Registered: Mar 2002
This was posted over on the AVSforum, and is news to me. Note that this mentioned they will build PVRs as well.
Thomson and DIRECTV Sign Long-Term Agreement On May 12, Thomson and DIRECTV signed a long-term supply agreement for the development and supply of digital satellite set-top boxes. Based on the contract terms, Thomson is expected to double its current annual revenues with DIRECTV and provide at least one half of DIRECTV’s satellite decoders over a five-year period. As part of the transaction, Thomson will also acquire Hughes Network Systems’ set-top box manufacturing assets. This agreement strengthens Thomson’s strategic relationship with News Corp. Ghislain Lescuyer, Executive Vice President of the Broadband Access Products SBU, reviews this major achievement for the Group.
Can you present the main characteristics of the agreement signed by Thomson and DIRECTV?
Thomson and the DIRECTV Group, Inc., the parent company of Hughes Network Systems, Inc. (HNS), announced on May 12 a definitive agreement for the long-term development and supply of digital satellite set-top boxes (or decoders). This agreement has three parts:
- Thomson will supply set-top boxes;
- Thomson will develop new products;
- Thomson is acquiring the set-top box manufa-cturing assets of Hughes Network Systems, a subsidiary of DIRECTV.
This supply and development agreement between Thomson and DIRECTV is strategic, because it replaces the pre-existing agreements between both companies, and, moreover, it positions Thomson as the key supplier to DIRECTV.
• What are the assets acquired by Thomson and how will they be integrated into the Broadband Access Products activity?
Thomson is acquiring HNS’ set-top box manufacturing assets, which comprise a plant in Tijuana, Mexico, and San Diego, California, as well as the right to hire key R&D employees in the Germantown, Maryland facility. In total, this division employs about 1200 employees.
These resources and assets only serve the American market; thus, this acquisition is not impacting Thomson’s European activities.
• To what extent is the agreement signed with DIRECTV important for Thomson?
This is a key agreement, first because the amounts are huge: Thomson expects to more than double its current annual revenues with DIRECTV. This represents a volume of 4 to 6 billion dollars of sales within the next five years, that is to say an average amount of $800 million per year. DIRECTV will become one of the Group’s major customers, and Thomson will be the lead supplier of DIRECTV System set-top receivers, accounting for half of its needs.
This agreement is also important to Thomson as it will serve as a strategic platform to develop new products, which are more “intelligent” (with more functions, like High Definition or Personal Video Recorder, which enables the recording of video content on a hard disk drive), more “mobile” (wi-fi etc.) and more “connected” (home networking).
Last, this agreement is key because of the synergies it will create with the other subsidiaries of News Corp (including in India, Latin America, Australia, etc.), which is one of the most important media groups in the world.
What is the cost of this operation for Thomson? We h
ave decided to invest $250 million to acquire the assets and win this long-term agreement. This is a common practice for this type of contract, and the recurrent revenues linked to this agreement will provide us with a positive margin: that is why this agreement is so important as it secures Thomson’s global leadership in set-top box development and manufacturing.
• What are the objectives of our Broadband Access Products activity for 2004-2007?
The Broadband Access Products (BAP) activity, part of the Video Networks Solutions Division, provides digital equipment and services for broadcast television, cable and other network operators. Through this activity, Thomson is one of the world’s leading suppliers of digital cable, satellite and digital terrestrial set top boxes, as well as DSL modems and IP Video set top boxes (enabling the broadcast video content over DSL networks). For the BAP activity, the objective is to double revenues over 2004-2007. To achieve this objective, we need to increase our market share with our existing customer base; to penetrate new, emerging markets such as China and India; to help operators extend their network reach through new technologies (DSL networks, Wi-Fi…); and to develop new solutions (especially for image and video processing, storage, security, connectivity…) and innovative business models for our clients.
• How is this deal contributing to Thomson’s strategy?
Today, the main mission for our Video Networks Solutions division is to sell our broadcast and access equipment and services, while reinforcing their value added by integrating them into an end-to-end solution; this mission also consists of selling value-added services as well as robust and innovative technology developments. When we ship decoders to our customers, we are not just providing a box, but a system architecture experience and end-to-end solutions, helping the customers provide solutions to their own customers.
The agreement signed between Thomson and DIRECTV enables Thomson to capitalize on its technologic leadership in various areas such as security, video compression, digital rights management and home networking, including mobile and wireless applications.
In addition, this agreement is another example of the strategic relationship that we formed with News Corp. last year. We will continue to develop further opportunities with News Corp in both our Broadcast and Technicolor businesses.
In the same way, we believe this new supply agreement is a springboard to further develop Thomson’s activities in key strategic geographic areas, especially in Asia, Latin America and Australia.
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