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Cable/Video

Synacor, Qumu strike merger to pursue enterprises

Seeking to make a bigger splash in the promising enterprise video market, Synacor and Qumu plan to combine forces in an all-stock transaction.

Under the deal announced Tuesday morning, the two companies will bring together Qumu's Enterprise Video platform with Synacor's Cloud ID Identity & Access Management platform and the Zimbra Email & Collaboration platform.

Qumu and Synacor said the combined business should generate more than $120 million in annual revenue on a pro-forma basis. That sum would include an estimated $70 million of software and services segment revenue, $50 million of which would be recurring, and about $50 million in the continuing portal and advertising segment revenue.

The two companies said they expect to realize $4 million to $5 million in annualized operating savings in the first fiscal year following the deal's closing, including overlapping public company costs and various operating expenses. The deal is expected to close mid-year.

While the deal is being presented as a merger of equals, Synacor will clearly be the senior partner here. Upon closing, Synacor stockholders are expected to own approximately 64.4% and Qumu shareholders are expected to own approximately 35.6% of the stock of the combined company. Himesh Bhise and Tim Heasley will continue as CEO and CFO of the combined company, respectively. At the same time, Qumu CEO Vern Hanzlik will become chief revenue officer for software and services. The new board of directors will consist of seven directors – three directors appointed by Synacor, two directors appointed by Qumu, Synacor CEO Himesh Bhise and a seventh independent director who will serve as the board chair.

The two companies have been seeking ways to beef up and extend their reach as both the video and enterprise markets keep shifting and evolving. They have especially been looking to expand their presence in the enterprise collaboration software market.

"With Synacor having an extensive network of more than 1,900 distribution partners and an established base of more than 4,000 customers, the merger will immediately accelerate our go-to-market efforts," Hanzlik said in a statement. "As the demand for enterprise collaboration solutions continues to expand, we believe there will be a significant opportunity for us to position a combined email, video and identity offering to reach a much wider cross-section of the enterprise market with a scalable, highly secure and extensible solution for cloud-based and hybrid deployments."

In particular, Synacor has been seeking new ways to grow as its traditional service provider market for web portal and advertising service stagnates and shrinks. Last July, for instance, AT&T pulled a major web portal services contract away from Synacor in favor of another, undisclosed vendor, creating a big revenue shortfall for the vendor.

The move comes as other tech vendors also seek to boost their prospects in the enterprise video market through M&A deals. In late December, for instance, Enghouse Networks bought Dialogic Group for $52 million to strengthen its play in the enterprise video space.

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— Alan Breznick, Cable/Video Practice Leader, Light Reading

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