FT Unit Reels In Orca
The news sent Orca's share price up by 4 pence, more than 23 percent, to £0.21 on the London Stock Exchange .
The value of the offer, equivalent to $0.59 (£0.29) per Orca share, represents $13 million for the company plus a balance for Orca's net cash position. The deal is subject to the approval of Orca's shareholders, who are due to meet on April 15.
Viaccess, a private firm that's 100 percent owned by the French incumbent operator, supplies conditional access and digital rights management (DRM) technology to broadcasters, telecom carriers, and cable operators, and counts France Telecom, naturellement, as its major telco customer. (See France Telecom: 'More IPTV, Please'.)
Other customers include Iceland's Síminn , Middle East operator Etisalat , European cable operators UPC Broadband , Numericable-SFR , and broadcasters British Broadcasting Corp. (BBC) and Eurosport.
Its CEO, François Moreau de Saint Martin, stated in his firm's press release that the move will lead to the development of integrated products aimed at the telecom and traditional TV services sector.
Lucent's former squeeze
The acquisition gives Viaccess a small but well known player in the IPTV middleware and applications market that was once courted by Lucent. (See Orca in IPTV Takeover Talks.)
Orca has 14 commercial deployments globally, but it hasn't managed to break into any major IPTV deployments. (See IPTV Trio Win LatAM Deal, Orca Wins Russian Deal, Lattelecom Uses Orca, and Orca Fishes Out Jazztel.)
As a result, the company, which employs about 80 staff, still only managed revenues of $6.4 million last year (nearly double 2006), and reported a net loss of $4.3 million, though that was an improvement on the previous year's $5.4 million net loss. The company expects to see further improvements in 2008. (See Orca Reports '07.)
Orca has found the going tough in an IPTV middleware market dominated by Microsoft Corp. (Nasdaq: MSFT), Thomson S.A. (NYSE: TMS; Euronext Paris: 18453), Nokia Networks , and UTStarcom Inc. (Nasdaq: UTSI), but also populated by more than 20 other vendors that have battled for the Tier 2 and Tier 3 accounts. (See page four of Who Makes What: IP Video Systems.)
"We've been holding strategic discussions with a number of companies to figure out how we could differentiate and get a bigger piece of the puzzle," says Orca's CEO Haggai Barel.
"Viaccess was the best fit. It's not a huge company, where we would disappear, but make us part of a bigger company of about 300 people that's focused on software for the development of TV services. And while it's still small enough to be flexible and innovative, it's also part of a huge organization [France Telecom] that gives us financial stability and lots of potential input into R&D, product testing, and so on."
So does Barel expect any business at France Telecom? He notes that FT has deployed Thomson's SmartVision middleware platform across its multiple IPTV markets, "and I don't think they have any plans to replace Thomson. But I see some prospects with new products," including the Compass content discovery tool that Orca launched late last year, which supplements existing electronic programming guides (EPGs) by providing a view of available broadcast and on-demand content based on customer preference or recommendations. (See Orca Spins Compass.)
Viaccess, which began negotiations with Orca in February 2007, wasn't the only company Orca talked to. Barel says some bigger companies took a look at Orca, including Comverse Inc. (Nasdaq: CNSI), which remains "a very important partner. But they underwent some reorganization last year and an acquisition wasn't relevant." (See Comverse Names New CEO and Comverse Delays Financials.)
Orca is still part of Comverse's IPTV offer to carriers, though, and was part of the deployment that Comverse announced in the tiny European principality of Andorra last month. (See Comverse Wins IPTV Deal.)
And Barel notes that Orca will continue to work with content protection system vendors other than Viaccess, with which it hasn't yet been deployed. "We are just completing integration, but are currently deployed with a number of [Viaccess's] rivals, and will continue to work with all players," says the CEO.
Barel will be accountable to that statement as he is due to stay on with Viaccess after the closing, as are an unspecified number of other Orca "key employees." In its filing with the London Stock Exchange today, Orca noted that, as part of the merger agreement, Barel will be retained, and be rewarded with a $548,000 cash bonus, payable when the acquisition closes.
— Ray Le Maistre, International News Editor, Light Reading