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Sources: Moto's Shopping for IPTV Middleware

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News Analysis
Light Reading
11/9/2006
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Motorola Inc. (NYSE: MOT) is shopping around for an IPTV middleware vendor to buy, according to several industry sources.

The sources, who requested anonymity, say Motorola has "kicked the tires" of several potential acquisition targets during the past few months.

The main motivation for Motorola's move, it seems, is to get itself on a par with its vendor rivals and give itself another foot in the door of potential carrier customers.

Many of Motorola's peers -- companies that provide integration and/or equipment for telco TV networks -- either have their own IPTV middleware system in-house or have formed tight partnerships with specialist players.

The most high profile of these is Alcatel (NYSE: ALA; Paris: CGEP:PA), which has a productive partnership with Microsoft Corp. (Nasdaq: MSFT) that has resulted in multiple carrier engagements. (See Wind, Telefónica Pick Alcatel, Alcatel, Microsoft Confirm IPTV Deal, and Alcatel Lands TDC IPTV Deal.)

But Alcatel is not alone. Nortel Networks Ltd. has forged a relationship with Minerva Networks Inc. , while Lucent Technologies Inc. (NYSE: LU) partnered with Orca Interactive Ltd. before more recently taking over development of Telefónica SA (NYSE: TEF)'s homegrown Imagenio middleware platform. (See Nortel, Minerva Find IPTV Partners, Lucent, Telefonica Team on IPTV, and Orca's Not Blubbering.)

In addition, Siemens AG (NYSE: SI; Frankfurt: SIE) acquired established IPTV middleware company Myrio Corp. , and Thomson S.A. (NYSE: TMS; Euronext Paris: 18453) bought Thales Broadcast & Multimedia, including the Smartvision middleware used by Orange (NYSE: FTE). (See Thomson Fuses VOIP & IPTV and Siemens Snaps Up Myrio.)

Meanwhile, Motorola and rival Cisco Systems Inc. (Nasdaq: CSCO), have, to date, remained relatively agnostic on IPTV middleware. (See Will Cisco Make an IPTV Middleware Move?.)

It makes sense that Motorola would be scouting for opportunities, says Heavy Reading analyst Rick Thompson. "There are still several major players out there that don’t have an IPTV middleware platform -- all those players are potential buyers and it would certainly include Motorola," says the analyst. "It's a long shot to assume it would try to retool its cable middleware product for telcos."

Thompson says a short list of possible acquisition targets can be derived just from identifying the current unattached players. "From a logical perspective you'd have to think of Minerva, Espial Group Inc. , Orca and a few other smaller players that are a little less visible, but that might pop up on the radar screen." (See Espial Joins IPTV Middleware Madness.)

Motorola erected the PR barricades when asked about any acquisition plans. "I can't give you a definite answer to that question either way," says Motorola spokesman Paul Alfieri. "I can't comment on any speculation."

"What I can say is that our current strategy is to partner with Microsoft where appropriate," Alfieri adds. Under that partnership, Motorola sells various set-top boxes to the customers of Microsoft's IPTV carrier accounts -- AT&T Inc. (NYSE: T), for example. (See AT&T Set to Expand Its U-verse.)

Asked if any service providers have asked Motorola to provide an end-to-end video distribution system including middleware, Alfieri says: "I can't commnent on customer conversations, but what I can say is that our play is the [set-top] box play."

It's easy to see how Motorola might benefit from owning its own IPTV middleware. Such a system could create "pull-through" sales of the vendor's video processing and infrastructure gear, insiders tell Light Reading.

Heavy Reading's Thompson shares that view. "Middleware alone isn’t a cash cow, but has a lot to do with owning the service and selling other equipment as part of the larger IPTV investment," he noted in a recent column. Operators may want to buy the middleware and the hardware from the same vendor because the two elements interoperate so closely, he stated. (See IPTV MiddleWARs: Far From Over.)

And service providers might think Motorola is an appealing supplier given its real-world video distribution experience. "Regardless of whether it’s a telco or a cable network, we do have that experience of how to get video from the head-end to the home," Alfieri points out.

Motorola already sells equipment at both ends of the IPTV distribution system -- encoders and VOD servers at the video head end, and set-top boxes and residential gateways at the customer premises. And the company has already added to its portfolio through acquisitions this year -- set-top box maker Kreatel Communications AB in January, and VOD server vendor Broadbus Technologies Inc. in July. (See Motorola Acquires Kreatel.) and Moto Buys VOD Vendor Broadbus.)

— Mark Sullivan, Reporter, Light Reading

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Mark Sullivan
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Mark Sullivan,
User Rank: Light Beer
12/5/2012 | 3:35:20 AM
re: Sources: Moto's Shopping for IPTV Middleware
Out of all the middleware players that remain unattached, Orca seems to be the most battle-hardened in larger deployments. Would this make a good buy for Motorola?
fRolin
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fRolin,
User Rank: Light Beer
12/5/2012 | 3:35:16 AM
re: Sources: Moto's Shopping for IPTV Middleware
A big part of Motorola's business is the set-top box and Orca does not own any client middleware assets or has any expertise in this area, which probably does not make them a good fit. Also, in the last 12 months, Orca really seems to have disappeared from the market. Their recent revenue numbers confirm this also.

If you looked at middleware vendors that have a server and client middleware offering, they seem to be Minerva, Myrio, Espial and Microsoft. Microsoft and Myrio are out, which probably only leaves Minerva and Espial.
LightWarrior
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LightWarrior,
User Rank: Light Beer
12/5/2012 | 3:35:15 AM
re: Sources: Moto's Shopping for IPTV Middleware
I don't know how you could really consider Minerva at this point. The system is entirely closed and though their recent re-write is a little better, their UI and service creation tools are very lacking. The other problem is Motorola needs something that can scale to millions, and Minerva is very unproven in that regard.

I also agree that Orca has dropped off the map. Their recent revenue announcement was very disappointing to say the least.

How about some other guys out there? There are some tiny little companies with new (and untested) products like Zignal and some others. Then there are all the browser-based products like Ant and GeoTel which are not a good fit for Motorola because the performance is slow and the products don't scale very well.

And as others suggested there is always Espial, who seemed to be everywhere at TelcoTV. But I don't see a very long list of possible acquisition targets for Motorola. I know they need something, because I heard the internal IPTV middleware efforts have come to nothing...

Mark Sullivan
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Mark Sullivan,
User Rank: Light Beer
12/5/2012 | 3:35:14 AM
re: Sources: Moto's Shopping for IPTV Middleware
With regard to Microsoft: Do you think they still have the momentum they once had with large carriers? We're hearing that carriers are looking at a next generation of middleware products that are more open and developer-friendly.
SolitonWave
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SolitonWave,
User Rank: Light Beer
12/5/2012 | 3:35:14 AM
re: Sources: Moto's Shopping for IPTV Middleware
Microsoft is expected to get quite a significant slice of this market with some important Tier1&2 wins. All the others are starting to lagg behind. Moto should stay with Microsoft or move Really fast. There are many options to buy but I'm not sure if any of them would give significant edge over Microsoft or Siemens (doubt it).
Mark Sullivan
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Mark Sullivan,
User Rank: Light Beer
12/5/2012 | 3:35:13 AM
re: Sources: Moto's Shopping for IPTV Middleware
We too have heard that Orca has been struggling. But is that really a reason for Moto not be interested in it? Seems it would devalue the company somewhat and make it ripe for acquiring. Also, the Orca product itself is said to be pretty good relative to its peers.
litedope
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litedope,
User Rank: Light Beer
12/5/2012 | 3:35:12 AM
re: Sources: Moto's Shopping for IPTV Middleware
Does OpenTV offer IPTV middleware on both server and client sides? If so, can this thing come to them?
Mark Sullivan
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Mark Sullivan,
User Rank: Light Beer
12/5/2012 | 3:35:10 AM
re: Sources: Moto's Shopping for IPTV Middleware
Looks like OpenTV is just client-side middleware. From their Web site:

OpenTV middleware products include:
OpenTV Core: Flagship middleware client software driving todayGÇÖs most advanced digital TV services including PVR and interactive TV for cable, satellite, telecommunications, and digital terrestrial network operators
RTL Rules
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RTL Rules,
User Rank: Light Beer
12/5/2012 | 3:35:10 AM
re: Sources: Moto's Shopping for IPTV Middleware
Where's MOTO getting their access equipment? The article mentions only headend and CPE equipment.

Where has MOTO gained real-world video distribution experience?

RTL
Honestly
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Honestly,
User Rank: Light Beer
12/5/2012 | 3:35:06 AM
re: Sources: Moto's Shopping for IPTV Middleware
Mark, you are a smart guy so remember that Software is best left in the hands of software infrastructure companies. Just do not think you will see MOT, or CSCO get into this business. I think they both understand what they do well and know what they do not know. Microsoft is just running the table, like it, or not. I think Verizon is already feeling the pain of trying to replicate some IPTV software and they failed before with IOBI. It will cost them billions and they will still us Microsoft

I say, do what you know.
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