With New Owner, Harris Is Moving Forward

Ending six months of speculation, Harris Corp. last Thursday announced a buyer for its financially struggling broadcast division — The Gores Group, a Los Angeles-based investment firm with a fat portfolio of companies, none of which is in the broadcast technology market.

The purchase price reflects the trouble Harris has had in implementing a one-stop-shop strategy of providing all the major pieces of a broadcast plant, including traffic and billing, signal processing, servers, digital asset management, master control automation and transmitters.

For assets that Harris paid nearly $1 billion in recent years to accumulate, Gores agreed to pay $225 million, but $65 million is deferred in the form of a $15 million note and $50 million in payments that Gores will owe Harris Corp. if its former division meets certain unspecified financial targets. The deal is expect to close early next year.

Despite the troubles, The Gores Group is sticking with the current management led by Harris Morris, a one-time Bain & Co. consultant who took over the division in 2010.

In this interview with TVNewsCheck Editor Harry A. Jessell, Morris says that the new owner is not only committed to him and his team, but also to the “end-to-end” strategy that has never really had a chance. “We started putting teeth in it about two-and-a-half years ago and it’s starting to really work.”

An edited transcript:

So what are we going to call this thing?

We have got the right to use the Harris name for up to three years. We will use Harris for a period of time, and then we’re going to work with the Gores guys to select a new name and transition to it very carefully so that we make sure it keeps all the traits, all the behaviors, all the brand promises, if you will, that we think this brand has come to mean.

Where does the division go from here? What’s the grand plan?

We’re really looking forward to working with the guys from Gores. They bring a very sophisticated operations team. They have a lot of expertise in carve outs — taking companies out of big entities and making them stand-alone companies. Obviously, as [Harris Corp. CEO] Bill Brown alluded to, a process like this in the broadcast industry in particular, can be a bit disruptive, a bit distracting. We’re really thrilled to just get back to doing what we do and focusing on our customers and their needs.

Do you have any plans to reduce the breadth of your offerings?

I think the Gores guys would tell you they are very excited by the end-to-end offerings that we have in our portfolio and they’re committed to developing leading-edge technologies across the broadcast value chain.

Obviously, that’s been our strategy. And as the world continues to move forward and becomes more workflow driven versus one in which disparate solutions are cobbled together, we think that’s an advantage.

The end-to-end strategy hasn’t worked in the past. What makes Gores and you think it’s going to work in the future?

No one ever really did it right. We started putting teeth in it about two-and-a-half years ago and it’s starting to really work. The work we have done on integrating automation and asset management, modularizing those systems, breaking up ingest from device control so that they can be simply implemented and upgraded and managed, linking servers and automation more closely together, linking traffic with live updates so you can go live to air later and make a lot more money with the same kind of inventory — these things are really starting to work.

Folks talked about it and there was a great deal of rhetoric, but people didn’t put the real interoperability hooks into the systems. They didn’t really take a software-centric and open approach to partnering. They really liked the drug, if you will, of closed proprietary systems, which really flies in the face of developing that kind of interoperability. At some point you have got to make a commitment. I think we have been doing that now.

So you think Harris Corp. just gave up on the strategy too soon?

I think they have been very clear about their rational for selling it. I don’t think it was giving up. I think it was Bill that said several times he actually thinks broadcast is a good business and selling it is not a comment on the way we serve our customers or the progress we were making, but it doesn’t fit their strategy.

It made a substantial investment of $1 billion to acquire all the companies that now constitute Harris broadcast. Do you think you can make that pay off?

We absolutely think that we have got the right pieces of intellectual property and we have got the right people. Look at our launches over past year and a half or so — Maxiva transmission, renewed and upgraded OSI [traffic and billing], Invenio Motion [digital asset management], Selenio [signal processing and networking], Versio [channel in a box] and obviously our server line.

I think we have the sweetest offerings we have ever had. I think that things are easier to configure and install, easier to use and lower cost to operate than ever before. We are starting to help people figure out how to unlock more revenue with their core assets.

Is it fair to characterize the purchase price as a fire sale price?

I am not going to talk price because I wasn’t in that part of it. A lot of things drive price and define price, particularly in this industry. I think the key message we have been taking to our customers and to our people is, price doesn’t define us either.

Clearly a process like the one we have been in for several months now has some disruptive and distracting impacts, but at the end of the day we’re defined by our products and our people. We think our product offering is better than it’s ever been, the people are the same ones and we keep augmenting that team with talent around the world.

What about head count? Are you going to be cutting employees as part of setting up the new company and making it more profitable?

I think we believe we have got the right people in this business and we actually think we’re pretty comfortable where we are.

I didn’t see anything in the Gores portfolio that suggests that they know anything about the broadcast equipment business.

What’s more important is they bring the ability to pull in some very savvy talent. Carl Vogel, former vice chairman and president of Dish was their senior adviser on this deal and will be a member of our board. He will be involved and obviously has some strong relationships and background.

I also think they understand what our challenges are — getting cleanly separated from Harris and set up as a stand-alone entity, keeping kind of a steady hand on the tiller in terms of what’s the growth story.

These are things that they believe in and things that they have done a lot across their other entities. I think of that as less of a segment discipline and more a functional discipline. Frankly, that’s what appealed to us about them as a buyer.

Read other Executive Session Q&As here.