Arris Group Inc. (ARRS) has decided to acquire the privately held Digeo Inc. Incorporatedluding its intellectual property portfolio, for a total consideration of approximately $20 million in cash.

Digeo is a pure-play interactive television (iTV) that has diversified its operations into digital video recorder (DVR) and interactive program guide (IPG) market after its merger with Moxi Digital in 2002. The company’s flagship product Moxi(r) HD DVR is a premium hub for home distribution of digital entertainment.

The deal is expected to be closed in the fourth quarter of 2009. Purchase of Digeo together with the recent acquisition of patents and video processing technology for digital network of EG Technology will significantly strengthen Arris’ combined portfolio of digital video networking and multimedia services delivery platform.

Acquisition of these valuable video processing assets will give Arris an edge in this industry, which is very competitive. Motorola (MOT), Cisco System Inc (CSCO), Harmonic Inc (HLIT), and TiVo Inc (TIVO) are major competitors. The primary marketing strategy of Digeo focuses on the retail segment with an effective direct-to cable MSO thrust.

Arris announced that it will continue to develop and market the current line of Digeo DVR products in collaboration with Charter Communications Inc (CHTR), a key cable operator partner of Digeo. During the last couple of years, Arris has been trying very hard to enrich its digital video portfolio since these products are generally high-margin.

In Sep 2007, Arris acquired C-COR for $730 million. The merger has expanded the company’s offerings with fiber enabled bandwidth expansion capabilities, OSS management systems, Ad-insertion platforms, and Video-on-Demand hardware/software.

In Jan 2009, the company entered into an agreement with Verivue to provide a converged video service network. Arris is likely to benefit from the continued growth of video and data traffic over cable Internet networks as competition has intensified among cable MSOs, telecom operators, and satellite TV service providers.

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