German giant acquires its IPTV middleware partner Myrio. Could digital rights system vendor Verimatrix be next?

April 8, 2005

3 Min Read
Siemens Snaps Up Myrio

Siemens Communications Group has acquired IPTV middleware vendor Myrio Corp. in a deal believed to be worth around $50 million (see Siemens Acquires Myrio).

Neither company released financial details.

The two companies are already close partners (see Siemens to OEM Myrio System and Siemens Gears Up for IPTV). They have brokered two IPTV deals together -- at European incumbent Belgacom (Euronext: BELG) and at Thai service provider Advanced Datanetwork Communications, which awarded Siemens a contract for Ethernet access equipment and its Surpass Home Entertainment system early in March (see Belgacom to Trial Interactive TV).

In addition, Siemens Venture Capital (SVC) was one of the investors in Myrio's most recent round of funding of $9 million in November 2003. The IPTV firm raised about $23 million in total: other major investors include Ridgewood Capital, NeoCarta Ventures, and Alexander Hutton Venture Partners.

The partnership is set to deliver further results, says Harald Schweickhardt, VP of home entertainment at Siemens Communications: "We're in advanced negotiations with many other carriers," including Tier 1 national incumbent operators. "Carriers around the world are looking to provide IPTV services, and they're getting serious about it now." (See Europe Tunes In to IPTV, Competition Trumps Demand in Euro IPTV, Verizon Makes Microsoft Video King, and SBC Awards Microsoft $400M IPTV Deal .)

He says Myrio's middleware is "the brains of our solution, and if you're serious about the market you'd want to own the brains. We've been developing the partnership to ensure that the acquisition goes smoothly. We all know from experience that not all acquisitions are successful."

Schweickhardt adds the move wasn't driven by rival M&A interest in Myrio, or by the partnership between two of Myrio's key rivals in the IPTV middleware market, Alcatel (NYSE: ALA; Paris: CGEP:PA) and Microsoft Corp. (Nasdaq: MSFT). (See Alcatel, Microsoft Confirm IPTV Deal.)

So are there any more IPTV acquisitions in the pipeline? Another potential M&A target could be digital rights management system provider Verimatrix Inc. It also has an OEM deal with Siemens, has its system pre-integrated with Myrio's platform, and is part of the deployment at Belgacom. And Siemens Venture Capital is an investor: It made a "strategic investment" in Verimatrix in January, when the OEM relationship was announced.

Sabine Zindera, VP of marketing and communications at SVC, says the company doesn't release details about how much is invested or the percentage held in any of its portfolio companies. She adds, though, that "our typical investment is always a minority stake, with an investment of between €1 million and €5 million [US$1.3 million and $6.4 million]."

Siemens isn't ruling out another purchase. "We are always screening the market to find out if a company fits," says a spokesman. "We cannot exclude this move, but there is nothing happening at the moment."

Myrio has more than 65 customers in all, mostly small, regional service providers (see Myrio Boasts IPTV Milestone, Myrio Lands Another Deal , and SkyStream, Myrio Win in Florida). That represents significant growth for Myrio, which had just 19 customers at the end of 2003, and about 36 by the middle of 2004 (see Myrio Rides Triple Play Wave).

Other significant players in the IPTV middleware sector include Infogate Online Ltd., Minerva Networks Inc., Orca Interactive Ltd., Thales SA (Paris: TCFP.PA), and UTStarcom Inc. (Nasdaq: UTSI). (See UTStarcom, Myrio Have Their IPTV , Citizens Cablevision Picks Infogate , Minerva Drives Italy's IPTV, and Who Makes What: Telco Video.)

Of those, Orca Interactive has been making the most noise of late, having struck some high-profile partnerships and posted much improved, though still small, annual revenues (see IBM, Orca Partner on IPTV, Orca Integrates With Amdocs for IPTV, Orca Finds IPTV Partner in China, and Orca Interactive Reports 2004). At the recent CeBIT tradeshow in Germany, it was notable that many of the IPTV demonstrations incorporated middleware from either Myrio or Orca (see Eurobites: CeBIT Schnippets).

— Ray Le Maistre, International News Editor, Light Reading

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