The sale of Digeo to cable hardware provider Arris looks like a mixed bag for everyone except perhaps cable customers.
Paul Allen is taking a big loss selling the company for $20 million, after investing more than $110 million in Digeo since he started it in 1999.
Arris investors saw their stock fall 8.5 percent to $12.53 today on the news. Apparently they’re not as enthused as Arris management about the Suwanee, Ga., company adding Digeo’s set-top box technology to its portfolio of broadband modems and technology widely used in cable company networks.
There are also the approximately 10 employees — including Chief Executive Greg Gudorf, a former Sony TV executive — who are losing their jobs (we broke the layoff news here).
About 245 other people lost jobs as Digeo shrank from a high of about 320 employees in 2002 — when Allen acquired Silicon Valley startup Moxi and merged it with Digeo — to its current 75 positions.
Winners may turn out to be cable customers, who are now more likely to get Digeo’s excellent Moxi software on their set-top boxes. The software includes a slick program guide and interface for Moxi-brand set-top boxes that function as both digital video recorders and gateways for digital content coming into a home via broadband.
Moxi is designed for cable subscribers, who connect the boxes via cable cards. It’s a nice alternative to high-def cable boxes, especially since there’s no rental fee.
The downside to Moxi has been the price — $799 for the box, plus $399 for smaller units to wirelessly connect additional TVs. There’s also a $999 bundle that includes one box and one extender, and the stuff is sold only via Moxi.com and Amazon.com. Below are the box and a screenshot of the Moxi interface from January.
But Arris has more leverage with component manufacturers, because of its scale, so should be able to quickly bring down the retail price of Moxi gear.
“I think they’ll be able to bring the price down,” said Gudorf, who is staying with the company until after the sale closes in October.
Gudorf wouldn’t talk about the haircut Allen took on Digeo, but he did clarify the timeline of the Kirkland company’s recent transformations and sale.
The big shifts began in late 2007 when Digeo began restructuring, leading to a move in January 2008 to cut its hardware and chip development efforts and focus on building (higher margin) software for industry-standard hardware.
That shift cut employment in half, to about 90 people, who were able to finally release a new version of the Moxi box for cable companies in late 2008 and a retail version in January 2009. Last month, the company released the extender device, and additional features are expected to be released later this year, Gudorf said.
Meanwhile Digeo’s board — which includes Gudorf, Allen and Allen’s sister, Jody Patton — met last spring and decided it was time to sell or find a strategic partner to get the software into more homes, Gudorf said.
This also came amid Allen’s growing troubles with Charter, the bankrupt cable company in which he invested $8 billion as the centerpiece of his vision for a “wired world” of broadband services, a vision that also included Digeo.
The board’s decision eventually led to the deal with Arris announced Tuesday afternoon.