Harmonic Completes Acquisition of Omneon

Harmonic Inc., a leading provider of broadcast and on-demand video delivery solutions, today announced that it has completed the acquisition of Omneon, Inc., a leading provider of video production and playout solutions for many of the world’s premier media companies, for aggregate consideration of approximately $194 million in cash and approximately 17.1 million shares of its common stock. This represents an enterprise value of approximately $273 million, based on the value of Harmonic's common stock as set forth in the definitive acquisition agreement and net of Omneon’s cash balances.

“By bringing together a powerful range of market-leading technologies that span content contribution through delivery, and leveraging strong relationships with content producers and service providers around the globe, Harmonic is now uniquely positioned as a global leader in video infrastructure for the digital media industry,” said Patrick Harshman, President and CEO of Harmonic. “In combination with Omneon, we expect to deepen our relationships with global media companies, enabling them to create, package and deliver the next generation of video-centric media services.”

The transaction is expected to be neutral to Harmonic’s non-GAAP net income in 2010 and to be accretive to non-GAAP net income in 2011, excluding the amortization of intangibles and non-recurring charges such as restructuring and transaction costs. See “Use of Non-GAAP Financial Measures” below.

Due to the purchase accounting for the transaction, Harmonic cannot reasonably estimate the impact on GAAP net income at this time. The Company expects to report consolidated guidance when it reports its results for the third quarter of 2010 in October.

Harmonic Introduces Revolutionary New EdgeQAM Platform

– Ultra-Dense NSG™ HectoQAM™ Universal EdgeQAM Sets New Benchmark with up to 648 QAMs in 2-RU; Incorporates New Technology to Enhance Efficiency and Flexibility –

Harmonic Inc. in August 2010 strengthened its edgeQAM leadership position with the introduction of the NSG™ HectoQAM™ (NSG 9000-40G), the world’s first universal edgeQAM solution to deliver up to 648 QAMs per two-rack unit chassis. In addition to its pace-setting density, the groundbreaking NSG 9000-40G incorporates pioneering new technologies that significantly improve efficiency and ease of operation, including Harmonic’s new EQAM Virtualization™ software technology and frequency agility for flexible placement of QAMs across the spectrum.

The cost-effective NSG 9000-40G supports video-on-demand (VOD), broadcast, switched digital video (SDV), modular cable modem termination system (M-CMTS), DOCSIS 3.0 and cable IPTV services, providing unparalleled flexibility while lowering operational costs for cable operators. Customer shipments for the NSG 9000-40G are scheduled to begin in September 2010.

“Harmonic’s expertise and commitment to edgeQAM technology innovation has resulted in the introduction of several exciting and unique features with the new NSG 9000-40G solution. Operators can more easily upgrade to an ultra-compact platform thanks to its use of the same form factor as existing NSG systems and its ability to utilize the same network, integrate with the same back-office system, and enable flexible use of available spectrum. Furthermore, with the number of QAMs that can be supported using NSG 9000-40G technology—648 QAMs in 2-RU for 6 MHz networks or 486 for 8 MHz—Harmonic’s new solution offers more than double the density of any other solution available today,” said Yoav Derazon, Senior Manager, Cable Solutions and Strategy for Harmonic.

The system supports up to 36 QAMs per port, a density nearly 10 times greater than most existing edgeQAM deployments. This feature, along with the new frequency agility capability, is critical to support more VOD traffic, SDV and M-CMTS services, and reduces MSOs’ capital and operating expenses by significantly lowering requirements for power, cabling, rack space and cooling.

Harmonic’s new EQAM Virtualization software technology allows a single device to be operated as a number of virtual systems, simplifying management and integration with the cable operator’s existing back-office solution. The NSG 9000-40G’s 10-Gbps interfaces serve up to 40 Gbps input total, and can also function as 1-Gbps links. As a result, MSOs can leverage their existing investment in 1-Gbps IP network equipment, an advantage which is particularly relevant for SDV applications.

The new NSG 9000-40G mainboard and blades are used with the existing NSG 9000 chassis, allowing operators to leverage their existing hardware investment for added OPEX savings. NSG 9000-40G blades are hot-swappable, allowing for ease of management and flexible enhancement of the system without service down-time.

Harmonic’s NSG family of edgeQAMs—the world’s first, introduced in 2000—holds top market-share standing with more than one million QAMs deployed by cable service providers around the world, serving more than 50 million cable TV subscribers. The award-winning NSG solutions will be on display at Harmonic’s stand #1.C61 during IBC 2010 in Amsterdam, September 10-14.

Harmonic to Demonstrate Broad Range of Video Delivery Solutions at Industry Events in Brazil

– Company to Feature Contribution/Distribution, HFC Access, HD/SD Video Processing and Converged Video Delivery Offerings –

Harmonic Inc. will showcase its comprehensive portfolio of solutions for contribution, video stream processing, distribution and multi-screen delivery at two industry events in Sao Paulo, Brazil. Harmonic will exhibit at the ABTA Exhibition & Conference August 10-12 in booth #F10, and booth #D20 at the SET 2010 Broadcast & Cable Show taking place August 25-27.

Key demonstrations at Harmonic’s ABTA booth include:

Industry-leading cable edge and access solutions including Harmonic’s high density NSG™ 9000 edgeQAM, PWRBlazer™ nodes, and the SUPRALink™ family of 1550 nm DWDM transmitter modules for advanced broadband networks

Harmonic’s ProStream™ 4000 real-time transcoder, part of the MediaPrism™ converged suite of multi-screen solutions for delivery of Internet television, 3G/4G mobile and broadcast mobile TV services

Latest-generation video and stream processing solutions including the market-leading Electra® 8000 multi-channel HD/SD MPEG-2/AVC encoder with integrated statistical multiplexing and Jünger Level Magic automatic audio level adjustment, and ProStream 1000 with ACE™ any-to-any transcoding

At SET, Harmonic will feature:

Low-delay contribution and distribution for satellite newsgathering with Harmonic’s Ellipse™ contribution encoders and ProView™ integrated receiver/decoders (IRD)

Harmonic’s recently introduced Distribution Management System for over-the-air (OTA) in-band control of content distribution network elements

Internet and mobile TV powered by the ProStream 4000 transcoder

Harmonic’s cost-effective, high quality ISDB-T solution based on the market-leading Electra 8000 and ProView 7000 IRD

“Harmonic is continuing to increase our local staffing and investment in the Latin America region to support our growing customer base, which includes many of Latin America’s leading broadcast, cable, satellite and telco IPTV service providers,” said Richard Phelps, Vice President of Caribbean and Latin America Sales for Harmonic. “Operators can rely on Harmonic’s broad suite of video contribution, distribution, processing, transformation and delivery solutions, including ISDB-T compatible products, to facilitate the cost-effective launch of mobile video, Internet TV and superior quality HDTV.”

Harmonic Powers End-to-End HD Digital Network in the Republic of Maldives

Harmonic will issue a press release announcing that its industry-leading digital video processing and delivery solutions have been deployed by CableNET for the first high definition (HD) and near video-on-demand (nVOD) network in the Republic of Maldives. For your reference, the full press release is enclosed below. Highlights of the announcement include:

CableNET, the premiere cable TV provider in the Republic of Maldives, has deployed Harmonic’s industry-leading digital video processing and delivery solutions for the first high definition (HD) and near video-on-demand (nVOD) network in the Maldives.

CableNET, serving 100,000 customers through its cable service in the capital city of Male and surrounding islands, and via a multichannel multipoint distribution service (MMDS) throughout the rest of the country, selected Harmonic to provide integrated digital video processing, compression, on-demand, network management and edge infrastructure for its hybrid cable/terrestrial network.

To power the end-to-end digital infrastructure for the new service, called Medianet, CableNET has deployed a comprehensive range of Harmonic video and edge processing solutions:

ProView™ 7000 and 2900 integrated receiver/decoders (IRDs) receive the channel feeds from satellite.

Ion™ AVC encoders and the ProStream™ 1000 stream processing platform compress and multiplex the video signals for distribution.

The ProStream™ 8000 digital mosaic solution creates multi-channel mosaics.

The market-leading NSG™ 9000 universal edgeQAM is used in the distribution of the programming over CableNET’s cable and MMDS networks.

Harmonic’s NMX Digital Service Manager™ controls the entire digital headend.

Harmonic Powers End-to-End HD Digital Network in the Republic of Maldives
– Provides Integrated Digital Video Processing, Compression, On-Demand, Network Management and Edge Infrastructure for Hybrid Cable/Terrestrial Network –

Harmonic Inc. today July 22 2010 announced that its industry-leading digital video processing and delivery solutions have been deployed by CableNET, the premiere cable TV provider in the Republic of Maldives, for the first high definition (HD) and near video-on-demand (nVOD) network in the Maldives. CableNET serves 100,000 customers through its cable service in the capital city of Male and surrounding islands, and via a multichannel multipoint distribution service (MMDS) throughout the rest of the country. Harmonic provides the powerful digital infrastructure to run simultaneous cable and MMDS services to the entire country with a single bandwidth-efficient MPEG-4 AVC (H.264) headend, making it possible for CableNET to be the first operator in the Maldives to provide MPEG-4 SD and HD, nVOD and digital channel mosaic services.

To power the end-to-end digital infrastructure for the new service, called Medianet, CableNET has deployed a comprehensive range of Harmonic video and edge processing solutions:

ProView™ 7000 and 2900 integrated receiver/decoders (IRDs) receive the channel feeds from satellite.

Ion™ AVC encoders and the ProStream™ 1000 stream processing platform compress and multiplex the video signals for distribution.

The ProStream™ 8000 digital mosaic solution creates multi-channel mosaics.

The market-leading NSG™ 9000 universal edgeQAM is used in the distribution of the programming over CableNET’s cable and MMDS networks.

Harmonic’s NMX Digital Service Manager™ controls the entire digital headend.

“The advanced digital processing technology and superior video quality provided by Harmonic were essential in building our new Medianet hybrid cable/terrestrial service,” said Ahmed Shafeeu, Managing Director at CableNET. “We needed a bandwidth-efficient system that did not compromise on quality for long haul, inter-island transmissions. Harmonic delivered the expertise that allows us to provide quality MPEG-4 SD and HD viewing and interactive services to our customers throughout the Republic of Maldives.”

“Harmonic’s end-to-end digital stream processing and delivery solutions are ideal for CableNET, providing a high quality yet cost-effective platform that builds upon their existing delivery infrastructure,” said Stalin Jekash Simson, Director of Regional Sales, India, at Harmonic Inc.

“The implementation of the Medianet hybrid MMDS and cable service puts CableNET in an excellent position to expand their service in the future to more islands throughout the Maldives, as well as to expand their interactive offerings.”

HARMONIC ANNOUNCES DEFINITIVE AGREEMENT TO ACQUIRE OMNEON

Combination Will Create Global Leader in Video Infrastructure for Media Companies

Harmonic Inc. and Omneon, Inc., a leading provider of video production and playout solutions for many of the world’s premier media companies, today announced the signing of a definitive agreement pursuant to which Harmonic would acquire Omneon for an enterprise value of approximately $274 million in cash and Harmonic stock. The proposed acquisition would combine Harmonic’s market-leading position in video delivery infrastructure with Omneon’s market-leading technology for the production, management and distribution of digital media.

“This proposed combination will position Harmonic to become a global leader in video infrastructure for the digital media industry,” said Patrick Harshman, President and CEO of Harmonic. “Media companies are being driven by ever-increasing demand for video content coupled with consumers’ desire to consume video anytime and anywhere. At the same time, the dramatic growth of video delivery over broadband and wireless networks is blurring traditional boundaries between content producers and service providers. With our deep customer relationships with content producers and service providers, and with our market leading technologies that span content acquisition through delivery, we believe that our combined company will be uniquely positioned to capitalize on these trends and to accelerate revenue growth.”

Omneon’s customer base includes the BBC, BSkyB, CBS, Comcast, Discovery Communications, Echostar, NBC Universal, News Corporation, Televisa, Turner Broadcasting System, Viacom and many other leading media companies worldwide. For the year ended December 31, 2009, Omneon’s revenues were approximately $105 million, of which 67% were outside the United States, with no single customer representing more than 10% of total revenue. Omneon’s gross margin was 58% in 2009. Omneon has approximately 280 employees worldwide, and is headquartered in Sunnyvale, California, with research and development facilities in Sunnyvale and Beaverton, Oregon.

“The combined company will have industry-leading technology and expertise in video compression, processing and delivery, video-optimized storage, production and playout servers, and media management,” said Suresh Vasudevan, CEO of Omneon. “Not only are the technologies complementary, but we see unique opportunities to leverage our technology adjacencies and drive market-leading innovation. We are very excited about this combination and the opportunities it creates for our customers and employees.”

The products and solutions of the combined company are deployed with over 2,000 customers across more than 100 countries, for broadcast and on-demand video services delivered via cable, satellite, telco, terrestrial, broadband and mobile networks. The company will have a combined video-focused global R&D organization of 450 engineers, a combined global sales and service organization of 330 people and a network of over 250 global sales channel partners.

Under the terms of the definitive agreement, which has been approved by the Boards of Directors of both companies, Harmonic will pay $190 million in cash and issue approximately 17.1 million shares of its common stock. This represents an enterprise value of approximately $274 million, based on the closing price of Harmonic common stock on May 5 and is net of Omneon’s cash balances which are expected to be approximately $32 million at closing. The proposed acquisition is subject to customary closing conditions and regulatory approvals, and is expected to close in the third quarter of 2010. The proposed acquisition is also subject to the approval of Omneon’s stockholders, and Harmonic has entered into voting agreements with holders of a majority of Omneon’s outstanding shares of capital stock, pursuant to which such Omneon stockholders agree to vote in favor of the transaction.

Most of the Omneon executive management team is expected to join Harmonic at closing, including Mr. Lawrence Kaplan, a founder of Omneon, and Mr. Vasudevan, who previously held senior executive positions at NetApp, Inc., and also worked for McKinsey & Company, an international management consulting firm.

The transaction is anticipated to be neutral to Harmonic’s non-GAAP net income in 2010 and accretive to non-GAAP net income in 2011, exclusive of the amortization of intangibles and non-recurring charges such as restructuring and transaction costs. Harmonic will determine the appropriate purchase accounting for the transaction at closing and, accordingly, cannot reasonably estimate the impact on GAAP net income at this time. See “Use of Non-GAAP Financial Measures” below.

BofA Merrill Lynch acted as exclusive financial advisor to Harmonic in connection with this transaction.

About Harmonic Inc.

Harmonic Inc. is redefining video delivery with the industry’s most powerful solutions for delivering live and on-demand video to TVs, PCs and mobile devices. Harmonic’s technical innovation and market leadership enable the company to offer a unique and comprehensive solution portfolio—including encoding, transcoding, content preparation, stream processing, asset management, edge processing, and delivery. Broadcast, cable, Internet, mobile, satellite and telecom service providers around the world choose Harmonic’s IP-based digital video, software, and broadband edge and access solutions. Using these award-winning and industry-leading solutions, operators can reduce costs and differentiate their services by offering consumers a higher quality, personalized multi-screen experience.

Harmonic (NASDAQ: HLIT) is headquartered in Sunnyvale, California with R&D, sales and system integration centers worldwide. The company’s customers, including many of the world’s largest communications providers, deliver services in virtually every country. Visit www.harmonicinc.com for more information.

About Omneon, Inc.
Omneon, Inc., is a leading provider of scalable media server and active storage systems that optimize workflow productivity and on-air reliability for the production, distribution, and management of digital media. Omneon is a pioneer in the use of advanced IT technologies and open systems for broadcast applications, producing a modular and expandable video server architecture in the Omneon Spectrum media server and highly scalable production storage with the MediaGrid active storage system. The company has an extensive global presence with customers in more than 85 countries on six continents. Omneon is on the Web at www.Omneon.com