Redundancy can be a virtue when you're experimenting with new technologies. On Wednesday, cable provider Comcast (NASDAQ:CMCSA) announced that it now has half again as many cable set-top box vendors. The firm already buys boxes from Motorola (NYSE:MOT), Pace Micro, Digeo, and Scientific Atlanta (NYSE:SFA), which is soon to be part of Cisco (NASDAQ:CSCO). Over the past couple of days, Comcast has announced supply agreements with two new vendors: the U.S. arms of Korea's Samsung and Japan's Matsushita (NYSE:MC).
Of the two contracts, it appears that Matsushita (better known by its trade name, "Panasonic") is getting the more valuable deal. Its initial contract calls for 250,000 DVR-capable boxes, but Comcast retains the option to purchase another 1 million boxes within the first year of the contract. The companies did not name a dollar value for the agreement. Still, with your average non-TiVo (NASDAQ:TIVO) DVR clone running about $300 wholesale, the deal should probably be valued at about $75 million initially, with a possibility of being worth as much as $375 million or thereabouts.
In contrast, Samsung will provide just 200,000 boxes initially, with an option for 500,000 additional units. Samsung, however, will be providing "relatively low-end," yet still "highly functional" boxes, according to Comcast. Basic digital boxes wholesale for quite a bit less than DVRs; still, this deal should be worth somewhere between $25 million and $150 million to the Korean electronics concern.
To Comcast, it could be worth quite a bit more than the ambiguous dollar figures. As described by Comcast's executive in charge of new business development, the real aim of sealing these deals is to ensure that Comcast's cable boxes can easily communicate with the wide variety of consumer electronics devices that are popping up in its customers' living rooms these days -- digital cameras, portable media players, flat-panel TVs, and cell phones, to name a few.
Sounds good to me. But it's also worth pointing out that the more vendors Comcast has in its lineup, the better it can play the one against the other for better pricing in the future. This also better insulates Comcast against the risk that any one manufacturer could experience disruptions in its supply chain, which might affect Comcast's ability to provide its customers with the latest in cable technology.
This may not be as big as the pact that Comcast inked with Motorola last year, but $500 million in new deals is still pretty big news.
Fool contributor Rich Smith has no position in any of the companies mentioned in this article. TiVo is a Motley Fool Stock Advisor pick. The Fool has a disclosure policy.
