In yet another significant merger and acquisition story for the IPTV industry, Motorola, Inc. and Tut Systems, Inc. announced that the two companies have signed a definitive merger agreement, under which Motorola will acquire all of the outstanding shares of Tut Systems common stock for $1.15 per share in cash. The transaction has a total equity value of approximately $39 million on a fully-diluted basis.

Tut Systems provides carrier-class end-to-end digital video encoding, processing and distribution products. Their solutions support MPEG-2 and MPEG- 4 AVC video compression, local ad insertion, forward error correction, and real-time conditioning of video and audio. Today, more than 160 service providers worldwide deliver IPTV powered by Tut Systems digital video distribution technology.

The integration of Tut Systems' solutions with Motorola's industry-leading digital video delivery solutions will expand Motorola's ability to help service providers deploy advanced video services over IP, ATM, or RF-based network architectures. Motorola currently has deployed 2060 digital video networks and over 50 million digital video set tops worldwide.

"This transaction brings together the telco-aware IPTV processing capabilities of Tut Systems with Motorola's proven video delivery expertise. Together, our combined portfolio will provide service providers with next-generation solutions for delivering rich video experiences into the connected home -- and out into the world," said Dan Moloney, President, Motorola Connected Home Solutions. "We look forward to adding the great people, technology and video expertise of Tut Systems to the Motorola Connected Home Solutions team."

"Today is an exciting day for Tut Systems. Our stockholders will be able to receive value for their investment, while our employees, customers and strategic partners will benefit as we join together with Motorola, an established, global leader in architecting and deploying digital and IP video networks," said Sal D'Auria President and CEO of Tut Systems. "Motorola's financial resources and customer relationships will enable us to address larger customer opportunities that were challenging as a smaller company. My team is committed to working closely with Motorola to ensure a rapid and seamless transition."

Upon completion of the transaction, Tut Systems will become a wholly-owned subsidiary of Motorola and will be integrated into the Motorola Connected Home Solutions business. Motorola intends to maintain Tut Systems' operations in Lake Oswego, Oregon, San Diego California and Pleasanton California.

The transaction is expected to be neutral to Motorola's earnings per share in the first year following closing, excluding certain non-cash charges relating to amortization associated with acquired intangibles and other one- time accounting and transaction-related costs. The transaction is subject to customary closing conditions, including regulatory approvals and the approval of Tut Systems' stockholders, and is expected to be completed in the first quarter of 2007.