broadcast technology market research | Posted by Joe Zaller
Jul 02 2013

Harris Broadcast said today that its CEO, Harris Morris, who led the company through its divestiture from Harris Corporation and subsequent acquisition by the Gores Group, will part ways with the company on July 3rd 2013.

The news was disclosed via an email sent to all Harris Broadcast staff by company chairman Carl Vogel.

No reason was given for Morris’s departure.

The company will name a new CEO on Tuesday July 9, 2013.

 

The text of Vogel’s email can be found below:

 

 

 

Date:        Tuesday July 2, 2013

To:          Harris Broadcast Employees 

From:        Carl Vogel, Chairman of the Board

 

“This is to inform you that, based on discussions with the board of directors of Harris Broadcast, Harris Morris is transitioning from the Company, effective end of day tomorrow.

“We thank Harris for his contributions to the company over his tenure and for guiding Harris Broadcast through the end of the fiscal year in its transition to an independent company. We wish Harris well as he pursues new opportunities.

“We are excited about the future and look forward to the next chapter for Harris Broadcast. As such, we will be announcing the new CEO to the company on Tuesday, July 9th

 

 

 

Morris joined the Harris Broadcast & Communications (BCD) business unit in January 2008 as VP software systems.  He became president of Harris BCD in February 2010.

In February 2013, Morris was named CEO of Harris Broadcast when it became an independent company following the purchase of Harris BCD by the Gores Group from Harris Corporation.

Prior to his time at Harris, Morris was chief strategy officer at Thomson Learning; and was a partner and vice president for Bain & Company, a global business consulting firm. In his 13 years with Bain & Company, he helped a wide variety of global clients analyze markets, develop growth strategies, expand into international markets and drive operational efficiencies.

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Related Content:

Harris Corp Completes Sale of Broadcast Business to The Gores Group

ASSET SALE AGREEMENT by and between HARRIS CORPORATION and GORES BROADCAST SOLUTIONS, INC. Dated as of December 5, 2012

Harris Corporation to Sell Broadcast Business to The Gores Group for $225 Million

Analyzing the Sale of the Harris Broadcast Division

Harris Corporation To Divest Broadcast Business

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© Devoncroft Partners 2009 – 2013. All Rights Reserved.

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Today: NAB 2013 Media Technology: Strategy and Valuation Conference

broadcast technology market research | Posted by Joe Zaller
Apr 07 2013

If you are in Las Vegas to attend the 2013 NAB Show, you don’t want to miss the second annual “Media Technology: Strategy and Valuation,” conference which is being co-produced by Devoncroft, Silverwood Partners and the organizers of the NAB Show.

This event is free for all registered attendees of the 2013 NAB show.

It is being  held in room N239/241 of the Las Vegas Convention Center on Sunday April 7th from 1:45 p.m. to 6:00 p.m.

This year’s conference features an intensive, information-packed series of presentations and panels that discuss the strategic trends and industry-specific factors influencing the value of media technology companies.

We’ve worked hard to put together an outstanding line-up of speakers and presenters, including top technology buyers, leading technology vendor CEOs, and private equity investors who will speak to the opportunities and challenges involved with financing the next phase of technology change in the industry.

The agenda will offer attendees the informed opinions of technology purchasers, industry executives, market research organizations, and financial professionals. The event will serve as a thought-provoking kick-off to the 2013 NAB Show.

This session is intended for senior executives from technology vendors, end-users, and investment firms in the media technology sector.

We are expecting 200+ attendees based on the latest registration numbers, so it’s a good networking opportunity as well.

 

Here’s the conference agenda:

 

1:45 pm – 1:50 pm

WELCOME AND INTRODUCTION

Joe Zaller – President, Devoncroft Partners

 

 

1:50 pm – 2:20 pm

NAB SHOW SPROCKIT PRESENTATIONS

Hear from three market-ready start-ups who have been selected by the NAB’s SPROCKIT initiative.  This session will include an introduction of the SPROCKIT initiative followed by presentations from three of NAB Show’s inaugural SPROCKIT participants.

Presenter(s):

  • Hilary DeCesare, Co-Founder and CEO, Everloop
  • Heidi Messer, Co-Founder & Chairman, Collective[I]
  • John West, Founder & CEO, The Whistle

 

 

2:20 pm – 2:45 pm

THE BROADCAST & MEDIA TECHNOLOGY INDUSTRY IN 2013

Joe Zaller will present a summary of key data derived from the newly published 2013 Big Broadcast Survey (BBS), the largest and most comprehensive study of the broadcast industry. Key results from the 2013 BBS will include key investments areas as well as trends of significance that are impacting these purchasing decisions.

Joe Zaller – President, Devoncroft Partners

 

 

2:45 pm – 3:10 pm

STRATEGIC INDUSTRY ANALYSIS: VALUATIONS, M&A, AND EQUITY FINANCING

Jonathan Hodson-Walker and Joshua Stinehour of Silverwood Partners will present an analysis of strategic industry trends and the specific factors that affect company valuations, including transaction activity and valuations; vendor strategic considerations; and the current M&A environment along with near-term expectations. Attendees will also learn which businesses are buyers and investors targeting and why.

Presenter(s):

  • Jonathan Hodson-Walker  – Managing Partner, Silverwood Partners
  • Joshua Stinehour – Managing Director, Silverwood Partners

 

 

3:10 pm – 3:35 pm

M&A, VALUATION PERSPECTIVES FROM INDUSTRY EXECUTIVES

Joe Zaller will moderate a panel of three recognized executives at leading vendors will offer views on the critical drivers of value (in context of M&A) in the industry, and discuss the best practices they’ve learned on how to review an acquisition opportunity and how to integrate M&A into overall growth strategies. Obstacles to further industry consolidation will also be discussed.

Moderator:

Joe Zaller – President, Devoncroft Partners

 

Panelists:

  • Dan Castle — CEO, Telestream
  • Harris Morris – CEO, Harris Broadcast
  • Denis Suggs — Executive Vice President, Belden

 

 

3:45 pm – 4:00 pm

IABM END-USER RESEARCH OVERVIEW

Yves Dupuis, Director of Market Intelligence at the IABM (trade association that represents broadcast technology suppliers) will present an overview of the latest end-user research from the IABM, including the changing requirements of broadcast technology buyers, and what this means for the supply community.

Yves Dupuis — Director of Market Intelligence, IABM

 

 

4:00 pm – 4:25 pm

THE BROADCAST TECHNOLOGY BUYER PERSPECTIVE

Joe Zaller will guide a discussion with broadcast executives responsible for technology budgets as they ponder the questions of most significance to decisions on technology purchasing: How are savvy broadcasters aligning known technology expenditures against uncertain multi-platform revenue opportunities in order to counteract the ‘consumer-broadcast disconnect’? How are these companies assessing the business risk of technology purchase decisions today given the uncertainty of future business models?

Moderator:

Joe Zaller – President, Devoncroft Partners

 

Panelists:

  • Fred Mattocks – General Manager Media Operations and Technology, Canadian Broadcasting Corporation
  • Steve Plunkett – Chief Technical Officer, Red Bee Media
  • Phil Braden — SVP Technology and Applications, PCCW

 

 

4:25 pm – 4:50 pm

KEYNOTE: TECHNOLOGY CHANGE, BUSINESS CHANGE

Clyde Smith, FOX Networks Engineering and Operations  will offer a broadcast executive’s perspective on the major business issues facing the industry, what major initiatives and projects have been created to solve these issues, a candid assessment of the results of these initiatives, and a discussion of what is still needed from a technology standpoint to address these issues.

Clyde Smith — SVP New Technology, FOX Networks Engineering and Operations

 

 

4:50 pm – 5:15 pm

INVESTOR PERSPECTIVES ON INDUSTRY

Joe Zaller will moderate this panel of private equity professionals who have made recent investments in the media and entertainment space will offer their unique perspectives on trends of significance for the M&E sector. They will also preview their plans for intelligence-gathering at this year’s NAB Show, the trends that are driving investment dollars in the sector, and what characteristics influence their evaluation of an investment opportunity within the M&E industry.

Moderator:

Joe Zaller – President, Devoncroft Partners

 

Panelists:

  • Dave Golob, Francisco Partners
  • Kevan Leggett, Lloyds TSB Development Capital Ltd
  • William Smales, The Carlyle Group
  • Bryce Winkle, The Gores Group

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© Devoncroft Partners. All Rights Reserved.

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Going to NAB? Don’t Miss 2nd Annual “Media Technology: Strategy and Valuation Conference,” A Thought Provoking Kick-Off to the 2013 NAB Show

broadcast industry technology trends, broadcast industry trends, Broadcast technology channel strategy, broadcast technology market research, Broadcast technology vendor financials, Broadcast Vendor Brand Research, Broadcast Vendor M&A, Broadcaster Financial Results, content delivery, technology trends | Posted by Joe Zaller
Apr 02 2013

If you are attending the 2013 NAB show, be sure not to miss the second annual “Media Technology: Strategy and Valuation,” conference which is being co-produced by Devoncroft, Silverwood Partners and the organizers of the NAB Show.

This event is being held in room N239/241 of the Las Vegas Convention Center on Sunday April 7th from 1:45 p.m. to 6:00 p.m., and it’s free for all registered attendees of the 2013 NAB show.

This year’s conference features an intensive, information-packed series of presentations and panels that discuss the strategic trends and industry-specific factors influencing the value of media technology companies.

We’ve worked hard to put together an outstanding line-up of speakers and presenters, including top technology buyers, leading technology vendor CEOs, and private equity investors who will speak to the opportunities and challenges involved with financing the next phase of technology change in the industry.

The agenda will offer attendees the informed opinions of technology purchasers, industry executives, market research organizations, and financial professionals. The event will serve as a thought-provoking kick-off to the 2013 NAB Show.

This session is intended for senior executives from technology vendors, end-users, and investment firms in the media technology sector.

 

Here’s the current lineup of presenters:

 

1:45 pm – 1:50 pm

WELCOME AND INTRODUCTION

Joe Zaller – President, Devoncroft Partners

 

 

1:50 pm – 2:20 pm

NAB SHOW SPROCKIT PRESENTATIONS

Hear from three market-ready start-ups who have been selected by the NAB’s SPROCKIT initiative.  This session will include an introduction of the SPROCKIT initiative followed by presentations from three of NAB Show’s inaugural SPROCKIT participants.

Presenter(s):

  • Hilary DeCesare, Co-Founder and CEO, Everloop
  • Heidi Messer, Co-Founder & Chairman, Collective[I]
  • John West, Founder & CEO, The Whistle

 

 

2:20 pm – 2:45 pm

THE BROADCAST & MEDIA TECHNOLOGY INDUSTRY IN 2013

Joe Zaller will present a summary of key data derived from the newly published 2013 Big Broadcast Survey (BBS), the largest and most comprehensive study of the broadcast industry. Key results from the 2013 BBS will include key investments areas as well as trends of significance that are impacting these purchasing decisions.

Joe Zaller – President, Devoncroft Partners

 

 

2:45 pm – 3:10 pm

STRATEGIC INDUSTRY ANALYSIS: VALUATIONS, M&A, AND EQUITY FINANCING

Jonathan Hodson-Walker and Joshua Stinehour of Silverwood Partners will present an analysis of strategic industry trends and the specific factors that affect company valuations, including transaction activity and valuations; vendor strategic considerations; and the current M&A environment along with near-term expectations. Attendees will also learn which businesses are buyers and investors targeting and why.

Presenter(s):

  • Jonathan Hodson-Walker  – Managing Partner, Silverwood Partners
  • Joshua Stinehour – Managing Director, Silverwood Partners

 

 

3:10 pm – 3:35 pm

M&A, VALUATION PERSPECTIVES FROM INDUSTRY EXECUTIVES

Joe Zaller will moderate a panel of three recognized executives at leading vendors will offer views on the critical drivers of value (in context of M&A) in the industry, and discuss the best practices they’ve learned on how to review an acquisition opportunity and how to integrate M&A into overall growth strategies. Obstacles to further industry consolidation will also be discussed.

Moderator:

Joe Zaller – President, Devoncroft Partners

 

Panelists:

  • Dan Castle — CEO, Telestream
  • Harris Morris – CEO, Harris Broadcast
  • Denis Suggs, Executive Vice President, Belden

 

 

3:45 pm – 4:00 pm

IABM END-USER RESEARCH OVERVIEW

Peter White, Director General IABM will present an overview of the latest end-user research from the IABM, including the changing requirements of broadcast technology buyers, and what this means for the supply community.

Peter White — Director General, IABM

 

 

4:00 pm – 4:25 pm

THE BROADCAST TECHNOLOGY BUYER PERSPECTIVE

Joe Zaller will guide a discussion with broadcast executives responsible for technology budgets as they ponder the questions of most significance to decisions on technology purchasing: How are savvy broadcasters aligning known technology expenditures against uncertain multi-platform revenue opportunities in order to counteract the ‘consumer-broadcast disconnect’? How are these companies assessing the business risk of technology purchase decisions today given the uncertainty of future business models?

Moderator:

Joe Zaller – President, Devoncroft Partners

 

Panelists:

  • Fred Mattocks – General Manager Media Operations and Technology, Canadian Broadcasting Corporation
  • Steve Plunkett – Chief Technical Officer, Red Bee Media
  • Phil Braden — SVP Technology and Applications, PCCW

 

 

4:25 pm – 4:50 pm

KEYNOTE: TECHNOLOGY CHANGE, BUSINESS CHANGE

Clyde Smith, FOX Networks Engineering and Operations  will offer a broadcast executive’s perspective on the major business issues facing the industry, what major initiatives and projects have been created to solve these issues, a candid assessment of the results of these initiatives, and a discussion of what is still needed from a technology standpoint to address these issues.

Clyde Smith — SVP New Technology, FOX Networks Engineering and Operations

 

 

4:50 pm – 5:15 pm

INVESTOR PERSPECTIVES ON INDUSTRY

Joe Zaller will moderate this panel of private equity professionals who have made recent investments in the media and entertainment space will offer their unique perspectives on trends of significance for the M&E sector. They will also preview their plans for intelligence-gathering at this year’s NAB Show, the trends that are driving investment dollars in the sector, and what characteristics influence their evaluation of an investment opportunity within the M&E industry.

Moderator:

Joe Zaller – President, Devoncroft Partners

 

Panelists:

  • Dave Golob, Francisco Partners
  • Kevan Leggett, Lloyds TSB Development Capital Ltd
  • William Smales, The Carlyle Group
  • Bryce Winkle, The Gores Group

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© Devoncroft Partners. All Rights Reserved.

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Harris Corporation to Sell Broadcast Business to The Gores Group for $225 Million

Broadcast Vendor M&A | Posted by Joe Zaller
Dec 06 2012

Harris Corporation said today that it has signed an agreement to sell its Broadcast Communications Division (Harris BCD) to The Gores Group (TGG), a Los Angeles-based private equity firm, for $225m.

Under the terms of the deal, The Gores Group will pay $160m in cash a $15m subordinated promissory note and an earnout of up to $50m based on future performance. The deal is expected to close in early calendar year 2013.

The deal price is  below the $287m valuation that Harris Corp recently said it had on its books for BCD following three successive write-downs of BCD.

“The sale of Broadcast Communications reflects our strategy to optimize our business portfolio and focus on our core businesses,” said Harris Corporation CEO William Brown.

The upfront cash portion of the deal is below the amount that Brown had previously telegraphed to the market.  When the sale of BCD was announced in May 2012, Brown said that he expected to receive “substantially more” than $200m for BCD, and that the company would the first $200m from the sale of BCD to shareholders, and use the residual to invest in the company’s core defense business.

Brown addressed this in a statement, saying “As previously communicated, we plan to repurchase up to $200 million of our shares after the deal closes. This is in addition to the $200 million of share repurchases already planned for fiscal 2013 and reflects our ongoing commitment to effectively deploy capital, including returning cash to shareholders.”

According to its website, The Gores Group has $3.3 billion in assets under management and “specializes in acquiring businesses that are undergoing change in capital structure, strategy, operations or growth and can benefit from Gores’ operational and strategic approach.” TGG says it “targets companies with a defensible core business, mature products or services, sustainable revenues, established customer relationships, and that have reached a transition point in their lifecycle presenting an opportunity for transformation.”

“In Harris Broadcast Communications, we are investing in a proven technology leader with great products and a great team. We are excited to provide the capital and support to transition this division to a strong and independent company further enabling it to continue developing and delivering market leading technologies to its customers,” said Ryan Wald, Managing Director of The Gores Group.

The announcement did not disclose whether current management would remain in place, or for how long Harris BCD will continue to have the right to use the Harris name.  However Wald’s statement that TGG is investing in a great team implies current Harris BCD president Harris Morris is likely to remain at the helm of the company.

The announcement comes after months of intense rumor and speculation, which began in May 2012 when Harris Corporation announced its intention to divest its broadcast business, saying BCD was no longer considered a core asset to the defense contractor’s overall business.

At that time, Harris Corporation CEO William Brown summed up the company’s reasons for wanting to sell-off BCD: “The combination of a lack of effective integration by the company over the last decade, coupled with a market outlook that is not as promising today as once believed led us to believe that the business is best owned by another party.

The structure of Harris BCD today is the result of a decade-long M&A program, which transformed the company from a leading provider of radio and television transmitters into one of the largest pure-play broadcast technology vendors. According to a TVNewsCheck article, Harris spent close to $1 Billion on M&A since 2000, including the acquisitions of Louth, Encoda, and Leitch.

A May 2012 analysis of the sale of the Harris broadcast business showed that the company has approximately 1,700 employees and had revenue of approximately $375m through the third quarter of FY 2012, essentially flat with the previous year.  It is believed that Harris BCD had revenue of approximately $500m for the full FY 2012, which ended on June 30, 2012, down about 10% versus the previous year.

 

Deal Valuation Below Book Value

The $225m valuation of BCD is below Harris Corp’s internal valuation of BCD, which the company said during its most recent earnings announcement that it had lowered to approximately $287m based on “recent indicators of value during the first quarter of fiscal 2013, including market, financial performance and indications of value from interested parties.”

At that time, Brown said this lowered internal valuation gives an “indication of the value we expect to receive” from the sale of Harris BCD.

The recent write-down of BCD is the third time in the last six months that Harris has taken a non-cash impairment charge against the value of BCD.

In May 2012 when Harris Corp announced its intention to divest BCD, the company said it “recorded in the third quarter a non-cash charge of $407m after-tax, or $3.62 per diluted share, to write down a significant portion of the goodwill and other long-lived assets in Broadcast Communications, resulting in the GAAP loss from continuing operations.”  Information about how Harris Corp calculated this write-down was published in the company’s Q3 FY 2012 10-Q filing.

Harris subsequently disclosed a second BCD impairment charge of $23.6m in August 2012 as part of the company’s annual 10-K filing with the SEC, which said:

 “Due to the length of time necessary to measure the impairment of goodwill and other long-lived assets, our impairment analysis [of BCD] was not complete as of the end of the third quarter of fiscal 2012. In the fourth quarter of fiscal 2012, we completed our impairment analysis and, as a result, recorded a $23.6 million ($10.5 million after-tax) increase to our initial estimated impairment charge. The portion of the total $447.6 million impairment charge related to goodwill was $395.6 million, a minor amount of which was deductible for tax purposes.”

 

Potential Implications of the Deal for the Broadcast Industry

The fact that Harris BCD was acquired by a private equity firm with no previous experience in the broadcast technology space has interesting implications for both Harris BCD and the broadcast technology landscape as a whole.

Since Harris Corp announced its intention to sell the broadcast unit, many names have been bandied about as potential buyers of BCD — ranging from established industry players such as Grass Valley (via their PE owner Francisco Partners), to large “strategic buyers” with some existing activities in the broadcast industry (similar to Belden’s purchase of Miranda Technologies earlier this year), to private equity players.

Now that the buyer has been announced, the next question is whether The Gores Group will use BCD as a platform for further expansion into the broadcast industry (as Belden said it would do with Miranda), or break BCD up and sell it off.

Time will tell.

 

What’s Next For Harris Corp?

Having found a buyer for BCD, Harris Corporation can now concentrate on its core defense business.  This was one of the primary factors cited by Brown when he announced the plan to sell BCD in May 2012, saying to equity analysts: “given the tough environment that we are facing it’s important for us to focus our resources including our management time and attention on the businesses that we know to be core to our company so we can be successful into FY 2013 and beyond.”

However, things are getting tougher in the defense business due in large part to hundreds of millions of dollars in mandatory budget that are scheduled to take effect in early 2013. This has put pressure on Harris Corp.  According to a recent Associated Press article Lazard Capital Markets analyst Michael Lewis downgraded his rating on the company’s stock, citing worries about weaker revenue due to reduced government spending.

This may make Harris Corp a potential takeover target.  Indeed, according to a recent Reuters article, the collapse of the proposed $45 Billion merger of defense giants BAE and EADS “will shift the focus to smaller deals among global weapons makers as companies strive to keep revenue rising in the face of cuts in military spending by the United States and Europe.  Instead, major defense companies likely will focus on possible combinations with smaller players such as Rockwell Collins, L-3 Communications Holdings Inc, SAIC Inc, ITT Exelis and Harris Corp, according to interviews with more than a dozen industry executives and bankers.”

Given the environment, one has to wonder whether the divestiture of BCD is a precursor of an eventual sale of Harris Corporation itself to a larger defense contractor. After all, both the company and its CEO may now be well-positioned for the next deal.

With the pending disposal of BCD now announced, Harris Corp is now a pure-play “mid-tier” defense contractor, and therefore more attractive as a potential partner to another defense firm; and Brown himself is well-suited for this environment.  He joined Harris from United Technologies (UTC), where he orchestrated a $16.5 billion deal to buy Goodrich Corp., which closed after he joined Harris as CEO.  Previously, as the head of UTC’s Fire & Security division, he executed more than 40 M&A deals, creating a $6.5 Billion operation in the process.

 

 

 

 

 

Related Content:

 

Press Release: Harris Corporation to Sell Broadcast Communications to The Gores Group for $225 Million

Harris Corp Announces Q1 FY 2013 Results, Further Writes Down Value of Broadcast Business

Harris Corporation To Divest Broadcast Business

Analyzing the Sale of the Harris Broadcast Division

Guest Post: Investment Banker Perspective on Sale of Harris Broadcast

Statement From Harris Broadcast CEO on Divestiture of Harris Broadcast Communications Division

Harris Q3 FY 2012 10-Q Filing – details write-down of broadcast division

Harris 8-K Filing – Restates Fiscal 2011-12 Revenue on Pro Forma Basis (Without Broadcast and Cyber Integrated Solutions)

TVNewsCheck Article: Tech’s Big Question: What’s Next For Harris?

Quincy Herald-Whig ArticleProspective buyers seek information on Harris broadcast; business as usual in Quincy

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© Devoncroft Partners. All Rights Reserved.

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Harris Corp Announces Q1 FY 2013 Results, Further Writes Down Value of Broadcast Business

Broadcast technology vendor financials, Broadcast Vendor M&A, Quarterly Results, SEC Filings | Posted by Joe Zaller
Oct 30 2012

Harris Corporation announced that its revenue in the first quarter of its 2013 fiscal year was $1.26Bn, down 6% versus the same period a year ago, and down 13% versus the previous quarter.

These results do not include the company’s Broadcast Communications Division (BCD) which was classified as a discontinued operation following the May 2012 announcement that Harris will divest its broadcast division, which is no longer considered a core asset to the defense contractor’s overall business. Harris Cyber Integrated Solutions (CIS), which the company said it was shutting down in February 2012 was also excluded from these results.

 

Performance of Broadcast Business Below Expectations

Although the company did not break out the results of its broadcast division, the performance of BCD in the quarter was “little bit worse than expected,” according to statements made by Harris CEO William Brown during a conference call with equity analysts.   “Our first quarter results in Broadcast were a little less than what we had expected, both because the market’s a little bit tough and because some of the issues around our selling the business [caused] some of our customers to be a bit hesitant,” said Brown.

Based on an analysis of recent Harris Corp SEC filings, it is believed that Harris BCD had revenues of approximately $135m during the first quarter of fiscal 2012, and more than $500m for the full 2012 fiscal year.

 

Update on Sale of Harris Broadcast Communications Division

Harris CFO Gary McArthur said the company is making progress on the disposal of BCD and it expects “to conclude by the end of the calendar year.”  This timetable is consistent with the company’s previous earnings call, and also with statements made by Harris BCD president Harris Morris at the company’s press conference at the recent IBC trade show.

McArthur also reiterated the company’s previously stated intention to “use up to $200m of the proceeds from the BCD disposition to repurchase additional shares” of Harris Corp.

 

Further Write-Down of Harris Broadcast Communications Division Valuation

Harris also announced that it has recorded additional non-cash impairment charges in discontinued operations totaling $222 million, the “vast majority” of which is related to BCD, with only about $6m attributed to CIS.

The company said it lowered the internal valuation of CIS and BCD based on “recent indicators of value during the first quarter of fiscal 2013, including market, financial performance and indications of value from interested parties.”

Brown said that as a result of these factors, Harris has puts a net book value of $287m on the company’s broadcast communications business, which he said gives an “indication of the value we expect to receive” from the sale of Harris BCD.

This is the third time in the last six months that Harris has taken a non-cash impairment charge against the value of BCD.

In May 2012 when Harris Corp announced its intention to divest BCD, the company said it “recorded in the third quarter a non-cash charge of $407m after-tax, or $3.62 per diluted share, to write down a significant portion of the goodwill and other long-lived assets in Broadcast Communications, resulting in the GAAP loss from continuing operations.”  Information about how Harris Corp calculated this write-down was published in the company’s Q3 FY 2012 10-Q filing.

Harris subsequently disclosed a second BCD impairment charge of $23.6m in August 2012 as part of the company’s annual 10-K filing with the SEC, which said:

 “Due to the length of time necessary to measure the impairment of goodwill and other long-lived assets, our impairment analysis [of BCD] was not complete as of the end of the third quarter of fiscal 2012. In the fourth quarter of fiscal 2012, we completed our impairment analysis and, as a result, recorded a $23.6 million ($10.5 million after-tax) increase to our initial estimated impairment charge. The portion of the total $447.6 million impairment charge related to goodwill was $395.6 million, a minor amount of which was deductible for tax purposes.”

 

The lowered valuation of BCD prompted JP Morgan Chase analyst Joseph Nadol to ask whether there is a price at which Harris would not sell the broadcast business.  Brown rebuffed this idea, saying “we made the decision to divest the Broadcast business because we didn’t think it fits strategically with where we want to take the [core] business. It’s now our job to maximize value for share owners and as we dispose of that business and that exactly what we’re doing. I don’t think it’s appropriate to have a where’s the sort of the walk-away price. We’re committed to sell the business and do the right thing for share owners, given the fact it doesn’t fit strategically and that’s what the management team has got a bead on right now. So we’ll tell more, we’ll have more of an update towards the end of the year as we announce the sale of Broadcast and clearly more to say as we announce our Q2 results.”

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Related Content:

Press Release: Harris Corporation Reports Fiscal 2013 First Quarter Results

Harris Corp. Fiscal 2013 First Quarter Earnings Call Presentation

Harris shares fall after Lazard downgrade http://dcft.co/Ra6J5m

Previous Quarter: Harris Announces Q4 and Full Year 2012 Results – Says Sale of Broadcast Business is On Track to Close by End of Year

Previous Year: Harris Reports Q1 2012 Results, Says Broadcast Revenue Increasing

Harris 10-K Filing with SEC for FY 2012

Presentation: Harris Annual Meeting of Shareholders, October 26, 2012

Guest Post: Investment Banker Perspective on Sale of Harris Broadcast

Analyzing the Sale of the Harris Broadcast Division

Statement From Harris Broadcast CEO on Divestiture of Harris Broadcast Communications Division

Harris Corporation To Divest Broadcast Business

Harris Q3 FY 2012 10-Q Filing – details write-down of broadcast division

Harris 8-K Filing – Restates Fiscal 2011-12 Revenue on Pro Forma Basis (Without Broadcast and Cyber Integrated Solutions)

TVNewsCheck Article: Tech’s Big Question: What’s Next For Harris?

Quincy Herald-Whig ArticleProspective buyers seek information on Harris broadcast; business as usual in Quincy

Harris Corporation Shuts Down Cyber Integrated Solutions Business

 

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© Devoncroft Partners. All Rights Reserved.

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More Broadcast Vendor M&A: Screen Service Targeted in €30.5m Takeover Bid

Broadcast technology vendor financials, Broadcast Vendor M&A | Posted by Joe Zaller
Oct 22 2012

Italian broadcast transmitter vendor Screen Service became the target of a €30.5m takeover bid launched by Monte Bianco, according to a filing with the Milan Stock Exchange.

The bid values Screen Service, which for the first half of its financial year posted a loss of €3.67 on revenue of €25.1m, at a 35% premium over its previous stock price.

Monte Bianco, which is backed by French PE firm HLD, said it had not previously discussed the proposed deal with any of the shareholders of Screen Service, including Opera who own about 30% of the company.

Monte Bianco, who currently has an holds about 1.2% of Screen Service’s shares, said the proposed deal will increase the competitiveness of Screen Service, and ensure its medium and long term growth.

Screen Service is based in Brescia, Italy also has operations in the US and Brazil.  In July 2012, the company paid €1.1m to up its stake in its Brazilian subsidiary to 75% from 60%.

This is the second PE-backed deal for a broadcast transmitter in the last two years.  In April 2011, Technicolor announced that it had sold the Grass Valley transmission business to PARTER Capital Group for a “non-material” amount.  At that time Technicolor said that the Grass Valley transmission business has 291 employees and posted a loss in 2009 of revenues of approximately €43m.

The Harris broadcast communications division (BCD), which supplies broadcast transmitters along with a wide variety of other products, is currently being divested by its parent company, Harris Corporation.  It is believed that Harris BCD posted revenue of approximately $500m in its last fiscal year, but transmitter revenues were not broken out.

Although many in the broadcast industry may perceive transmitter as “old technology,” Harris BCD president Harris Morris said at the IBC 2012 exhibition that the company’s transmitter business are the “tip of the spear” into high growth emerging markets.  According to Morris, when countries in emerging markets make the transition to digital broadcasting one of the first things they buy is a transmitter, so  Harris BCD is able to sell through its additional elements of its product line on the back of these deals.

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Related Content:

Reuters Article: French group launches bid for Italy’s Screen Service

More Broadcast Vendor M&A: Technicolor Closes Deal to Dispose of Grass Valley Transmission Business

Analyzing the Sale of the Harris Broadcast Division

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© Devoncroft Partners. All Rights Reserved.

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Impressions of IBC 2012: M&A, Cloud, Multi-Platform, 4K, Efficient Operations, CiaB, and the “Return of Grass Valley”

broadcast industry technology trends, broadcast industry trends, broadcast technology market research, content delivery, market research, technology trends | Posted by Joe Zaller
Sep 20 2012

A previous version of this article appeared in the “Tech Thursday” Spotlight Section of TVNewsCheck

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Against the backdrop of the ongoing European debt crisis and the afterglow of the 2012 Olympics, nearly 51,000 visitors made their way to Amsterdam for the annual IBC trade show. Major themes of the five-day broadcast technology jamboree included vendor consolidation, buzz about new technologies for multi-screen content delivery and social TV, futuristic technology demonstrations, and several important new product introductions.

The broadcast vendor community got a little less fragmented on the first morning of IBC, with a merger announcement by two Norway-based video transport technology providers — Nevion and T-VIPS

Although no additional deals were unveiled at the show, vendor consolidation was one of the most discussed themes at IBC, and according to statements made by some of the leading vendors, there is potentially a lot more consolidation on the way.   

Newly acquired Miranda technologies made its debut as a “Belden brand” at IBC, and Belden EVP Denis Suggs was on hand at the show to meet customers and explain his company’s vision for the broadcast industry, and why they decided to buy Miranda in one of the largest broadcast technology M&A deals in recent years. 

In a nutshell, Belden saw the opportunity to acquire a cash-generating company with a top-class management team that’s growing faster than the overall market and jumped at it. Including Miranda, Belden now generates approximately $450 million a year in broadcast-related revenue, making it one of the industry’s largest players, and it appears they are not done doing deals in this space. 

Suggs said Belden views Miranda as a platform from which is can further expand its broadcast industry operations, and that it intends to support Miranda’s existing plan for further acquisitions.

Grass Valley CEO Alain Andreoli echoed a similar sentiment at his company’s press conference. He said that Francisco Partners, the private equity firm that owns Grass Valley, has a $3 billion fund behind it and will support Grass Valley’s efforts to become an industry consolidators.

When the dust settles, he said, Grass Valley may not be the largest player, but it will certainly be in the top three. Last year, Grass Valley bought PubliTronic, a provider of channel-in-a-box (CiaB) technology, to gain a larger foothold in the playout market. Expect to see Grass Valley and other players making additional strategic moves that help them enter attractive new market spaces.

But most IBC M&A talk centered on Harris Broadcast, which is currently being divested by its parent company. Although rumors were flying at the show about who might buy the division, its executives were tight-lipped. Harris Broadcast President Harris Morris would only say that the deal is progressing according to plan, and is on track to be completed as soon as the end of 2012.

New products and services based on cloud technology, multi-platform content delivery and social TV services dominated many demonstration and hallway conversations at IBC, particularly in the “Connected World” pavilion, where dozens of new and established firms displayed a host of products aimed at securing a place in this emerging ecosystem.

Despite the enthusiasm of vendors, many buyers publicly and privately expressed caution about the technology.

Critics of cloud technology cited immature technology, bandwidth limitations, security, and an unproven business case as barriers to its adoption. Likewise, broadcasters and content owners expressed concern over the “disconnect” between the desire of end-users to receive and consume video content on an ever-increasing number personal devices, and the ability of broadcasters to create sustainable and profitable multi-platform business models.

Cloud-based discussions at IBC ranged from real-world case studies of how EVS helped broadcasters set up private clouds to facilitate remote production of the Euro 2012 soccer championships and London Olympics, to practical solutions from Signiant and Aspera for managing the delivery of file-based content over IP-enabled and cloud-based infrastructure, to new solutions for cloud-based video production.

Cloud-based production is an emerging trend, but initiatives such as the ‘Adobe Anywhere’ initiative will prove to be a catalyst in this area. Taking cloud-based production to the “next level” are new firms like VC-backed start-up A-Frame, which is building from the ground-up a complete cloud-based video production environment that marries the experience of broadcast and post-production experts with forward-thinking IT-based software experts. 

On the multi-screen front, Ericsson introduced its first encoder based on HEVC/H.265 compression technology. The company says that its HEVC implementation offers the potential for users to reduce bandwidth by up to 50%, thereby enabling more efficient delivery of content over multiple platforms, including mobile networks.

Harmonic unveiled a new version of its ProMedia transcoder, aimed at enabling its customers to deliver an integrated multi-screen experience to their subscribers. Harmonic also introduced new members of its senior management team: CMO Peter Alexander, and CTO Krish Padmanabhan, who recently joined the company from Cisco and NetApp, respectively.

Noticeable by their absence on the Harmonic booth at IBC were the familiar Omneon and Rhozet brand names, which have now been absorbed into Harmonic. “Harmonic is a branded house, not a house of brands, and our singular focus is delivering excellent video quality to consumers everywhere,” said Alexander.

The Sony/SES Astra demonstration of live delivery of 4K images over satellite drew a lot of attention.

For many years, 4K images have been trade show “eye candy” for visitors, but at IBC 2012 Sony and SES showed that technology exists today to transmit high quality 4K images over satellite at a manageable 50mbit/s using h.264 compression technology.  The stunning live video images were delivered via an SES satellite to an 84-inch Sony Bravia 4K display.

The demo prompted speculation that 4K will be the “next HD” in terms of consumer adoption and broadcast infrastructure upgrades. Other observers took a more practical approach, saying that the industry might see 4K being used as a high-end production format in near to mid term, but that it will be a long time before broadcasters who have already spent millions on the transition to HDTV decide to upgrade again to 4K.

Indeed, when it comes to broadcast infrastructure upgrades it is operational efficiency, not higher resolution, which appears to be the primary demand of broadcasters. Thus, many vendors at IBC were promoting solutions designed to help broadcasters transition their operations to file-based and IT-oriented workflows. 

One of the ongoing initiatives in this area has been the development by a large number of vendors of integrated IT-based playout technologies, more commonly known as channel-in-a-box (CiaB).  These systems offer the promise of increased operational efficiency and significant cost savings through the integration of previously disparate playout and master control functionality into a single IT-based platform. Over the past several years, major vendors including Grass Valley, Miranda, Snell, Harmonic, and Evertz have offered products.

At IBC 2012, Harris became the latest entrant into the market with the launch of Versio, a CiaB system based on several of the company’s existing technology platforms including the Nexio server family, ADC automation, and Inscriber graphics. 

When describing the new Versio product at the company IBC press conference, Harris Morris said the No. 1 requirement for automated IT-based playout systems is reliability, and that this is an area where Harris Broadcast excels. Morris also emphasized that CiaB platforms rely heavily on automation technology, where Harris Broadcast is an established leader, making the company a natural choice for broadcasters considering integrated IT-based playout.

Although Harris Broadcast touted the fact that their Versio platform is based on the company’s existing technology platforms, it stopped well short of saying that the new system is a direct replacement for its current products, particularly its popular Nexio server family.

Instead the company described Versio as a robust cost-effective way for broadcasters to quickly add new services and digital subchannels channels, and to provide backup in emergencies.

“Channel-in-a-box should be about opening up new possibilities rather than limiting how a broadcaster can operate across multiple on-air scenarios,” said Andrew Warman, senior product manager at Harris Broadcast. “It’s limiting to look at channel-in-a-box as a system replacement for servers, automation, and other play-to-air systems. Broadcasters need freedom to build appropriate workflows for their operations, including external components.”

However, other vendors clearly see the CiaB market differently, and have taken a very different approach than Harris Broadcast, especially those firms that do not have an existing playout server business to protect. 

Snell Chief Architect Neil Maycock said that his company’s ICE platform is not only “ready for prime-time,” it is on the air today delivering high value content for major broadcasters.  Maycock also said that ICE has a unique architecture that enables it to scale from a single channel implementation, through a multi-location centralcasting model, to a large multi-channel playout environment.

PlayBox CEO Vassil Lefterov said he has built his entire business on disrupting the traditional server-based playout market. “We believe our singular focus on this application is a key advantage,” he said.  “Playbox has thousands of live channels on the air today and is working to re-define playout operations for many of our customers.”

Grass Valley, which like Harris has a significant video server business, took a more pragmatic approach.  SVP and CMO Graham Sharp said that “it’s likely CiaB and other IT-based playout systems may ultimately impact everyone’s server business, so we’ve taken the decision to cannibalize our own products where necessary by embracing IT technology, because if we don’t do it to ourselves someone else will.” 

Grass Valley was among the vendors with significant new products. Introductions included a new LDX camera platform that scales from a basic model to a high-end super-slow motion system; a new video server family, and brand new electronics for the Kayenne and Karrera production switchers.  Grass Valley said all its new products feature native 1080p processing, and provide straightforward upgrades via software.

Grass Valley also made bold claims about its future product plans, stating that by 2014 it will have replaced its entire portfolio with all new 1080p, IT-focused products. 

GV’s Sharp also hinted at a major NAB 2013 announcement from Grass Valley: “Next year we will introduce a completely new integrated IP-based platform that is totally format agnostic.” he said.  “We believe this new platform will enable a new way of working that we call non-linear production….”

All Grass Valley products, including those launched at IBC 2012, will be compatible with the new architecture, he said.

Sharp concluded GV press conference by saying: “If there is one take-away from this presentation about Grass Valley, it’s this: We’re back.”

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© Devoncroft Partners. All Rights Reserved.

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Guest Post: Investment Banker Perspective on Sale of Harris Broadcast

broadcast technology market research | Posted by Joe Zaller
May 08 2012

In a recent post called Analyzing the Sale of the Harris Broadcast Division I said I would defer to others on the valuation of and the structure of a transaction for Harris Broadcast. 

In response to this, Josh Stinehour from boutique investment bank Silverwood Partners contacted me and said he has an opinion to offer on the subject. 

So in the first-ever guest post on this site, Stinehour weighs in with his thoughts on the Harris Broadcast deal, including valuation, transaction type, and potential buyers.

Like many observers of the broadcast technology sector, and loyal readers of the Devoncroft blog, I have followed the recent announcements at Harris Corporation with great interest.  The merits of Harris Corporation’s decision to divest its Broadcast Division are well established.  This post is a perspective on the anticipated transaction – timing, type, and price.

Harris in its public messaging has established a few key data points:

  • There is no interest in pursuing a sale of the individual product lines or pieces of the Broadcast Division (Harris Morris’s interview with TVNewsCheck). It is difficult to understate how many vendors were disappointed with this announcement.
  • The expectations is for a price “substantially higher” than $200 million and Harris expects to “divest the business in a sale with cash returning to the company” (Q3 Earnings Conference Call).
  • There has been consistent inbound interest in the division (Harris Morris’s interview with TVNewsCheck, Chris Parson’s interview with Quincy Herald-Whig) – no surprise here.
  • The Company is assuming the transaction closes at the end of 2012 (Q3 Earnings Conference Call).
  • Based on historical SEC filings, the recently provided pro forma analysis (Harris Corp 8K filing), and selected assumptions, the income statement has a revenue and operating income (before corporation overhead) profile approximately as follows:

 

 

 

As the chart above suggests, the sale process will not have the benefit of meaningful revenue growth or a meaningful level of profitability in the Broadcast Division.  That is not to suggest the Broadcast Division is not a valuable asset.  The sale process will have the benefit of an end-to-end suite of products (several are category-leading), a great brand (as confirmed by Devoncroft’s Big Broadcast Survey), a well-regarded management team, and substantial size, presence, and revenue level in the media technology industry.  The caveat to those qualitative points is a portfolio that is much more hardware than software, and Harris Corporation’s self-admission that there is still operational work to do in streamlining the division’s operations (Q2 Earnings Call).

 

 

 

Harris will also have the benefit of a highly accommodating M&A environment, as illustrated in the below slide from our 2012 NAB Industry Analysis.

 

 

Possible Transaction Types:

 

Public Spinout to Harris Shareholders

One possible alternative for Harris is to spin out the Broadcast Division to its shareholders in the form of a stock dividend.  There is precedent for Harris taking this action with a subsidiary.  In January 2007, Harris Microwave Communications Division and Stratex Networks Inc. combined to create a new company having annual revenues of approximately $650 million.  On December 8, 2008 Harris announced it was evaluating strategic alternatives related to this majority-owned subsidiary, Harris Stratex Networks (now Aviat Networks). On March 31, 2009, the Board of Directors of Harris Corporation approved the spin-off to its shareholders of all the shares of Harris Stratex Networks owned by Harris Corporation.   Harris Corporation shareholders received approximately .24 of a share of Harris Stratex Networks for every share of Harris Corporation common stock owned.

This approach allowed the Harris Microwave Communication Division to gain scale, and find a public market with shareholders that were focused on small cap commercial communications growth investments rather than large cap, military communications investments.  A similar logical underpinning would apply in the case of the Broadcast Division. However, the business would need more scale and much more growth for such a strategy to be successful and attract public investors.  This approach would also be time consuming and there may be substantial uncertainty over the upside potential if the business continues to post modest or negative levels of growth and effectively break-even operating results. In sharp contrast, a straightforward sale of the Broadcast Division business for cash allows Harris Corporation to eliminate the distraction and redeploy capital into its core business.

 

Trade Sale to an Industry Participant

You can count on a single hand the number of industry participants capable of financing a greater than $200M cash purchase price.  In each case, it would represent a transformative deal and would require immediate rationalization of the combined organization and cost structure – product overlap would be almost unavoidable.  If such a transaction were successfully executed, the resulting business would have a dominant market position.

 

Trade Sale to a Broader Technology Vendor

Harris is certainly large enough to attract the attention of the comparably much larger IT vendors adjacent to the media technology sector.  For some time, IT vendors have lauded the growth opportunities in video as talking points to Wall Street, and in many instances these same vendors have occupied large booths at NAB and IBC.  However, head of digital media at these vendors is a difficult job to hold through an entire business cycle. 

In this circumstance, the biggest question is whether a broader technology vendor views the Broadcast Division’s portfolio as too hardware-centric and too specialized to the broadcast industry. Conceivably any IT vendor interested in moving into the broadcast sector had the opportunity to make such a decision in connection with the sale process at Grass Valley in 2010, the ongoing sale process at Miranda, or in connection with the evolving situation at other large vendors in the sector.

 

Purchase by a Private Equity Firm

A CapitalIQ screen of private equity firms with a focus in North America, technology, corporate divestitures, and investment criteria in the suggested range yields approximately 2,000 firms – that is not a typo.

There is a tremendous amount of private equity interest in the media technology sector.  The single biggest obstacle these firms have in finding investment opportunities in the sector is a dearth of businesses large enough to support the amount of money these groups are looking to invest. 

Unambiguously there is a private equity buyer for the Broadcast Division.  The challenge is price.  Without the benefit of existing, meaningful historical cash flow or near-term expected cash flows, there is little ability to borrow money to support the purchase price.  Therefore, private equity firms will value the division based on the expectation of near-term efficiencies that can be brought and the expected value of the ultimate exit (generally in a 3-5 year time horizon).  Recall that on a net cash basis, Technicolor provided cash to Francisco Partners at closing in connection with the purchase of Grass Valley. 

 

 

Price

Since 2004, Harris has spent just under $1 billion dollars on acquisitions for the Broadcast Division.  But the market has no memory.

Triangulating between the recent write-downs and the last publicly available balance sheet for the division, it is estimated there is approximately $600 million of assets associated with the division, and more important, the annual revenue is estimated at approximately $530 million.  In the context of those numbers, the level of profitability is insignificant, but critically it is not negative. 

The public comparable companies suggest a revenue multiple of 0.5x to 1.0x.  Recent M&A transactions might suggest a revenue multiple of 1.0 to 1.5.  In the case of the Broadcast Division, the multiples ignore the specifics of the situation; all but a select few industry participants can finance a transaction of the size expected. Private equity firms may have an interest, but they are inescapably bound to pay a price supported by the immediate prospects of cash flow, which price would imply the low end of the suggested multiples. 

In the context of an IT vendor’s balance sheet, a valuation “substantially higher” than $200 million is not a significant amount of money. For that group of buyers, it is a binary question of interest, more than of price. In the past 16 months, by my count, vendors accounting for almost one third of the industry’s revenue have been sold or have actively sought a sale.  With only a few exceptions, the broader technology vendor universe has not participated in those transactions.  The Harris Broadcast Division will make for a great litmus test of the interest in the broadcast technology sector by broader technology vendors: it is big enough to matter to them, spans just about the entire workflow, and comes with a quality and level of video expertise in both the management and engineering ranks that broader IT vendors can not replicate internally.

It will take several months to work through the sale process.  The end result will be a signature event in the industry and will reframe exit expectations for vendors in the sector.

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Related Content:

Analyzing the Sale of the Harris Broadcast Division

Harris Corporation To Divest Broadcast Business

Press Release: Harris Corporation Reports Fiscal 2012 Third Quarter Results

Harris Q3 FY 2012 10-Q Filing

Harris 8-K Filing – Restates Fiscal 2011-12 Revenue on Pro Forma Basis (Without Broadcast and Cyber Integrated Solutions)

Press Release: Harris Corporation Reports Fiscal 2012 Third Quarter Results

Harris Fiscal Q3 2012 Analyst Presentation

Harris Fiscal Q3 2012 Conference Call Transcript

TVNewsCheck Article: Tech’s Big Question: What’s Next For Harris?

Quincy Herald-Whig ArticleProspective buyers seek information on Harris broadcast; business as usual in Quincy

Harris Broadcast Revenue and Income Rise in Q2 2012, Says It’s Laser Focused on Maximizing Shareholder Value.

 

© Devoncroft Partners. All Rights Reserved.

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Statement From Harris Broadcast CEO on Divestiture of Harris Broadcast Communications Division

Broadcast Vendor M&A | Posted by Joe Zaller
May 01 2012

Following on from the announcement that Harris Corporation will divest its broadcast business, Harris Morris, the president of the company’s broadcast communications business issued the following statement: 

“Today, Harris announced its decision to divest the Broadcast Communications business. I fully support this decision and believe that the timing is right for both Harris and Broadcast Communications. 

“Harris has supported us by investing in our business, allowing us to develop some of the market’s most innovative, solution-based technologies. However, over time Broadcast Communications has become less aligned with the Harris core businesses and long term strategy.

“Operating independently or as part of a broadcast or media-focused enterprise will provide us with strategic investment, increased competitive flexibility, and customer focus to lead the continuing transformation in this competitive marketplace.

“The decision to divest in no way reflects the quality of the work Broadcast Communications performed in support of our customers and our company.  Harris simply determined that Broadcast Communications could provide higher value and operate more effectively under a different ownership model. 

“In the interim, Broadcast Communications will continue to be a part of Harris Corporation and operate business as usual. Our valued relationships, both longstanding and new, remain our top priority. The global team will continue to work diligently to ensure our commitment to our customers and partners remains steadfast, our execution to fulfill commitments is flawless, and our progress against strategic objectives remains focused.”

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Related Content:

Harris Corporation To Divest Broadcast Business

Harris 8-K Filing – Restates Fiscal 2011-12 Revenue on Pro Forma Basis (Without Broadcast and Cyber Integrated Solutions)

Harris Broadcast Revenue and Income Rise in Q2 2012, Says It’s Laser Focused on Maximizing Shareholder Value.

Harris Corporation Shuts Down Cyber Integrated Solutions Business

Harris Corporation Strategically Realigns Business Segments; Broadcast Communications Rolled into New “Integrated Network Solutions” Unit

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© Devoncroft Partners. All Rights Reserved.

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