2011 Streamticker: Online Video Mergers, Acquisitions, and Investments

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KIT Gets Cash, Orders Another Round of Delivery Services in Multicast Media

Prague-based KIT Digital sold just more than 1.5 million shares in early 2010, netting approximately $14 million after deal-related expenses and legal
fees. It rapidly turned around and bought everyone a drink.

Actually, the publicly traded company rapidly turned around and used the proceeds "to repurchase outstanding warrants issued in prior private placement financings from certain warrant holders and, if there are residual proceeds, for acquisitions, working capital and general corporate purposes."

Turns out there was money left over, which KIT used to make its sixth purchase in the past several years: Multicast Media Technologies, Inc. joins the ranks
of other KIT acquired companies, including The FeedRoom and Nunet.

KIT used a part of its $15 million raise to pay out approximately $5 million in cash for its overall $18 million deal to acquire Multicast Media. Another 1.3 million shares of KIT digital common stock was added to the mix, along with KIT's assumption of Multicast's long-term liabilities, estimated at $4.6 million.
Still, the deal may be a bargain, dilution concerns aside, as TechCrunch reports that privately held Multicast Media has revenues of approximately $12 million per year, in addition to professional services fees which pay, pushing the annual revenues a bit higher.

Late in the year, KIT took pains to right the situation with another public offering, bringing the total outstanding shares to approximately 33.2 million, netting around $102 million in proceeds after deducting deal and legal fees. KIT's buying binge continued in early 2011, with the company acquiring KickApps, Kowego, and Kyte for an aggregate $77.2 million.

Harmonic Likes Its Acquisitions Well-Aged, Picks Up Omneon

Back in mid-2007, Harmonic announced that it was doing a $15.5 million deal to acquire Rhozet Corp., a software-based transcoding company that would, in Harmonic's words, position the company as a leader in internet and mobile video creation.

"Viewers are increasingly turning to the Internet and mobile devices to watch an ever-expanding range of video content," said Patrick Harshman, CEO of Harmonic, Inc. at the time of the Rhozet acquisition, which brought Carbon Coder into the Harmonic fold.

Fast forward to mid-2010 to another Harmonic announcement: the company is acquiring Omneon for $190 million in cash and a 17.1 million common stock share issue.

What's notable about the Omneon deal-besides the $274 million price differential and the fact that Omneon is able to issue 17.1 million additional common stock shares in the middle of an economic downturn-is the fact that the Omneon acquisition continues to build on Harmonic's previous strategy, but on a much broader scale.

"This proposed combination," Harshman said in May 2010, "will position Harmonic to become a global leader in video infrastructure for the digital media industry. 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."

Omneon, which had a 12-year existence that was primarily venture-backed, required a recapitalisation in the 2002 time frame. It has ended up with an admirable customer base that includes both the BBC and BSkyB.

More interestingly, Omneon was highly diversified, with 280 employees worldwide yet with no single customer accounting for more than 10% of Omneon's revenues. In fact, 67% of its sales are outside of the U.S.

It also appeared to be on a firm financial footing: allowing for the fact that Omneon had gross margins of 58% in 2009 and a cash balance of $32 million at
the time of closing, the Harmonic strategy to acquire Omneon appeared sound on several fronts.

Telestream Nurses Single Acquisition for Entire Year

This acquisition was the story that almost spanned the entire year, borne of a competition that lasted almost a decade.

Starting back in January 2010, Grab Networks told Streaming Media's Dan Rayburn that it was in talks to sell off its Anystream product line.  "I'm told that Grab Networks originally had no interest in selling off the Anystream product line," Rayburn wrote in a 2010 blog post, "and was not shopping the company until another vendor approached them to discuss the idea. Once that took place, Grab Networks started investigating all possible acquisition angles to gauge Anystream's value in the market."

Grab was itself a merger of Anystream and Voxant, so the unbundling of the Anystream assets at a higher price would show potential value to Grab shareholders.

Telestream had reason to look favourably on an acquisition of one of the competitors in the enterprise space, noting in its August 2010 definitive-agreement press release that research and analytics firm In-Stat "expects the worldwide multiformat transcoding market to grow from $117 million to $297 million in 2014."

While it's uncertain whether Telestream was the initial company to approach Grab to grab up the Anystream product line, the company was mentioned in the comments' section of Rayburn's original blog post.

When the definitive agreement between Telestream and Grab was announced in August, one commenter who had worked at Anystream in the early days mentioned how uncertain the industry's predictions can be.

As Bob Donlon, now with Adobe, wrote of the 2000-2002 time frame, "Back then, Telestream was our only real competition, and we generally did very well competing against them. Management's prediction was we'd put 'em out of business in short order. Today, reading about this ‘exit strategy' for Anystream just puts a smile on my face."

Telestream didn't seal the deal until the wee hours of the morning prior to its IBC press conference in early September 2010. The combined company, however, seems to be having a much smoother time of it, integrating engineering resources on opposite U.S. coasts and also in Europe.

Logitech Takes Home a Stunner

Switzerland, meet Texas. Logitech, a Swiss company that's a major player in the consumer electronics space, primarily around computer peripherals,
set-top boxes, and webcams, acquired Austin, Texas-based LifeSize.

In a cross-pond pairing that somewhat mimics the San Francisco-Norwegian deal between Cisco and TANDBERG, the LifeSize deal allows Logitech to combine technical expertise with marketing savvy.

Several years ago, I interviewed Craig Malloy, who was the co-founder of LifeSize. Malloy has a long history in videoconferencing, having founded Via Video, which was then acquired by Polycom. His take with LifeSize, though, was that inexpensive HD videoconferencing would not have competition from webcams, so the acquisition by a "webcam" company may be poetic justice of sorts.

Still, Logitech's expertise in HD cameras, coupled with LifeSize's two-way communication solutions experience, could be good for gaming, video chat, and a variety of other consumer media experiences: Google TV post Revue, anyone? It will be interesting to view the offspring of collaboration between these two companies.

That's a wrap-up of our mergers and acquisitions recap for 2010. Like any good night at the streaming media pub, it was filled with action, intrigue, and enough deal making to keep us looking forward to 2011's announcements.

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