Combined, the two companies had revenue of $1.2bn in the 12 months to June 30 and a customer base of 250 companies, though the majority of revenue is currently generated in the US.

Atlanta, Georgia-based Arris was foiled in its efforts in January to pay $1.2bn for digital video processing company Tandberg Television when Ericsson moved in with a $1.38bn for the company.

While Arris CEO Bob Stanzione insisted it was not buying C-Cor on the rebound, it is clear that a big motivation for the deal was to cash in on increased investment by the cable companies as they move to on-demand services.

While Arris claims to be leader in cable IP telephony with a 45% market share, and says it is number two in cable modem termination systems, C-Cor has a strong position in the access and transport segment. With the industry moving from services provided by the carrier to those demanded by the consumer, it said it is in a good position to supply unified video systems.

With little overlap, the companies calculate conservatively that synergies could be $10m a year, though there will be strong cross-selling opportunities. It said the product portfolio will more than match those of Cisco and Motorola, while its $1.2bn revenue will dwarf that of niche players including Harmonic with $280m, Bigband with $213m, SeaChange with $165m, and Concurrent with $69m.

Stanzione said the combined company will be well positioned to deliver cross-platform solutions aimed at customer spending initiatives including switched digital video, next-generation video on-demand, and digital advertising infrastructure. It said it will allow it to be at the forefront of innovation enable it to introduce products and solutions that neither company would be able to develop alone.

Asked if Arris has further acquisitions in mind, Stanzione said: We’ve got our hands full for the next few months but I would rule anything out beyond that period of time.

C-Cor shares leapt 27.02% to $12.55 on news of Arris’s $13.75 a share offer where investors can opt for a cash payment or 0.9642 Arris shares, subject to a pro rata distribution of 51% cash and 49% shares.

Both companies have impressive recent financial records. In the year to June 30, C-Cor turned a loss of $30m into income of $25.6m on revenue that rose 29% to $277.3m.

Arris is highly profitable and in 2006 it increased net income from $51.4m to $142.3m on revenue that rose 31% to $891.5m.

Our View

The largest pure-play cable equipment provider has a nice ring to it. A bit like the biggest brewer in Milwaukee or the largest bicycle manufacturer in the UK, it is a description redolent of an era when companies could achieve fame by dominating local markets or vertical segments.

However, the dividing lines between cable operators, wireline, and wireless telcos and satellite companies are breaking down as everyone looks for the cheapest way to provide broadband services. Arris and C-Cor are right to merge, but will have to grow a lot bigger to survive long-term.