Video services

Synacor Guns for $75M IPO

Synacor Inc. , a firm that develops hosted broadband application and TV Everywhere aggregation portals primarily for Tier 2/3 MSOs and telcos, intends to raise up to $75 million in an initial public offering.

According to the S-1 documents filed on Nov. 18 by the Buffalo, N.Y.-based company, Charter Communications Inc. and CenturyLink Inc. (NYSE: CTL) (including what's coming in from the former Qwest Communications International properties) are Synacor's two largest customers, accounting for 60 percent of the $66.2 million revenues generated in 2010, when it recorded a net loss of $3.6 million. Consumer electronics firm Toshiba Corp. (Tokyo: 6502) is Synacor's third-largest customer, accounts for more than 10 percent of revenues.

Synacor's off to a better start through the first nine months of 2011, notching revenues of $62.1 million, a 29 percent increase, along with a profit of $2.18 million. It ended that period with $7.25 million in cash and cash equivalents.

Thirteen-year-old Synacor, which had 254 employees (one based in the U.K.) as of Sept. 30, said it has 45 customers covering more than 25 percent of the estimated 79 million high-speed Internet households in the U.S. It drives revenues through a mix of search and display advertising and through service fees tied to things like website design, billing integration, and its video player and video discovery/delivery system.

A revenue-sharing deal with Google (Nasdaq: GOOG) is scheduled to expire in February 2014. About 23 percent of revenues through the first nine months of 2011 came from display advertising on its platform.

With the S-1 filing behind it, Synacor has about 18 months to pull the trigger. It's looking to go public as the TV Everywhere market heats up among small- and mid-sized service providers that are trying to head off over-the-top video threats but don't have the engineering resources of Comcast Corp. (Nasdaq: CMCSA, CMCSK), Verizon Communications Inc. (NYSE: VZ) or Time Warner Cable Inc. (NYSE: TWC). Synacor also sees expansion into Europe and, longer-term, into Asia and Latin America, as part of its growth strategy. (See Cable Co-Op Boots Up TV Everywhere Project.)

Timing is everything
Still, the S-1 filing is interesting because two other companies that play in other parts of the advanced video technology sector have opted to hold back.

Envivio Inc. (NASDAQ: ENVI) filed its S-1 in April but is content to stay where it is until the economy shows signs of improvement, company CEO Julien Signes told Light Reading Cable at last week's Cable-Tec Expo in Atlanta. (See Envivio Goes for IPO Glory .)

RGB Networks Inc. , which has threatened to go public for years, is not moving forward on an S-1 for similar reasons. RGB officials want to wait until they have a better fix on when cable MSOs and other service providers will execute their IP video migrations, and on how big that market will be, says company CEO Jef Graham. (See RGB Relights Its IPO Fire .)

"Our preference is still an IPO," he said at the show last week when asked if RGB might be tempted to look at other options, including an acquisition.

— Jeff Baumgartner, Site Editor, Light Reading Cable

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