There's been some interesting consolidating going on in the video market that's worth an update, as it leaves Harmonic (HLIT) in a stronger position to be the next company acquired. You probably remember that Cisco (CSCO) acquired Scientific-Atlanta in early 2006. Scientific-Atlanta's strength is set-top boxes for cable systems, and their main competitor, General Instrument, was acquired by Motorola (MOT) at the end of 1999.

In the last six months, Motorola has been acquiring companies and technology to give them the pieces that they need to compete with Cisco in Internet Protocol Television (IPTV). MOT still can't compete with Harmonic in the "head end" at the broadcast studio, cable TV central office, or telephone company IPTV central office, but they have bought companies in video on demand, switched broadcast, DSL routing, ad insertion, video software and MPEG-4 encoding technology for a total of around $600 million.

In February, Ericsson agreed to buy Tandberg TV with similar technologies for $1.4 billion, so it looks like MOT got a pretty good deal overall. Alcatel-Lucent, the fourth big competitor, has been very successful in Europe and uses Harmonic equipment in its bids.
Once Tandberg is acquired, Harmonic will be the only independent video company with a complete head end solution. It also happens to have the technically best solutions. So any company that acquires HLIT freezes out the other independents, and if MOT makes the bid, Alcatel-Lucent winds up buying gear from a competitor.