Video hardware

RGB Tunes Up Mobile TV With RipCode Buy

Build or buy? That's been a question RGB Networks Inc. has been asking itself as it weighed how to add key mobile IP video capabilities to a cross-platform video box that has big "TV Everywhere" aspirations.

The "buy" side of the argument won out. Today, RGB is announcing it's sealed a deal to buy RipCode Inc. , a startup that's developed software that can convert live and on-demand video to the various formats required by cellphones and other mobile devices. (See RGB Networks Acquires RipCode.)

RGB CEO Jef Graham says the vendor determined that it simply didn't have time to develop that capability if it was to be ready in time for the mobile TV trials that will be getting underway soon, first in Europe, followed by more aggressive activity in North America.

Terms of the deal, which marries two privately held companies, weren't disclosed.

RGB plans to bake RipCode's technology into its Video Multiprocessing Gateway (VMG), a chassis that can change a primary video stream into a variety of formats for TVs, PCs, and other IP-based video displays. The box, introduced last fall, also houses an integrated service management platform and can support modules targeted specifically at video processing, ad insertion and overlays, and video trans-coding and adaptive IP video streaming. (See RGB's TV Everywhere Offer: A Video God Box .)

RGB has been eager to add mobile video to the feature list and believes the answer will come by plugging an Intel Corp. (Nasdaq: INTC) blade outfitted with RipCode's software into the VMG. The hard part of that integration lies in the blade's interfaces with the VMG's other modules and the underlying management system, but RGB believes it will have the RipCode piece ready to go by the fourth quarter.

In the meantime, Graham says, the VMG is already in some PC-centric video trials with still-undisclosed operators in the US, Asia, and Europe, including an instance in which one primary video stream is being morphed into 14 different formats.

From the outset of the deal, it appears RGB will have to play a big role in expanding RipCode's base. MySpace is among its announced customers, and RipCode president and founder Brendon Mills (who also founded Genband Inc. ) says the company has also scored a government contract as well as deployments with some undisclosed carriers. (See RipCode Launches, Signs Up MySpace.)

Still pushing for an IPO
In addition to positioning it against competitors such as Harmonic Inc. (Nasdaq: HLIT) and BigBand Networks Inc. (Nasdaq: BBND), Graham believes the buy will help RGB further diversify its product portfolio; expand its cable, satellite, telco TV customer base; and move it one step closer to an initial public offering.

"We're profitable now and think we can IPO next year," says Graham, who puts the post-deal valuation of RGB at greater than $220 million.

RGB's raised $62 million, with Comcast Interactive Capital among its backers. Austin, Texas-based RipCode, founded in 2006, has raised $32 million.

RGB's been very public about its desire to go public and had recently expressed hopes to pull the trigger as early as 2010. And at least one analyst agrees that RipCode's capabilities may help it to finally get over the hump.

"This [acquisition] seems to be the missing piece to their going public within a year, Heavy Reading senior analyst Alan Breznick says of the deal. "This should help them bring in more telco customers and more international providers as customers." (See RGB Still Gunning for an IPO and RGB Raids Envivio .)

Most of RipCode's employees are joining RGB. The lone executive casualty is Brian Alton, RipCode's CFO (RGB's already got one). RGB says its employee base has grown to 175 employees after adding 25 from RipCode, and that the RipCode engineering team will continue to operate out of its Austin office. Founder Mills is staying on to help lead RGB's thrust into the mobile sector.

— Jeff Baumgartner, Site Editor, Light Reading Cable

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