By Kate Holton and Alexei Oreskovic
LONDON/SAN FRANCISCO Dec 10 British TV decoder
maker Pace Plc said on Monday that it had made an
early-stage proposal to Internet group Google Inc to
acquire its set-top TV box maker Motorola Home.
"Discussions with Google are currently at a preliminary
stage and there is no certainty as to whether any agreement
regarding any transaction will be reached," Pace said in a
The offer is one of several bids for the unit, including
from private equity firms, that Google received on Friday,
according to a person familiar with the situation.
Google acquired the set-top box maker as part of its $12.5
billion acquisition in May of Motorola Mobility, which was
largely motivated by a desire to snap up its large portfolio of
Since acquiring Motorola, Google has moved to revamp the
company's loss-making mobile phone business, while appearing
less interested in the set-top business.
"It's a fine business, it's just not core to Google," said
Pivotal Research Group analyst Brian Wieser.
Motorola and Cisco Systems Inc's Scientific Atlanta
dominate the U.S. market for cable television set-top boxes and
for the back-end infrastructure that manages the transmission of
video signals to the boxes, said Wieser.
He estimated that the Motorola's home business could fetch
"in the billions" of dollars, depending on how the deal is
structured, such as whether patents are included.
Arris Group, a cable equipment maker, also made a bid for
the business, according to a report by Bloomberg. Arris Group
and Google declined to comment.
Google, the world's No.1 Web search engine, has increasingly
expanded into the hardware business as consumers turn from their
personal computers to smartphones and other gadgets to access
Google worked closely with companies such as Asus and LG
Electronics to develop Nexus-branded smartphones and tablets
that Google sells directly on its website. And Google has said
it is shifting the emphasis at Motorola Mobility's phone unit
from low-end phones to more innovative smartphones.
Some analysts had speculated that Google might use the
Motorola set-top box business to help it gain a foothold in the
living room, where its nearly three-year-old Google TV efforts
have so far failed to make a huge splash with consumers.
"It seems like it would make sense to be able to integrate
that into a set top box," said Needham & Co. analyst Kerry Rice,
referring to Google TV.
But he said Motorola Home's customers - cable providers and
telecommunications companies - were different than the
advertising agencies and consumers that Google is accustomed to
The Motorola Home business generated $797 million in revenue
in the third quarter, according to Google's financial results,
with $25 million in operating income.
Pace said its shares had been suspended from trading in
London as the potential acquisition would be classified as a
"reverse takeover" deal given the size of the acquisition
relative to Pace.
A deal could help Pace recover from the three profit
warnings it issued in 2011 due to natural disasters such as
flooding in Thailand and the earthquake and tsunami in Japan
that damaged the group's supply chain.
"Pace already has a somewhat stretched balance sheet, they
have done a good job over the past 12 months to try to pay down
that debt but how they would finance such a large acquisition is
a question, but not an insurmountable one," said Numis
Securities analyst Nick James.
Shares of Google were just a shade higher in Monday
afternoon trading, up 80 cents, or 0.1 percent, to $685.01.