In the world of  hardware and software vendors marketing to TV stations, Harris Broadcast Communications is a true giant.

A unit of the publicly traded Harris Corp., Harris Broadcast totals between $650 million and $700 million in revenue each year. Of that, about a third comes from domestic TV broadcasters.

The rest comes from other TV and video producers—broadcast and cable networks, sports stadiums, sports production trucks and local cable systems.

Harris began pursuing broadcasters in 1957 when it purchased Gates Radio, a pioneering broadcast transmitter manufacturer.

And, for many years, transmitters defined the company.

But over the past several years, the Harris Broadcast market profile began changing dramatically through a series of acquisitions—Louth Automation, Question d’Image, Encoda Systems, Leitch Technology, Aastra Digital, Optimal Solutions Inc., (OSi) and, just last year, Zandar Technologies.

The buys, along with internal technology development work, have transformed the company to one that can deliver most of the major pieces of a TV station with the notable exception of cameras.

Its product line includes play-out automation, graphics, demodulators, asset management, distribution amplifiers, editing, multiviewers, routing, sales traffic and billing, servers, signal processing, test and measurement and, of course, transmission.

Indeed, Harris now markets itself as "One Company" as in a one-stop for station builders.

Now heading Harris Broadcast as president is Tim Thorsteinson, a well-known broadcast hardware executive who has served in top jobs at Grass Valley Group and Leitch Technology. Harris scooped him up when it purchased Leitch in 2005.

In this interview with TVNEWSDAY, Thorsteinson talks about the broadcast market and Harris’s place in it. For the foreseeable future, he says, there will be no additional acquisitions. The focus is not on expanding the product line, but making sure all the pieces work perfectly together and helping stations run as efficiently as possible.

An edited transcript:

Would you say the TV station business in the U.S. is a growing segment?

Growing in that there’s a lot of rebuilding occurring to convert infrastructure to high definition and investment in new technology that allows greater flexibility, but, obviously, it’s not growing in numbers.

The high growth part of the business is outside of the U.S. right now. That’s a fairly recent phenomenon, by the way.

Where is that taking place?

Middle East, China, India, Latin America.

And you’re able to penetrate those markets because of the parent company?

No, actually we have excellent channels on our own. You’ve got to remember, Leitch was not a U.S. company and well over 50 percent of its business was outside of the U.S. The traditional transmitter business has always been very much a global business.

TVNEWSDAY is all about the domestic TV station business, so let’s focus on it. How are transmitter sales?

The DTV market where broadcasters are buying digital transmission equipment to meet the February 2009 deadline has picked up steadily over the last two or three quarters and looks pretty good. It should stay that way until next year when it becomes largely an international business. By then, the U.S. transmission infrastructure will have been built out, although there may be additional buying around mobile television or other initiatives.

You’ve been growing through acquisitions. I’ll name the acquisition. You tell me what it’s done for Harris. Let’s start with Leitch, your old company.

Well, what was the old Leitch business? Routing and master control and servers and conversion gear and distribution amplifiers—what we call video infrastructure. That’s been very strong now for the last two or three years, growing double digits pretty much through that whole period. So Leitch has provided growth, new channels and new customers.

What about OSi?

OSi has been been a solid business for us as people trade out of their legacy systems into newer technology. It really is a technology replacement for the Encoda business, right? So as people decide to change out their old Columbine system, OSi is the technology solution they’ve selected.

What about this Zandar technologies?

Zandar gave us a lower-end solution in the multiviewer market. That’s really the only acquisition we’ve done in the last 12 months. We’ve kind of slowed down the pace of our acquisitions because we’ve pretty much rounded out our portfolio and we want to make sure we assimilate them all and run them efficiently.

Are you eyeing anything else? Should we expect any other purchases?

No, not right now.

No missing pieces?

Well, there’s always some missing pieces. We obviously don’t make cameras, but we don’t plan to. We think that we’ve got a pretty broad portfolio and we’re really trying to get our engineering resources internally focused on getting things to interoperate across the value chain.

So we’re spending a lot of time and effort on making sure everything works seamlessly, which, when you put a bunch of acquisitions together, is one of the challenges, right? Maybe some of your products aren’t going to work as well together as they could, so we spend a lot of time and effort on our interoperability initiative. A pretty significant portion of our R&D budget goes towards interoperation at this point.

Last month, you announced a $2.5 million dollar lab in Toronto to test and certify the interoperability of systems. Is that what you are talking about?

Yes. We’ve got 43 racks of equipment to just make sure that everything that we sell a customer in a work chain has been fully tested, exercised and optimized to work well together. We’ve got master control and routing and automation and servers and graphics products all interoperating in a way that they would with a customer.

Will it be testing systems on a project-by-project basis?

Where we’d like to be in the future is when we sell something—say our master control integrated with our graphics—then we want to test it the way customers are buying it. That hasn’t always been the experience.

More often, we’ll be asked to integrate our master control with somebody else’s router or with somebody else’s server. Then there’ll be teams of engineers from different companies on site for a period of time trying to get everything to work together. That hasn’t proven to be a very economically successful model for anybody really.

Do you earn money from system integration? Is that a business for you?

Not generally, no. We generally stop short of full integration at systems design. We want to have a very clear delineation there because, frankly, it’s been my experience that equipment suppliers have a really hard time succeeding at integration.

Grass Valley tried it; it didn’t work out very well. Harris tried it at one point in its evolution; it didn’t work out very well. Sony has been in and out of it. I’ve concluded that it’s not a business that works very well in a public company model.

System integration is the job of CEI and Roscor and Azcar. There’s a whole bunch of successful systems integrators and we don’t want to compete with them. We want them to be our customers.

Broadcasters don’t seem to be having as good a year as they thought they would primarily because of lousy auto advertising. Are you feeling any of that?

The last couple of quarters the business has been softer than what it was before that. So, if you go back to the end of the last calendar year, we started to see the business slow down a bit, but it’s been masked for us a bit by the transmitter business being very strong.

Well, as we discussed, that’s one thing broadcasters have to invest in if they haven’t already.

Yes. I would say overall that the business has softened. It’s gone from being the strongest I’ve ever seen it in my 12 years in the business to a little less than that. It’s still growing, but at a lower rate than it used to be.

Broadcasters want to buy efficiency. They’re going to want to do things more cheaply than they were before. So what’s your ROI pitch?

That’s how you sell a server and that’s how you sell automation obviously. That’s most of our product line. There are only two reasons a broadcaster buys anything today: A) to improve the quality of the output, which may or may not make them more money, or B) the old substitution of capital for labor play.

Everybody wants to understand the return on every dollar spent because the next quarter has got to be better than the quarter before and the quarter after that has got to be better still. If your top line is not growing, your only way to make it better is to take cost out of your operation. That means that when you can buy technology that allows you to eliminate labor, you do it.

By the way, it also means that you would like to spend less for your equipment. So it’s a very competitive market. One of the things that I have noticed in the last six months is that it’s gotten more competitive. Now, part of that is because we’re entering some spaces we weren’t in before. When you do that, the people in them obviously aren’t just going to say, welcome, glad you’re here.

We didn’t sell multiviewers before and we’re selling them now. That’s a great market, but you already had a couple of players. Every market we’re in has at least two solid competitors and the vast majority of them have three very solid competitors. That won’t last.

What do you mean? Do you expect a shakeout?

Hey, it’s Economics 101. You don’t usually have markets with three solid competitors in them unless they’re growing very rapidly.

And, right now, the total broadcasting market isn’t growing rapidly. In U.S, for instance, we’ve got Evertz, Miranda and Harris all selling infrastructure products. They all have their advocates, right? So we’re in battles on every deal with two other competitors which makes pricing difficult and challenging. We’ve got to watch our cost structure.

What’s the market for servers like?

Harris came back from the dead because the Leitch server business was pretty much gone when I got here four years ago. We’re now winning a lot of business in the U.S. So, it’s Harris, Omneon and Grass Valley and Grass Valley with Profile has got certainly the largest install base. Omneon’s been very strong the last two or three years. There used to be others, but now Pinnacle has gone by the wayside and Avid, thankfully, got out of the business.

Well, you get the last word here. Any big push for NAB or anything else you would like to talk about?

Well, again, we intend to go to NAB as we do every year with a lot of new products that are at new price points and allow for new capabilities. I think you’ll see that again from us this year. Our business is strong. It’s helped by the fact that it’s a global business, but we’re real bullish about the future in the U.S. We’ll see how it plays out.