The DIRECTV Group, Inc., the parent company of Hughes Network Systems, Inc. (HNS), and French consumer electronics manufacturer Thomson announced a definitive agreement for the long-term development and supply of digital satellite set-top boxes (STBs). As part of the transaction, Thomson will also acquire HNS' set-top box manufacturing assets.
The 5-year supply agreement provides DIRECTV with an experienced partner for its forthcoming product and service development initiatives. Thomson will be involved in the technology development of new set-top box models during the contract period and will manufacture a full range of receivers, including DIRECTV-brand high-definition and digital video recorder (DVR) receivers, with an objective to deliver home receiving units that meet DIRECTV's pricing, quality, and time-to-market objectives.
Based on the contract terms, Thomson expects to more than double its current annual revenues with DIRECTV.
DIRECTV will receive from Thomson U.S. $250 million cash upon close of the sale of HNS' set-top box manufacturing assets. In addition, the agreement includes incentives to DIRECTV -- based on revenues and set-top box order volume to Thomson over the next 5 years -- that could increase the amount paid to as much as $400 million, including the up front amount. Thomson will be the lead supplier of DIRECTV System set-top receivers, accounting for half of its needs.
The agreement is expected to close in the second quarter of 2004, pending customary regulatory reviews and approvals.
"Thomson is the original manufacturer of DIRECTV receivers and over the years has been at the forefront of developing new set-top box features and technologies," said Romulo Pontual, executive vice president and chief technology officer, The DIRECTV Group. "We look forward to continuing our relationship with Thomson and working closely with them to bring innovative new products to DIRECTV customers that will enhance their viewing experience."
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