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ADB Enters Gateway Market with Pirelli Purchase

October 22, 2010

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Switzerland-based ADB has become the latest set-top manufacturer to buy into the gateway market, acquiring Pirelli Broadband Solutions, the set-top boxes and routers business of the Italian tyre and materials manufacturer. The net value of the deal will cost ADB €30m in a mixture of stock and cash, leaving Pirelli with just over seven per cent of ADB shares. The divestment is part of a more general move by Pirelli to refocus on its core business of tyres.

The acquisition of Pirelli is strategically important for ADB since it brings expertise and deals in telco grade routers, as well as bolstering its IPTV set-top sales. In 2009, ADB turned over around €270m, of which almost 90 per cent was derived from set-top box sales. However, less than a quarter of this came from IPTV, the rest coming from pay satellite, cable and pay terrestrial.

Pirelli by contrast generated €132m in revenues, but only around €30m of this from set-tops, the remaining €100m plus from routers and gateways. ADB will also gain access to some key tier 1 customers, especially Telecom Italia, where Pirelli holds both a router and set-top deal, and OTE in Greece.

The consolidated company would have turned over around €164m for the first half of 2010, of which around €110 in set-top boxes. This is not expected to cause any change in the overall ranking of set-top box vendors by revenue, where ADB are currently 8th.

In Pirelli's portfolio, ADB has bought in key router and IP gateway technology, both giving it access to the telco gateway market and putting it into contention for next generation media gateways, such as UPC's Horizon Connected Home Gateway, essentially a high-end, multi-tuner set-top with an in-built router and home networking.

Of the seven companies with greater set-top revenues in 2009, only Humax does not hold router technology. The others have already positioned themselves for this opportunity: Motorola and Technicolor have long-established router businesses; Cisco, Echostar and Pace have bought in expertise, in the form of D-Link, Sling and Bewan / 2Wire respectively, additionally Echostar recently launched a stand-alone DOCSIS 3.0 product; and Samsung is slated to manufacture UPC Horizon product, along with its existing product portfolio.


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